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, 2017

 

 

 

 

ITEM 1. SCHEDULE OF INVESTMENTS.

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

FORM N-Q

JULY 31, 2017

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited)    July 31, 2017

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT 		     VALUE  
MUNICIPAL BONDS - 98.0%           

Alabama - 5.7%

           

Jefferson County, AL, Sewer Revenue:

           

AGM

      5.500 %      10/1/53      $ 400,000      $ 457,636  

Convertible CAB, Subordinated Lien

      0.000 %      10/1/50        3,020,000        2,473,924 (a) 

Subordinated Lien Warrants

      6.000 %      10/1/42        1,120,000        1,316,358  

Subordinated Lien Warrants

      6.500 %      10/1/53        3,000,000        3,608,340  

Lower Alabama Gas District, Gas Project Revenue

      5.000 %      9/1/46        1,500,000        1,886,025  
          

 

 

  

Total Alabama

              9,742,283  
          

 

 

  

Arizona - 3.5%

           

La Paz County, AZ, IDA, Educational Facility Lease Revenue, Charter School Solutions, Harmony Public School Project

      5.000 %      2/15/36        1,000,000        1,069,440 (b) 

Navajo Nation, AZ, Revenue

      5.500 %      12/1/30        190,000        209,581 (b) 

Phoenix, AZ, IDA, Education Revenue:

           

Basis School Inc.

      5.000 %      7/1/35        1,000,000        1,043,760 (b) 

Great Hearts Academies

      5.000 %      7/1/41        1,200,000        1,282,332  

Salt Verde, AZ, Financial Corp. Senior Gas Revenue

      5.000 %      12/1/37        1,500,000        1,800,825  

University Medical Center Corp., AZ, Hospital Revenue

      6.250 %      7/1/29        500,000        548,160 (c) 
          

 

 

  

Total Arizona

              5,954,098  
          

 

 

  
California - 10.1%           

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

      5.000 %      10/1/34        500,000        572,235  

Anaheim, CA, Public Financing Authority Lease Revenue

      5.000 %      5/1/46        2,000,000        2,264,680  

California State PCFA, Water Furnishing Revenue

      5.000 %      11/21/45        3,000,000        3,003,360 (b) 

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

      5.125 %      10/1/31        1,500,000        1,699,695  

California Statewide CDA, Student Housing Revenue:

           

Provident Group-Pomona Properties LLC

      5.600 %      1/15/36        505,000        548,324  

Provident Group-Pomona Properties LLC

      5.750 %      1/15/45        360,000        390,935  

Inland Valley, CA, Development Agency, Successor Agency Tax Allocation Revenue

      5.000 %      9/1/44        500,000        557,700  

M-S-R Energy Authority, CA, Gas Revenue

      7.000 %      11/1/34        2,000,000        2,887,300  

M-S-R Energy Authority, CA, Gas Revenue

      6.500 %      11/1/39        3,000,000        4,306,170  

Redding, CA, RDA, Tax Allocation, Shastec Redevelopment Project

      5.000 %      9/1/29        600,000        600,228  

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

      5.500 %      9/1/45        620,000        664,764  
          

 

 

  

Total California

              17,495,391  
          

 

 

  
Colorado - 4.0%           

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

      5.000 %      12/31/51        150,000        164,571  

North Range, CO, Metropolitan District#2, GO

      5.625 %      12/1/37        500,000        505,085  

Public Authority for Colorado Energy, Natural Gas Purchase Revenue

      6.125 %      11/15/23        4,000,000        4,892,800  

Reata South Metropolitan District, CO, GO

      7.250 %      6/1/37        975,000        918,684  

Solaris, CO, Metropolitan District #3, GO

      7.000 %      12/15/46        500,000        496,245  
          

 

 

  

Total Colorado

              6,977,385  
          

 

 

  

 

See Notes to Schedule of Investments.

 

1

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2017

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT 		     VALUE  

Delaware - 1.2%

           

Delaware State EDA Revenue, Indian River Power LLC

      5.375 %      10/1/45      $ 2,000,000      $ 2,079,580  
          

 

 

  

District of Columbia - 1.6%

           

District of Columbia Revenue:

           

Friendship Public Charter School Inc.

