WESTERN ASSET MUNICIPAL HIGH INCOME FUND INC.

DEFA14A 1 ddefa14a.htm SMITH BARNEY AND SALOMON BROTHERS FUNDS Smith Barney and Salomon Brothers Funds

SCHEDULE 14A

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Smith Barney Allocation Series Inc.	Zenix Income Fund Inc.
Smith Barney Multiple Discipline Trust	Managed High Income Portfolio Inc.
Smith Barney Institutional Cash Management Fund Inc.	Smith Barney Investment Series
Smith Barney Aggressive Growth Fund Inc.	Smith Barney Trust II
Smith Barney Investment Funds Inc.	Salomon Funds Trust
Smith Barney Equity Funds	Variable Annuity Portfolios
Smith Barney Muni Funds	CitiFunds Premium Trust
Intermediate Muni Fund Inc.	CitiFunds Institutional Trust
Smith Barney Municipal Money Market Fund Inc.	CitiFunds Trust I
High Income Opportunity Fund Inc.	CitiFunds Trust III
Smith Barney Funds, Inc.	Salomon Brothers Capital Fund Inc
Smith Barney Income Funds	Salomon Brothers Investors Value Fund Inc
Smith Barney Small Cap Core Fund, Inc.	Salomon Brothers Opportunity Fund Inc
Smith Barney Money Funds, Inc.	Salomon Brothers Series Funds Inc
Smith Barney Fundamental Value Fund Inc.	Salomon Brothers Variable Series Funds Inc
Greenwich Street Series Fund	Salomon Brothers Institutional Series Funds Inc
Smith Barney Managed Municipals Fund Inc.	The Salomon Brothers Fund Inc
Smith Barney California Municipals Fund Inc.	Salomon Brothers Capital and Income Fund Inc.
Smith Barney New Jersey Municipals Fund Inc.	Salomon Brothers Emerging Markets Debt Fund Inc.
Smith Barney Oregon Municipals Fund	Salomon Brothers Emerging Markets Income Fund Inc.
Smith Barney Arizona Municipals Fund Inc.	Salomon Brothers Emerging Markets Income Fund II Inc.
Smith Barney Core Plus Bond Fund Inc.	Salomon Brothers Emerging Markets Floating Rate Fund Inc.
Smith Barney Sector Series Inc.	Salomon Brothers Global High Income Fund Inc.
Smith Barney Massachusetts Municipals Fund	Salomon Brothers Global Partners Income Fund Inc.
Smith Barney Investment Trust	Salomon Brothers High Income Fund Inc
Smith Barney Appreciation Fund Inc.	Salomon Brothers High Income Fund II Inc
Smith Barney World Funds, Inc.	Salomon Brothers Inflation Management Fund Inc.
Travelers Series Fund Inc.	Salomon Brothers Municipal Partners Fund Inc.
SB Adjustable Rate Income Fund	Salomon Brothers Municipal Partners Fund II Inc.
Managed Municipals Portfolio Inc.	Salomon Brothers 2008 Worldwide Dollar Government Term Trust Inc
Municipal High Income Fund Inc.	Salomon Brothers Variable Rate Strategic Fund Inc.
Citigroup Investments Corporate Loan Fund Inc.	Salomon Brothers Worldwide Income Fund Inc.
Real Estate Income Fund Inc.

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Citigroup Asset Management

Advised Investment Companies

ISS Presentation Relating to

Transaction with Legg Mason

September 27, 2005

Citigroup Asset Management [Logo] Page 0

Contents

1.	Overview
2.	The Proposed Transaction
3.	Approval of New Management & Subadvisory Agreements
4.	Election of Directors
5.	Corporate Governance
6.	Dissident Proxy Fights
7.	Dissident Proxy Fights on Certain Closed-End Funds

Citigroup Asset Management [Logo] Page 1

Overview Items for Shareholder Approval

Proposal 1:	To Approve a New Management Agreement
	-	All Funds in Fund Complex (Appendix A)
Proposal 2:	To Approve a New Subadvisory Agreement
	-	Certain Funds (Appendix B)
Proposal 3:	To Elect Board Members
	-	All Open-End Funds (Appendix C)

Citigroup Asset Management [Logo] Page 2

The Proposed Transaction

Sale of substantially all of Citigroups asset management business, Citigroup Asset Management (CAM), to Legg Mason in exchange for the broker-dealer and investment banking business of Legg Mason, shares of common and preferred stock of Legg Mason and a loan

Several conditions to the sale, including:

Obtaining certain required regulatory approvals

Consent of certain advisory clients of CAM representing no less than 75% of the revenue attributable to the assets under management for such clients to continue their advisory relationship with CAM

Citigroup Asset Management [Logo] Page 3

The Proposed Transaction Advisory Agreements

Sale will cause the Funds current investment advisory and subadvisory agreements to terminate as a matter of law

Shareholder approval is needed to assure continuity of investment advisory services after the completion of the transaction

Total fees for advisory and administrative services will remain the same under the new management agreements and new subadvisory agreements

Citigroup Asset Management [Logo] Page 4

The Proposed Transaction About Legg Mason

The combination will create the worlds 5 th largest money manager in the U.S. with assets under management of over $830 billion

Legg Mason becomes a singularly focused, more profitable and certainly more influential organization within the global asset management community 1

