-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VrsKeoyGiMSxqFVQ5xcctdMutkBQ1aFoFOCrwvOPtwURFF1Kc5hspStKE77r3ViL eMcVh8svj5tCTeRi7zmBMA== 0000950130-02-003359.txt : 20020506 0000950130-02-003359.hdr.sgml : 20020506 ACCESSION NUMBER: 0000950130-02-003359 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020228 FILED AS OF DATE: 20020506 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MANAGED MUNICIPALS PORTFOLIO INC CENTRAL INDEX KEY: 0000886043 STATE OF INCORPORATION: MD FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06629 FILM NUMBER: 02634819 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2124648068 N-30D 1 dn30d.txt MANAGED MUNICIPALS PORTFOLIO INC. Managed Municipals Portfolio Inc. [GRAPHIC] QUARTERLY REPORT February 28, 2002 [GRAPHIC] Managed Municipals Portfolio Inc. Dear Shareholder: We are pleased to provide the quarterly report for Managed Municipals Portfolio Inc. ("Fund") for the nine months ended February 28, 2002. In this report, we summarize the period's prevailing economic and market conditions and outline our investment strategy. A detailed summary of the Fund's performance can be found in the appropriate sections that follow. We hope you find this report to be useful and informative. During the period, the Fund distributed income dividends to shareholders totaling $0.45 per share. The table below details the annualized distribution rate and the nine-month total return for the Fund based on its February 28, 2002 net asset value ("NAV") per share and the New York Stock Exchange ("NYSE") closing price./1/
Price Annualized Nine-Month Per Share Distribution Rate/2/ Total Return/2/ ------ ------------------- -------------- $11.84 (NAV) 5.07% 5.18% $10.75 (NYSE) 5.58% 5.07%
- ----- 1The NAV is calculated by subtracting total liabilities from the closing value of all securities held by the Fund (plus all other assets) and dividing the result (total net assets) by the total number of the Fund's shares outstanding. The NAV fluctuates with the changes in the market price of the securities in which the Fund has invested. However, the price at which an investor may buy or sell shares of the Fund is at their market (NYSE) price as determined by supply of and demand for the Fund's shares. 2Total returns are based on changes in NAV or the market value, respectively. Total returns assume the reinvestment of all dividends and/or capital gains distributions in additional shares. Annualized distribution rate is the Fund's current monthly income dividend rate, annualized, and then divided by the NAV or the maket value noted in this report. This annualized distribution rate assumes a current monthly income dividend rate of $0.050 for 12 months. This rate is as of March 31, 2002 and is subject to change. The important difference between a total return and an annualized distribution rate is that the total return takes into consideration a number of factors including the fluctuation of the NAV or the market value during the period reported. The NAV fluctuation includes the effects of unrealized appreciation or depreciation in the Fund. Accordingly, since an annualized distribution rate only reflects the current monthly income dividend rate annualized, it should not be used as the sole indicator to judge the return you receive from your Fund investment. Past performance is not indicative of future results. [GRAPHIC] 1 During the period, the Fund generated a total return based on NAV of 5.18%. In comparison, the Fund's Lipper Inc. ("Lipper")/3/ peer group of general and insured municipal funds (unleveraged) returned 4.27% for the same period. Special Notice to Shareholders At the time this report was prepared, a plan to merge Managed Municipals Portfolio II Inc. into Managed Municipals Portfolio Inc. was awaiting shareholder approval. If the plan is approved, shareholders of Managed Municipals Portfolio II Inc. will become shareholders of Managed Municipals Portfolio Inc. Investment Objective The Fund seeks as high a level of current income exempt from Federal income tax as is consistent with the preservation of principal./4/ Market Overview and Outlook The U.S. Federal Reserve Board ("Fed") lowered short-term interest rates eleven times in 2001, effectively reducing the federal funds rate ("fed funds rate")/5/ to its lowest level in several decades. In addition, after September 11th, the Fed injected $190 billion in liquidity into the system in the form of loans to banks and investment dealers. We believe that both of these actions provided a much-needed boost to an economy that is now showing some very early signs of recovery. Although the economy may limp along for another quarter or two, we believe that it is probably in the early stages of recovery and that a fairly powerful economic recovery should gain momentum by late 2002. However, this recovery could possibly be slowed by lingering skepticism about truthfulness in corporate accounting practices, along with some possible delays in corporate earnings releases for the first two or three quarters of 2002 as - ----- 3Lipper is a major independent mutual fund tracking organization. 4Certain investors may be subject to the Federal Alternative Minimum Tax ("AMT"), and state and local taxes may apply. Capital gains, if any, are fully taxable. 5The fed funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. The fed funds rate often points to the direction of U.S. interest rates. [GRAPHIC] 2 executives check and double-check their financial reports before releasing them. We also believe that corporate profits may be somewhat disappointing for the first six to eight months of the year but will improve enough to exceed investor expectations by late 2002 and early 2003. In our opinion, the fiscal stimulus package that was passed by Congress in early 2002 should help the economy because it was aimed at corporations -- which we believe led the economy into recession. In our view, the fact that the package was smaller than anticipated should not prevent its effectiveness. With this economic scenario in mind, we believe the Fed will most likely keep interest rates steady until the economy is on solid footing. Its aggressive reductions of the fed funds rate in 2001 were designed to bring short-term interest rates down to a level that would be so compellingly unattractive that investors might be inspired to begin moving the massive amounts of money that they had transferred into money market funds back into the stock and bond market, and into the economy in general. Massive amounts of money remain on the