      5.000 %      6/1/42        2,000,000        2,143,480  

Ingleside Rock Creek Project

      4.125 %      7/1/27        100,000        99,635 (d) 

KIPP Charter School

      6.000 %      7/1/33        200,000        231,686  

KIPP Charter School

      6.000 %      7/1/43        250,000        285,685  
          

 

 

  

Total District of Columbia

              2,760,486  
          

 

 

  

Florida - 2.4%

           

Florida State Development Finance Corp., Educational Facilities Revenue:

           

Renaissance Charter School Inc. Project

      6.000 %      6/15/35        250,000        259,297 (b) 

Renaissance Charter School Inc. Project

      6.125 %      6/15/46        215,000        222,777 (b) 

Florida State Development Finance Corp., Senior Living Revenue, Tuscan Isle Champions Gate Project

      6.375 %      6/1/46        250,000        236,017 (b) 

Florida State Mid-Bay Bridge Authority Revenue

      5.000 %      10/1/28        500,000        579,345  

Martin County, FL, IDA Revenue, Indiantown Cogeneration LP Project

      4.200 %      12/15/25        1,500,000        1,540,320 (b)(e) 

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

      7.500 %      6/1/49        400,000        476,452  

Reunion, FL, East Community Development District, Special Assessment

      6.600 %      5/1/33        305,000        313,644  

Reunion, FL, East Community Development District, Special Assessment

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

Santa Rosa, FL, Bay Bridge Authority Revenue

      6.250 %      7/1/28        782,321        555,448 *(f) 
          

 

 

  

Total Florida

              4,183,303  
          

 

 

  

Georgia - 2.3%

           

Atlanta, GA, Water & Wastewater Revenue

      6.250 %      11/1/39        2,000,000        2,231,960 (c) 

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

      6.125 %      7/1/40        1,000,000        1,096,960 (c) 

Franklin County, GA, Industrial Building Authority Revenue, Emmanuel College Inc.

      6.000 %      11/1/32        1,000,000        600,000 *(f) 
          

 

 

  

Total Georgia

              3,928,920  
          

 

 

  

Hawaii - 1.3%

           

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

      6.500 %      7/1/39        2,000,000        2,155,940  
          

 

 

  

Illinois - 5.3%

           

Chicago, IL, GO

      5.000 %      1/1/25        500,000        525,555  

Chicago, IL, GO

      5.500 %      1/1/34        1,250,000        1,281,250  

Chicago, IL, GO

      6.000 %      1/1/38        300,000        322,521  

Chicago, IL, Motor Fuel Tax Revenue, AGM

      5.000 %      1/1/32        1,000,000        1,075,330  

Chicago, IL, O’Hare International Airport Revenue

      5.000 %      1/1/31        1,500,000        1,714,050 (e) 

Chicago, IL, O’Hare International Airport Revenue, Senior Lien

      5.000 %      1/1/42        500,000        563,100 (e) 

Chicago, IL, Wastewater Transmission Revenue, Second Lien

      5.000 %      1/1/38        500,000        552,080  

Chicago, IL, Waterworks Revenue, Second Lien

      5.000 %      11/1/29        500,000        575,230  

Illinois State Finance Authority Revenue, Franciscan Communities Inc.

      5.250 %      5/15/47        1,000,000        1,051,260  

Illinois State, GO

      5.000 %      2/1/26        650,000        717,093  

 

See Notes to Schedule of Investments.

 

2

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2017

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT 		     VALUE  

Illinois - (continued)

           

Illinois State, GO

      5.000 %      2/1/27      $ 250,000      $ 276,030  

Illinois State, GO

      5.000 %      2/1/29        300,000        325,728  

Metropolitan Pier & Exposition Authority, IL, Revenue, CAB-McCormick Place Expansion Project

      0.000 %      12/15/52        700,000        93,947  
          

 

 

  

Total Illinois

              9,073,174  
          

 

 

  

Indiana - 1.6%

           

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

      5.000 %      7/1/48        2,000,000        2,152,240 (e) 

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

      7.000 %      1/1/44        500,000        593,385 (e) 
          

 

 

  

Total Indiana

              2,745,625  
          

 

 

  

Kentucky - 1.3%

           

