Investment Company Act file number

811-5497

Western Asset Municipal High Income Fund Inc.

(Exact name of registrant as specified in charter)

620 Eighth Avenue, 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:

1-888-777-0102

Date of fiscal year end:

October 31

Date of reporting period:

July 31, 2011

SECURITY

RATE

MATURITY
DATE

FACE
AMOUNT

VALUE

MUNICIPAL BONDS — 96.7%

Arizona — 1.8%

Pima County, AZ, IDA Revenue, Tucson Electric Power Co.

5.750%

9/1/29

$

1,000,000

$

1,015,830

Salt Verde, AZ, Financial Corp. Gas Revenue

5.000%

12/1/37

1,500,000

1,353,870

University Medical Center Corp., AZ, Hospital Revenue

6.250%

7/1/29

500,000

514,080

Total Arizona

2,883,780

Arkansas — 0.4%

Arkansas State Development Financing Authority, Industrial Facilities Revenue, Potlatch Corp. Projects

7.750%

8/1/25

600,000

614,310

(a)

California — 4.5%

Golden State Tobacco Securitization Corp., California Tobacco Settlement Revenue, Asset Backed

7.800%

6/1/42

2,000,000

2,267,260

(b)

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

7.000%

11/1/34

2,000,000

2,315,280

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

6.500%

11/1/39

2,000,000

2,214,040

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

5.000%

9/1/29

600,000

533,100

Total California

7,329,680

Colorado — 5.1%

Colorado Educational & Cultural Facilities Authority Revenue:

Charter School Peak to Peak Project

7.500%

8/15/21

665,000

666,583

(b)

Cheyenne Mountain Charter Academy

5.250%

6/15/25

680,000

655,941

Cheyenne Mountain Charter Academy

5.125%

6/15/32

510,000

461,749

Elbert County Charter

7.375%

3/1/35

785,000

733,245

Public Authority for Colorado Energy, Natural Gas Purchase Revenue

6.125%

11/15/23

4,000,000

4,298,520

Reata South Metropolitan District, CO, GO

7.250%

6/1/37

1,000,000

820,270

Southlands, CO, Metropolitan District No. 1, GO

7.125%

12/1/34

500,000

605,665

(b)

Total Colorado

8,241,973

Delaware — 4.1%

Delaware State EDA Revenue, Indian River Power LLC

5.375%

10/1/45

4,000,000

3,627,600

Sussex County, DE, Recovery Zone Facility Revenue, NRG Energy Inc., Indian River Power LLC

6.000%

10/1/40

3,000,000

2,991,510

Total Delaware

6,619,110

District of Columbia — 1.2%

District of Columbia COP, District Public Safety & Emergency, AMBAC

5.500%

1/1/20

1,895,000

1,978,721

Florida — 6.2%

Beacon Lakes, FL, Community Development District, Special Assessment

6.900%

5/1/35

815,000

816,002

Bonnet Creek Resort Community Development District, Special Assessment

7.500%

5/1/34

1,500,000

1,412,775

Century Parc Community Development District, Special Assessment

7.000%

11/1/31

885,000

873,566

Highlands County, FL, Health Facilities Authority Revenue, Adventist Health Systems

6.000%

11/15/25

1,000,000

1,069,590

(b)

Martin County, FL, IDA Revenue, Indiantown Cogeneration Project

7.875%

12/15/25

2,000,000

2,008,100

(a)

Orange County, FL, Health Facilities Authority Revenue, First Mortgage Healthcare Facilities Revenue Bonds, GF/Orlando Inc. Project

9.000%

7/1/31

1,000,000

979,960

SECURITY

RATE

MATURITY
DATE

FACE
AMOUNT

VALUE

Florida — continued

Palm Beach County, FL, Health Facilities Authority Revenue, John F. Kennedy Memorial Hospital Inc. Project

9.500%

8/1/13

$

155,000

$

168,400

(c)

Reunion East Community Development District, Special Assessment

7.375%

5/1/33

2,000,000

1,431,060

Santa Rosa, FL, Bay Bridge Authority Revenue

6.250%

7/1/28

1,000,000

350,000

(d)

University of Central Florida, COP, FGIC

5.000%

10/1/25

1,000,000

957,820

Total Florida

10,067,273

Georgia — 6.7%

Atlanta, GA, Airport Revenue:

AGM

5.000%

1/1/26

1,000,000

1,021,950

FGIC

5.625%

1/1/30

1,000,000

1,006,690

(a)