Legg Mason becomes the 5th largest manager of mutual funds in the United States 1

Legg Masons equity fund platform gains a number of large-cap growth and large-cap core funds and well regarded managers to complement Legg Masons existing strength across value, blend and small-cap asset classes

Western Asset becomes the #1 pure manager of fixed income in the world, with approximately $490 billion of assets under management and broad capabilities in all major fixed income asset types and currencies

1 Source: Pensions & Investments, The Top Money Managers, May 30, 2005.

Citigroup Asset Management [Logo] Page 5

The Proposed Transaction About Legg Mason Contd

Salomon Brothers Asset Management, Smith Barney Fund Management LLC and TIMCO, the Funds advisers, will become part of a pure play asset management organization

Percent of assets beating the Lipper Category Average (U.S. open- and closed-end funds):

1-Year	3-Year	5-Year	10-Year
71%	88%	95%	98%

Source: Lipper Analytical New Applications v. 4.0 Does not include money market funds

Citigroup Asset Management [Logo] Page 6

Approval of New Management and Subadvisory Agreements

No increase in the aggregate advisory and administrative fees

Advisers will continue to provide the same level of advisory and administrative services to the Funds

New standardized investment management agreement for the fund complex combining advisory and administrative services

Advisers will be owned by Legg Mason with its reputation for asset management excellence

Citigroup Asset Management [Logo] Page 7

Board Considerations in Approving New Agreements

Among other things, the Board Members considered the following when approving the New Management Agreements and New Subadvisory Agreements:

The reputation, financial strength and resources of Legg Mason and its investment advisory subsidiaries (including Western Asset);

There is not expected to be any diminution in the nature, quality and extent of services provided to the Funds and their shareholders by the Advisers, including compliance services

The potential benefits to Fund shareholders from being part of a combined fund family with Legg Mason-sponsored funds, including possible economies of scale and access to investment opportunities

The fact that each Funds total advisory and administrative fees will not increase by virtue of the New Management Agreements, but will remain the same

Citigroup Asset Management [Logo] Page 8

Board Considerations in Approving New Agreements

Assurances from Citigroup and Legg Mason that, for a three year period following the closing of the Transaction, the Advisers will have substantially the same access to the Citigroup sales force when distributing shares of the Funds

The Funds would not bear the costs of obtaining shareholder approval of the New Management Agreements

Citigroup Asset Management [Logo] Page 9

Election of Directors

Openend mutual funds only

Experienced Directors

Closed-end funds elect directors at regularly scheduled annual meetings

Citigroup Asset Management [Logo] Page 10

Corporate Governance

Independence of Board All Boards have only one interested Director. All other Directors are independent.

Each Fund has an Independent Audit Committee & Nominating/Governance Committee

Independent Directors meet regularly in executive sessions with counsel to the Independent Directors

Independent Directors separately reviewed and unanimously approved the new management and subadvisory agreements

Citigroup Asset Management [Logo] Page 11

Dissident Proxy Fights Closed End Funds

Dissident Objectives

Side-show issue: Dissidents are focusing on issue that lacks relevance to purpose of Special Meeting

Asking shareholders to vote against long-term interests of shareholders and approval of new management agreement

Opportunistic proxy fights centered on discounts

Focusing on the interests of short-term shareholders only

Closed-end Funds frequently trade at a discount, these funds are not unique

Taking advantage of need for shareholder approval to reap short-term windfall for minority group

Citigroup Asset Management [Logo] Page 12

Dissident Proxy Fights Closed End Funds

Board Objectives

Focused on the interests of all shareholders

The Boards review and evaluate issues surrounding discounts at least quarterly :

Reviewed various solutions to the discount problem

Instituted share repurchase plans for some funds (SBF, SCD)

DRIP Plans repurchase shares at certain levels

Believe that closed-end fund structure is beneficial to shareholders

Citigroup Asset Management [Logo] Page 13

Dissident Proxy Fights on Certain Closed-End Funds

Karpus Management Inc. d/b/a Karpus Investment Management

Salomon Brothers Municipal Partners Fund

Salomon Brothers Municipal Partners Fund II

Salomon Brothers Inflation Management Fund

Salomon Brothers Capital and Income Fund

Real Estate Income Fund

Elliott Associates, L.P. and Elliott International, L.P.

The Salomon Brothers Fund

Citigroup Asset Management [Logo] Page 14

Salomon Brothers Municipal Partners Fund

Inception Date — Ticker	January 29, 1993 — MNP
Investment Objective	High level of current income which is exempt from regular federal income taxes, consistent with the preservation of capital
Portfolio Content	Substantially all of its assets in a diversified portfolio of long-term tax-exempt securities that are rated investment grade
Net Assets as of 8/22/05	$127,172,866
Average Annualized Total Return	1yr	3yr	5yr	10yr
NAV (8/31/05) 1	5.37%	6.12%	7.69%	7.13%
Market Price (8/31/05) 1	12.20%	8.41%	10.20%	9.06%
Lehman Muni Bond Index	5.31%	5.17%	6.37%	6.20%
Discount	Discount on 9/22/05: -6.09%
	Discount range for year ended 8/31/05: -14.31% to -6.05%

1 Source: Lipper Analytical Services.