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

      6.250 %      6/1/39        2,000,000        2,155,120  
          

 

 

  

Louisiana - 0.0%

           

Epps, LA, COP

      8.000 %      6/1/18        775,000        77,500 *(f) 
          

 

 

  

Maryland - 2.0%

           

Maryland State Health & Higher EFA Revenue, Mercy Medical Center

      6.250 %      7/1/31        3,000,000        3,393,900  
          

 

 

  

Massachusetts - 1.6%

           

Massachusetts State DFA Revenue:

           

Partners Healthcare System

      5.000 %      7/1/47        1,250,000        1,408,750  

Tufts Medical Center Inc.

      6.875 %      1/1/41        1,000,000        1,144,990  

Umass Boston Student Housing Project

      5.000 %      10/1/41        200,000        219,222  
          

 

 

  

Total Massachusetts

              2,772,962  
          

 

 

  

Michigan - 2.8%

           

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

      5.000 %      7/1/35        200,000        227,382  

Michigan State Finance Authority Ltd. Obligation Revenue:

           

Higher Education, Thomas M Cooley Law School Project

      6.000 %      7/1/24        310,000        329,298 (b) 

Higher Education, Thomas M Cooley Law School Project

      6.750 %      7/1/44        330,000        333,614 (b) 

Michigan State Finance Authority Revenue:

           

Senior Lien Detroit Water & Sewer

      5.000 %      7/1/33        260,000        290,170  

Senior Lien Detroit Water & Sewer

      5.000 %      7/1/44        270,000        289,632  

Michigan State Strategic Fund Ltd. Obligation Revenue:

           

Evangelical Homes of Michigan

      5.250 %      6/1/32        500,000        516,295  

Evangelical Homes of Michigan

      5.500 %      6/1/47        750,000        768,112  

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

      8.250 %      9/1/39        2,000,000        2,155,700 (c) 
          

 

 

  

Total Michigan

              4,910,203  
          

 

 

  

Missouri - 2.2%

           

Kansas City, MO, IDA, Senior Living Facilities Revenue, Kansas City United Methodist Retirement Home Inc.

      6.000 %      11/15/51        200,000        195,154 (b) 

Missouri State HEFA Revenue:

           

Lutheran Senior Services

      6.000 %      2/1/41        500,000        547,325  

Lutheran Senior Services

      5.000 %      2/1/44        750,000        803,145  

 

See Notes to Schedule of Investments.

 

3

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2017

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT 		     VALUE  

Missouri - (continued)

           

St. Louis County, MO, IDA, Senior Living Facilities Revenue, Friendship Village of Sunset Hills

      5.875 %      9/1/43      $ 2,000,000      $ 2,294,500  
          

 

 

  

Total Missouri

              3,840,124  
          

 

 

  

Nebraska - 2.1%

           

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

      5.000 %      9/1/42        3,340,000        3,616,352  
          

 

 

  

Nevada - 0.5%

           

Director of the State of Nevada Department of Business & Industry Revenue:

           

Somerset Academy of Las Vegas

      5.000 %      12/15/35        300,000        310,134 (b) 

Somerset Academy of Las Vegas

      5.125 %      12/15/45        500,000        510,370 (b) 
          

 

 

  

Total Nevada

              820,504  
          

 

 

  

New Jersey - 6.5%

           

Gloucester County, NJ, PCFA Revenue, Keystone Urban Renewal, Logan Generating

      5.000 %      12/1/24        450,000        490,239 (e) 

New Jersey State EDA Revenue, Private Activity-The Goethals Bridge Replacement Project

      5.375 %      1/1/43        1,500,000        1,675,725 (e) 

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

      5.000 %      7/1/38        100,000        114,999  

New Jersey State Higher Education Assistance Authority, Student Loan Revenue

      5.000 %      12/1/44        640,000        676,166 (e) 

New Jersey State Transportation Trust Fund Authority Revenue, Transportation Program

      5.250 %      6/15/32        4,720,000        4,968,036  

Salem County, NJ, PCFA Revenue, Chambers Project

      5.000 %      12/1/23        3,000,000        3,262,170 (e) 
          

 

 

  

Total New Jersey

              11,187,335  
          

 

 

  

New York - 3.5%

           