Atlanta, GA, Development Authority Educational Facilities Revenue, Science Park LLC Project

5.000%

7/1/32

2,000,000

2,012,220

Atlanta, GA, Tax Allocation, Atlantic Station Project

7.900%

12/1/24

2,500,000

2,588,450

(b)

Atlanta, GA, Water & Wastewater Revenue

6.250%

11/1/39

2,000,000

2,136,400

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

6.125%

7/1/40

1,000,000

1,080,170

Gainesville & Hall County, GA, Development Authority Revenue, Senior Living Facilities, Lanier Village Estates

7.250%

11/15/29

1,000,000

1,001,600

Total Georgia

10,847,480

Hawaii — 2.7%

Hawaii State Department of Budget & Finance Special Purpose Revenue:

Craigside Retirement Residence

6.400%

11/15/14

550,000

551,188

Craigside Retirement Residence

7.500%

11/15/15

1,500,000

1,529,220

Craigside Retirement Residence

8.750%

11/15/29

200,000

228,854

Hawaiian Electric Co.

6.500%

7/1/39

2,000,000

2,107,120

Total Hawaii

4,416,382

Illinois — 2.4%

Cook County, IL, Revenue, Navistar International Corp.

6.500%

10/15/40

2,000,000

2,059,720

Illinois Finance Authority Revenue:

Park Place of Elmhurst

8.125%

5/15/40

1,000,000

987,210

Refunding, Chicago Charter School Project

5.000%

12/1/26

1,000,000

892,290

Total Illinois

3,939,220

Indiana — 0.5%

County of St. Joseph, IN, EDR:

Holy Cross Village Notre Dame Project

6.000%

5/15/26

285,000

267,700

Holy Cross Village Notre Dame Project

6.000%

5/15/38

550,000

486,211

Total Indiana

753,911

Kansas — 0.7%

Salina, KS, Hospital Revenue, Refunding & Improvement Salina Regional Health

5.000%

10/1/22

1,150,000

1,193,941

Kentucky — 1.3%

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

6.250%

6/1/39

2,000,000

2,092,900

Louisiana — 0.5%

Epps, LA, COP

8.000%

6/1/18

855,000

858,463

Maryland — 1.9%

Maryland State Health & Higher EFA Revenue, Mercy Medical Center

6.250%

7/1/31

3,000,000

3,167,610

SECURITY

RATE

MATURITY
DATE

FACE
AMOUNT

VALUE

Massachusetts — 1.2%

Boston, MA, Industrial Development Financing Authority Revenue, Roundhouse Hospitality LLC Project

7.875%

3/1/25

$

785,000

$

657,854

(a)

Massachusetts State DFA Revenue, Tufts Medical Center Inc.

6.875%

1/1/41

1,000,000

1,060,680

Massachusetts State Port Authority Revenue

13.000%

7/1/13

150,000

175,887

(c)

Total Massachusetts

1,894,421

Michigan — 5.1%

Allen Academy, COP

7.500%

6/1/23

2,130,000

2,146,507

Cesar Chavez Academy, COP

6.500%

2/1/33

1,000,000

1,002,150

Cesar Chavez Academy, COP

8.000%

2/1/33

1,000,000

1,040,220

Gaudior Academy, COP

7.250%

4/1/34

1,000,000

907,480

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

8.250%

9/1/39

2,000,000

2,306,080

Star International Academy, COP

7.000%

3/1/33

940,000

922,507

Total Michigan

8,324,944

Missouri — 0.8%

Missouri State HEFA Revenue, Refunding, St. Lukes Episcopal

5.000%

12/1/21

1,300,000

1,339,104

Montana — 1.3%

Montana State Board of Investment, Resource Recovery Revenue, Yellowstone Energy LP Project

7.000%

12/31/19

2,145,000

2,048,239

(a)

New Jersey — 3.6%

Casino Reinvestment Development Authority Revenue, NATL

5.250%

6/1/20

1,500,000

1,526,385

New Jersey State EDA Revenue, Refunding

6.875%

1/1/37

5,000,000

4,367,900

(a)

Total New Jersey

5,894,285

New Mexico — 0.6%

Otero County, NM, COP, Jail Project Revenue

7.500%

12/1/24

1,000,000

982,540

New York — 5.1%

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

6.250%

7/15/40

2,000,000

2,036,660

New York City, NY, IDA, Civic Facilities Revenue, Special Needs Facilities Pooled Program

8.125%

7/1/19

340,000

344,335

New York Liberty Development Corp., Liberty Revenue, Refunding, Second Priority, Bank of America