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

      6.250 %      7/15/40        2,000,000        2,256,080 (c) 

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

      5.000 %      11/15/44        1,205,000        1,308,955 (b) 

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

           

LaGuardia Airport Terminal B Redevelopment Project

      4.000 %      7/1/31        2,000,000        2,076,440 (e) 

LaGuardia Airport Terminal B Redevelopment Project

      5.000 %      7/1/46        300,000        325,296 (e) 
          

 

 

  

Total New York

              5,966,771  
          

 

 

  

North Carolina - 0.3%

           

North Carolina State Turnpike Authority Monroe Expressway Toll Revenue

      5.000 %      7/1/47        500,000        543,010  
          

 

 

  

Ohio - 0.4%

           

Ohio State Private Activity Revenue, Portsmouth Bypass Project

      5.000 %      6/30/53        700,000        760,375 (e) 
          

 

 

  

Oklahoma - 1.1%

           

Payne County, OK, EDA Revenue, Epworth Living at The Ranch

      6.250 %      11/1/31        250,000        243,992  

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

           

Montereau Inc. Project

      7.125 %      11/1/30        1,000,000        1,158,870 (c) 

Montereau Inc. Project

      5.250 %      11/15/37        500,000        554,620  
          

 

 

  

Total Oklahoma

              1,957,482  
          

 

 

  

 

See Notes to Schedule of Investments.

 

4

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2017

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT 		     VALUE  

Oregon - 0.4%

           

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

      5.000 %      11/15/51      $ 725,000      $ 756,690  
          

 

 

  

Pennsylvania - 5.1%

           

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

      5.000 %      1/1/28        350,000        395,948  

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

      5.000 %      1/15/36        750,000        845,198  

Montgomery County, PA, IDA Revenue:

           

Acts Retirement-Life Communities

      5.000 %      11/15/28        1,400,000        1,542,870  

Acts Retirement-Life Communities

      5.000 %      11/15/29        1,350,000        1,481,409  

Pennsylvania State Turnpike Commission Revenue, Turnpike Subordinate Revenue Refunding Bonds

      5.000 %      6/1/39        3,170,000        3,541,048  

Philadelphia, PA, Authority for IDR:

           

Discovery Charter School Inc. Project

      6.250 %      4/1/37        500,000        524,470  

Performing Arts Charter School Project

      6.000 %      6/15/23        425,000        455,158 (b) 
          

 

 

  

Total Pennsylvania

              8,786,101  
          

 

 

  

Texas - 24.2%

           

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

      5.000 %      12/1/46        200,000        216,728  

Brazos River, TX, Harbor Industrial Development Corp., Environmental Facilities Revenue, Dow Chemical Co.

      5.900 %      5/1/28        1,500,000        1,541,595 (a)(e)(g) 

Central Texas Regional Mobility Authority Revenue

      5.000 %      1/1/42        2,000,000        2,208,880  

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

      5.000 %      11/1/42        4,000,000        4,451,360 (e) 

Grand Parkway Transportation Corp., TX, System Toll Revenue, Convertible CAB

      0.000 %      10/1/35        1,500,000        1,375,110 (a) 

Gulf Coast, TX, IDA Revenue, Citgo Petroleum Corp. Project

      4.875 %      5/1/25        1,000,000        1,046,560 (e) 

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

      5.625 %      11/15/32        2,000,000        2,119,480 (c) 

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

      5.250 %      11/1/40        6,000,000        6,631,380  

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

      5.000 %      11/1/33        20,000        23,138 (e) 

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

      5.000 %      11/1/35        30,000        34,524 (e) 

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

      5.000 %      11/1/36        20,000        22,964 (e) 

New Hope Cultural Education Facilities Finance Corp., TX, Retirement Facility Revenue:

           

MRC Crestview

      5.000 %      11/15/36        550,000        572,341  

MRC Senior Living-Langford Project

      5.375 %      11/15/36        475,000        454,893  

Westminster Manor Project

      5.000 %      11/1/40        1,000,000        1,088,540  

New Hope Cultural Education Facilities Finance Corp., TX, Senior Living Revenue:

           

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

      5.000 %      7/1/46        250,000        271,986  

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

      5.000 %      7/1/51        150,000        165,402  

New Hope Cultural Education Facilities Finance Corp., TX, Student Housing Revenue:

           

Collegiate Housing Stephenville II LLC, Tarleton State University Project

      5.000 %      4/1/39        1,165,000        1,220,198  

NCCD-College Station Properties LLC

      5.000 %      7/1/47        500,000        533,255  

 

See Notes to Schedule of Investments.