6.375%

7/15/49

5,000,000

5,139,350

Suffolk County, NY, IDA, Civic Facilities Revenue, Eastern Long Island Hospital Association

7.750%

1/1/22

755,000

779,319

(b)

Total New York

8,299,664

Ohio — 2.7%

Cuyahoga County, OH, Hospital Facilities Revenue, Canton Inc. Project

7.500%

1/1/30

1,465,000

1,467,271

Miami County, OH, Hospital Facilities Revenue, Refunding and Improvement Upper Valley Medical Center

5.250%

5/15/21

1,500,000

1,532,280

Riversouth Authority, OH, Revenue, Riversouth Area Redevelopment

5.000%

12/1/25

1,260,000

1,312,605

Total Ohio

4,312,156

Oklahoma — 1.5%

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

Montereau Inc. Project

6.875%

11/1/23

1,300,000

1,348,490

Montereau Inc. Project

7.125%

11/1/30

1,000,000

1,041,730

Total Oklahoma

2,390,220

SECURITY

RATE

MATURITY
DATE

FACE
AMOUNT

VALUE

Pennsylvania — 4.2%

Cumberland County, PA, Municipal Authority Retirement Community Revenue, Wesley Affiliate Services Inc. Project

7.250%

1/1/35

$

1,000,000

$

1,103,970

(b)

Lebanon County, PA, Health Facilities Authority Revenue, Good Samaritan Hospital Project

6.000%

11/15/35

1,000,000

907,620

Monroe County, PA, Hospital Authority Revenue, Pocono Medical Center

5.000%

1/1/27

1,000,000

959,470

Northumberland County, PA, IDA Facilities Revenue, NHS Youth Services Inc. Project

7.500%

2/15/29

900,000

784,845

Pennsylvania Economic Development Financing Authority, Health Systems Revenue, Albert Einstein Healthcare

6.250%

10/15/23

2,000,000

2,080,340

Philadelphia, PA, Authority for IDR, Host Marriot LP Project, Remarketed 10/31/95

7.750%

12/1/17

1,000,000

1,001,670

(a)

Total Pennsylvania

6,837,915

Puerto Rico — 0.6%

Puerto Rico Electric Power Authority, Power Revenue

5.250%

7/1/40

1,000,000

972,420

Tennessee — 1.3%

Shelby County, TN, Health Educational & Housing Facilities Board Revenue, Trezevant Manor Project

5.750%

9/1/37

2,500,000

2,138,200

Texas — 22.8%

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

5.900%

5/1/28

1,500,000

1,537,530

(a)(e)

Burnet County, TX, Public Facility Project Revenue

7.500%

8/1/24

1,375,000

938,506

Garza County, TX, Public Facility Corp.

5.500%

10/1/18

1,000,000

1,010,320

Garza County, TX, Public Facility Corp., Project Revenue

5.750%

10/1/25

2,000,000

2,033,160

Gulf Coast of Texas, IDA, Solid Waste Disposal Revenue, CITGO Petroleum Corp. Project

7.500%

10/1/12

2,000,000

2,027,560

(a)(e)

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

5.625%

11/15/32

2,000,000

1,860,420

Houston, TX, Airport Systems Revenue, Special Facilities, Continental Airlines Inc. Project

6.125%

7/15/27

2,750,000

2,575,925

(a)

Laredo, TX, ISD Public Facility Corp., Lease Revenue, AMBAC

5.000%

8/1/29

1,000,000

1,000,380

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

5.250%

11/1/40

6,000,000

5,674,320

Midlothian, TX, Development Authority, Tax Increment Contract Revenue

6.200%

11/15/29

1,000,000

1,005,150

North Texas Tollway Authority Revenue

5.750%

1/1/40

2,500,000

2,533,250

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

9.000%

10/1/30

2,000,000

1,643,640

Texas Private Activity Bond Surface Transportation Corp., Senior Lien, NTE Mobility Partners LLC

6.875%

12/31/39

2,000,000

2,115,480

Texas Private Activity Bond Surface Transportation Corp. Revenue, LBJ Infrastructure Group LLC

7.000%

6/30/40

4,000,000

4,261,280

Texas State Public Finance Authority:

Charter School Finance Corp. Revenue, Cosmos Foundation Inc.