 

5

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2017

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT 		     VALUE  

Texas - (continued)

           

North Texas Tollway Authority Revenue:

           

System-First Tier

      5.750 %      1/1/40      $ 2,190,000      $ 2,233,559 (c) 

System-First Tier

      5.750 %      1/1/40        310,000        315,775  

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

      9.000 %      10/1/30        2,000,000        1,400,000 *(f) 

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

      6.250 %      12/15/26        1,000,000        1,213,500  

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

      5.000 %      12/15/28        1,500,000        1,672,830  

Texas State Private Activity Bond Surface Transportation Corp. Revenue:

           

LBJ Infrastructure Group LLC

      7.000 %      6/30/40        4,000,000        4,548,840  

Senior Lien, Blueridge Transportation Group LLC

      5.000 %      12/31/40        1,000,000        1,101,550 (e) 

Senior Lien, NTE Mobility Partners LLC

      6.875 %      12/31/39        2,000,000        2,237,380  

Texas State Public Finance Authority, Charter School Finance Corp. Revenue:

           

Cosmos Foundation Inc.

      6.200 %      2/15/40        1,000,000        1,120,650 (c) 

Uplift Education

      5.750 %      12/1/27        1,500,000        1,523,730 (c) 

Willacy County, TX, PFC Project Revenue, County Jail

      7.500 %      11/1/25        425,000        381,531  
          

 

 

  

Total Texas

              41,727,679  
          

 

 

  

U.S. Virgin Islands - 1.1%

           

Virgin Islands Public Finance Authority Revenue, Matching Fund Loan

      6.750 %      10/1/37        2,500,000        1,975,000  
          

 

 

  

Utah - 0.2%

           

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

      5.000 %      4/15/42        250,000        277,905  
          

 

 

  

Virginia - 2.5%

           

Virginia State Port Authority Port Facility Revenue

      5.000 %      7/1/41        250,000        285,060 (e) 

Virginia State Port Authority Port Facility Revenue

      5.000 %      7/1/45        300,000        340,575 (e) 

Virginia State Small Business Financing Authority Revenue:

           

Elizabeth River Crossings OpCo LLC Project

      5.250 %      1/1/32        1,000,000        1,106,050 (e) 

Elizabeth River Crossings OpCo LLC Project

      5.500 %      1/1/42        2,000,000        2,231,980 (e) 

Senior Lien, 95 Express Lanes LLC

      5.000 %      1/1/40        300,000        323,709 (e) 
          

 

 

  

Total Virginia

              4,287,374  
          

 

 

  

Wisconsin - 1.2%

           

Public Finance Authority, WI, Education Revenue, North Carolina Charter Educational Foundation Project

      5.000 %      6/15/36        1,000,000        962,120 (b) 

Public Finance Authority, WI, Exemption Facilities Revenue, Celanese Project

      5.000 %      12/1/25        550,000        624,860 (e) 

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

      7.000 %      12/1/50        250,000        274,465 (b) 

Public Finance Authority, WI, Revenue, Church Home of Hartford Inc.

      5.000 %      9/1/38        250,000        254,613 (b) 
          

 

 

  

Total Wisconsin

              2,116,058  
          

 

 

  

TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS
(Cost - $157,077,793)

              169,024,630  
          

 

 

  

 

See Notes to Schedule of Investments.

 

6

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2017

 

SECURITY

    RATE     MATURITY
DATE		      FACE
AMOUNT 		     VALUE  
SHORT-TERM INVESTMENTS - 1.5%           
MUNICIPAL BONDS - 1.5%           

California - 0.1%

           

California State, GO, Kindergarten, LOC-Citibank N.A.