6.200%

2/15/40

1,000,000

981,610

Uplift Education

5.750%

12/1/27

1,500,000

1,403,400

West Texas Detention Facility Corp. Revenue

8.000%

2/1/25

1,865,000

1,830,423

Willacy County, TX, Local Government Corp. Revenue

6.875%

9/1/28

1,000,000

1,030,000

Willacy County, TX, PFC Project Revenue

8.250%

12/1/23

1,000,000

1,042,480

SECURITY

RATE

MATURITY
DATE

FACE
AMOUNT

VALUE

Texas — continued

Willacy County, TX, PFC Project Revenue, County Jail

7.500%

11/1/25

$

550,000

$

485,177

Total Texas

36,990,011

U.S. Virgin Islands — 1.6%

Virgin Islands Public Finance Authority Revenue, Matching Fund Loan

6.750%

10/1/37

2,500,000

2,614,425

Virginia — 2.2%

Alexandria, VA, Redevelopment & Housing Authority, MFH Revenue, Parkwood Court Apartments Project

8.125%

4/1/30

295,000

276,341

Broad Street CDA Revenue

7.500%

6/1/33

748,000

856,019

(b)

Chesterfield County, VA, EDA, Solid Waste and Sewer Disposal Revenue, Virginia Electric Power Co. Project

5.600%

11/1/31

2,500,000

2,522,025

(a)

Total Virginia

3,654,385

West Virginia — 1.5%

Pleasants County, WV, PCR, Refunding, County Commission, Allegheny Energy Supply Co., LLC

5.250%

10/15/37

2,500,000

2,403,525

Wisconsin — 0.6%

Wisconsin State HEFA Revenue, Aurora Health Care Inc.

6.400%

4/15/33

1,000,000

1,018,370

TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost — $156,624,912)

157,119,578

SHORT-TERM INVESTMENTS — 1.9%

Maryland — 0.7%

Maryland State Stadium Authority, Sports Facilities Lease Revenue, Football Stadium, SPA-Dexia Credit Local

2.000%

3/1/26

1,100,000

1,100,000

(f)(g)

New York — 0.4%

New York City, NY, GO, LOC-Dexia Credit Local

1.400%

1/1/36

700,000

700,000

(f)(g)

North Carolina — 0.7%

Charlotte-Mecklenburg Hospital Authority, NC, Health Care System Revenue, AGM, SPA-Dexia Credit Local

0.900%

1/15/43

1,100,000

1,100,000

(f)(g)

Virginia — 0.1%

Virginia Small Business Financing Authority, Hospital Revenue, Carilion Clinic Obligation, SPA-Wells Fargo Bank N.A.

0.240%

7/1/42

200,000

200,000

(f)(g)

TOTAL SHORT-TERM INVESTMENTS (Cost — $3,100,000)

3,100,000

TOTAL INVESTMENTS — 98.6% (Cost — $159,724,912#)

160,219,578

Other Assets in Excess of Liabilities — 1.4%

2,299,519

TOTAL NET ASSETS — 100.0%

$

162,519,097

(a)

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

(b)

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.

(c)

Bonds are escrowed to maturity by government securities 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)

The coupon payment on these securities is currently in default as of July 31, 2011.

(e)

Maturity date shown represents the mandatory tender date.

(f)

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.

(g)

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.

Abbreviations used in this schedule:

AGM

- Assured Guaranty Municipal Corporation - Insured Bonds

AMBAC

- American Municipal Bond Assurance Corporation - Insured Bonds

CDA

- Communities Development Authority

COP

- Certificates of Participation

DFA

- Development Finance Agency

EDA

- Economic Development Authority

EDR

- Economic Development Revenue

EFA

- Educational Facilities Authority

FGIC

- Financial Guaranty Insurance Company - Insured Bonds

GO

- General Obligation

HEFA

- Health & Educational Facilities Authority

IDA

- Industrial Development Authority

IDR

- Industrial Development Revenue

ISD

- Independent School District

LOC

- Letter of Credit

MFH

- Multi-Family Housing

NATL

- National Public Finance Guarantee Corporation - Insured Bonds

PCR

- Pollution Control Revenue

PFC

- Public Facilities Corporation

SPA

- Standby Bond Purchase Agreement - Insured Bonds

Industrial revenue

31.7

%

Health care

18.0

Leasing

11.4

Transportation

7.1

Pre-refunded/escrowed to maturity

6.4

Special tax obligation

5.9

Education

5.8

Power

5.3

Other

2.9

Solid waste/resource recovery

1.6

Water & sewer

1.3

Local general obligation

0.5

Housing

0.2

Short-term investments

1.9

100.0

%

Standard & Poor’s/Moody’s/Fitch‡

AAA/Aaa

3.6

%

AA/Aa

2.1

A

22.1

BBB/Baa

37.9

BB/Ba

3.9

B/B

1.3

CCC/Caa

1.6

CC/Ca

1.0

D

0.2

A-1/VMIG 1

1.9

NR

24.4

100.0

%

AAA

—

An obligation rated “AAA” has the highest rating assigned by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.

AA

—

An obligation rated “AA” differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.

A

—

An obligation rated “A” is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.

BBB

—

An obligation rated “BBB” exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

BB

—

An obligation rated “BB” is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions, which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.

B

—

An obligation rated “B” is more vulnerable to nonpayment than obligations rated “BB”, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.

CCC

—

An obligation rated “CCC” is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

CC

—

An obligation rated “CC” is currently highly vulnerable to nonpayment.

C

—

The “C” rating may be used to cover a situation where a bankruptcy petition has been filed or similar action has been taken, but payments on this obligation are being continued.

D

—

An obligation rated “D” is in payment default. The “D” rating category is used when payments on an obligation are not made on the date due, even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payments will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments of an obligation are jeopardized.

Aaa

—

Obligations rated “Aaa” are judged to be of the highest quality, with minimal credit risk.

Aa

—

Obligations rated “Aa” are judged to be of high quality and are subject to very low credit risk.

A

—

Obligations rated “A” are considered upper-medium grade and are subject to low credit risk.

Baa

—

Obligations rated “Baa” are subject to moderate credit risk. They are considered medium grade and as such may possess certain speculative characteristics.

Ba

—

Obligations rated “Ba” are judged to have speculative elements and are subject to substantial credit risk.

B

—

Obligations rated “B” are considered speculative and are subject to high credit risk.

Caa

—

Obligations rated “Caa” are judged to be of poor standing and are subject to very high credit risk.

Ca

—

Obligations rated “Ca” are highly speculative and are likely in, or very near, default, with some prospect of recovery for principal and interest.

C

—

Obligations rated “C” are the lowest rated class and are typically in default, with little prospect of recovery for principal and interest.

AAA

—

Obligations rated “AAA” by Fitch denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

AA

—

Obligations rated “AA” denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

A

—

Obligations rated “A” denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.

BBB

—

Obligations rated “BBB” indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.

BB

—

Obligations rated “BB” indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial commitments.

B

—

Obligations rated “B” indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.

CCC

—

Default is a real possibility.

CC

—

Default of some kind appears probable.

C

—

Default is imminent or inevitable, or the issuer is in standstill.

NR

—

Indicates that the obligation is not rated by Standard & Poor’s, Moody’s or Fitch.

SP-1

—

A short-term obligation rated “SP-1” is rated in the highest category by Standard & Poor’s. Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.

SP-2

—

A short-term obligation rated “SP-2” is a Standard & Poor’s rating indicating satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

SP-3

—

A short-term obligation rated “SP-3” is a Standard & Poor’s rating indicating speculative capacity to pay principal and interest.

A-1

—

A short-term obligation rated “A-1” is rated in the highest category by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment on these obligations is extremely strong.

A-2

—

A short-term obligation rated “A-2” by Standard & Poor’s is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment on the obligation is satisfactory.

A-3

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A short-term obligation rated “A-3” by Standard & Poor’s exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

B

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A short-term obligation rated “B” by Standard & Poor’s is regarded as having significant speculative characteristics. Ratings of “B-1”, “B-2” and “B-3” may be assigned to indicate finer distinctions within the “B” category. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.

VMIG 1

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Moody’s highest rating for issues having a variable rate demand feature — VRDO. This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price on demand.

VMIG 2

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This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price on demand.

VMIG 3

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This designation denotes acceptable credit quality. Adequate protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price on demand.

MIG 1

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Moody’s highest rating for short-term municipal obligations. This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.

MIG 2

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This designation denotes strong credit quality. Margins of protection are ample, although not as large as the preceding group.

MIG 3

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This designation denotes acceptable credit quality. Liquidity and cash flow protection may be narrow, and market access for refinancing is likely to be less well-established.

SG

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This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.

P-1

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Moody’s highest rating for commercial paper and for VRDO prior to the advent of the VMIG 1 rating. Have a superior ability to repay short-term debt obligations.

P-2

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Have a strong ability to repay short-term debt obligations.

P-3

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Have an acceptable ability to repay short-term debt obligations.