      0.720 %      5/1/34      $ 200,000      $ 200,000 (h)(i) 
          

 

 

  

New York - 1.3%

           

New York State Housing Finance Agency Revenue:

           

42nd & 10th Housing, LIQ-FHLMC, LOC-FHLMC

      0.840 %      11/1/41        800,000        800,000 (e)(h)(i) 

505 West 37th Street, LOC-Landesbank Hessen-Thuringen

      0.800 %      5/1/42        1,300,000        1,300,000 (e)(h)(i) 

Onondaga County, NY, Trust Cultural Resource Revenue, Syracuse University Project, LOC-Wells Fargo Bank N.A.

      0.810 %      12/1/29        100,000        100,000 (h)(i) 
          

 

 

  

Total New York

              2,200,000  
          

 

 

  

Texas - 0.1%

           

Rockwall, TX, ISD, GO, School Building, PSF-GTD, SPA-Wells Fargo Bank N.A.

      0.820 %      8/1/37        200,000        200,000 (h)(i) 
          

 

 

  

TOTAL MUNICIPAL BONDS
(Cost - $2,600,000)

              2,600,000  
          

 

 

  
                  SHARES         

MONEY MARKET FUNDS - 0.0%

           

State Street Institutional U.S. Government Money Market Fund, Premier Class
(Cost - $23,451)

      0.938 %         23,451        23,451  
          

 

 

  

TOTAL SHORT-TERM INVESTMENTS
(Cost - $2,623,451)

              2,623,451  
          

 

 

  

TOTAL INVESTMENTS - 99.5%
(Cost - $159,701,244#)

              171,648,081  

Other Assets in Excess of Liabilities - 0.5%

              859,690  
          

 

 

  

TOTAL NET ASSETS - 100.0%

            $ 172,507,771  
          

 

 

  

 

* Non-income producing security.

 

(a) Variable rate security. Interest rate disclosed is as of the most recent information available.

 

(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, unless otherwise noted.

 

(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) Security is purchased on a when-issued basis.

 

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

 

(f) The coupon payment on these securities is currently in default as of July 31, 2017.

 

(g) Maturity date shown represents the mandatory tender date.

 

(h) Variable rate demand obligations 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.

 

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

 

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

 

See Notes to Schedule of Investments.

 

7

WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

 

Schedule of investments (unaudited) (cont’d)    July 31, 2017

 

Abbreviations used in this schedule:

 

AGM    — Assured Guaranty Municipal Corporation - Insured Bonds
CAB    — Capital Appreciation Bonds
CDA    — Communities Development Authority
COP    — Certificates of Participation
CSCE    — Charter School Credit Enhancement
DFA    — Development Finance Agency
EDA    — Economic Development Authority
EFA    — Educational Facilities Authority
FHLMC    — Federal Home Loan Mortgage Corporation
GO    — General Obligation
GTD    — Guaranteed
HEFA    — Health & Educational Facilities Authority
IDA    — Industrial Development Authority
IDR    — Industrial Development Revenue
ISD    — Independent School District
LIQ    — Liquidity Facility
LOC    — Letter of Credit
PCFA    — Pollution Control Financing Authority
PFC    — Public Facilities Corporation
PSF    — Permanent School Fund
RDA    — Redevelopment Agency
SPA    — Standby Bond Purchase Agreement - Insured Bonds

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.

 

8

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.

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. Short-term fixed income securities that will mature in 60 days or less are valued at amortized cost, unless it is 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. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. 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.

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

 

9

  •  

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.

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†

      —        $ 169,024,630        —        $ 169,024,630  
  

 

 

     

 

 

     

 

 

     

 

 

  

Short-Term Investments†:

            

Municipal Bonds

      —          2,600,000        —          2,600,000  

Money Market Funds

    $ 23,451        —          —          23,451  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Short-Term Investments

      23,451        2,600,000        —          2,623,451  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Investments

    $ 23,451      $ 171,624,630        —        $ 171,648,081  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

† See Schedule of Investments for additional detailed categorizations.

2. Investments

At July 31, 2017, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

 

Gross unrealized appreciation

    $ 15,063,373  

Gross unrealized depreciation

      (3,116,536 ) 
  

 

 

  

Net unrealized appreciation

    $ 11,946,837  
  

 

 

  

 

10

 

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 22, 2017

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 22, 2017

 

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

Date: September 22, 2017