sidelines. In March 2002, money market funds contained roughly $2.35 trillion -- which represents roughly 26% of the entire Wilshire 5000 Total Market Index./6/ We believe the Fed wants to be certain that those funds are flowing back into the market before considering any rate hikes. Although recent activity in the bond market indicates that an economic recovery may be imminent, we believe this optimism may be slightly premature. For the next six to eight months, we anticipate the bond market will remain an attractive market for investors. One of the reasons municipal bonds were so attractively priced at the end of the period is that there were roughly $290 billion in new issues in 2001 -- the second-highest issuance level on record. However, much of this issuance was from refinancings, not from newly issued products. In 2002, we believe roughly $200 billion of new issuance will occur, which, in our view, could help municipal bonds outperform most other fixed-income products during the next 12 to 18 months. We believe there will be a significant drop in supply over the next year or two, with the exception of a large energy-related issuance in California. Because we anticipate a shortage of supply with continued high demand, we believe that municipal bonds will perform well versus their taxable counterparts going forward. - ----- 6The Wilshire 5000 Total Market Index is the broadest stock market indicator covering the performance of the entire U.S. equity market, which consists of over 7,000 U.S. headquartered equity securities individually weighted by market capitalization. Please note that an investor cannot invest directly in an index. [GRAPHIC] 3 Fund Outlook In general, we anticipate maintaining a fairly aggressive stance during the next several months. We are currently focusing on high-grade obligations with an average maturity of roughly 20 years with lower credit risk. As the economy improves, we anticipate transferring some cash to the sidelines and taking a slightly more conservative stance than we have taken in the past several years. Thank you for investing in the Managed Municipals Portfolio Inc. Sincerely, /s/ Heath B. McLendon /s/ Joseph P. Deane Heath B. McLendon Joseph P. Deane Chairman Vice President and Investment Officer March 12, 2002 The information provided in this letter represents the opinion of the manager and is not intended to be a forecast of future events, a guarantee of future results nor investment advice. Further, there is no assurance that certain securities will remain in or out of the Fund. Please refer to pages 6 through 14 for a list and percentage breakdown of the Fund's holdings. Also, please note any discussion of the Fund's holdings is as of February 28, 2002 and is subject to change. [GRAPHIC] 4 Take Advantage of the Fund's Dividend Reinvestment Plan! Did you know that Fund investors who reinvest their dividends are taking advantage of one of the most effective wealth-building tools available today? Systematic investments put time to work for you through the strength of compounding. As an investor in the Fund, you can participate in its Dividend Reinvestment Plan ("Plan"), a convenient, simple and efficient way to reinvest your dividends and capital gains, if any, in additional shares of the Fund. Below is a short summary of how the Plan works. Plan Summary If you are a Plan participant who has not elected to receive your dividends in the form of a cash payment, then your dividend and capital gain distributions will be reinvested automatically in additional shares of the Fund. The number of common stock shares in the Fund you will receive in lieu of a cash dividend is determined in the following manner. If the market price of the common stock is equal to or exceeds the net asset value per share ("NAV") on the determination date, you will be issued shares by the Fund at a price reflecting the NAV, or 95% of the market price, whichever is greater. If the market price is less than the NAV at the time of valuation (the close of business on the determination date), or if the Fund declares a dividend or capital gains distribution payable only in cash, PFPC Global Fund Services ("Plan Agent"), will buy common stock for your account in the open market. If the Plan Agent begins to purchase additional shares in the open market and the market price of the shares subsequently rises above the previously determined NAV before the purchases are completed, the Plan Agent will attempt to terminate purchases and have the Fund issue the remaining dividend or distribution in shares at the greater of the previously determined NAV or 95% of the market price. In that case, the number of Fund shares you receive will be based on the weighted average of prices paid for shares purchased in the open market and the price at which the Fund issues the remaining shares. A more complete description of the current Plan appears in this report beginning on page 28. To find more detailed information about the Plan and about how you can participate, please call PFPC Global Fund Services at (800) 331-1710. [GRAPHIC] 5 SCHEDULE OF INVESTMENTS February 28, 2002 (unaudited)
Face Amount Rating(a) Security Value - ---------------------------------------------------------------------------------- MUNICIPAL BONDS AND NOTES -- 100.0% Alabama -- 0.8% $3,160,000 AAA Mobile County, AL Board of School Commissioners, Capital Outlay Warrants, Series B, AMBAC-Insured, 5.125% due 3/1/26 $ 3,161,106 - ---------------------------------------------------------------------------------- Alaska -- 1.1% 4,000,000 AA+ Valdez, AK Marine Terminal Revenue Refunding, BP Pipelines Inc. Project, Series A, 5.850% due 8/1/25 4,060,040 - ---------------------------------------------------------------------------------- Arizona -- 1.4% 4,000,000 AAA Mesa, AZ IDA, Discovery Health Systems, Series A, MBIA-Insured, 5.625% due 1/1/29 4,167,600 1,000,000 AA Salt River Project, Agricultural Improvement & Power District, Electric System Revenue, 5.000% due 1/1/31 993,880 - ---------------------------------------------------------------------------------- 5,161,480 - ---------------------------------------------------------------------------------- California -- 7.1% 4,540,000 Ba1* California Educational Facilities Authority Revenue, (Pooled College & University Projects), Series A, 5.625% due 7/1/23 4,238,317 4,000,000 A3* California Health Facilities Authority Revenue, (Cedars-Sinai Medical Center), Series A, 6.250% due 12/1/34 4,285,760 1,000,000 A+ California Health Facilities Financing Authority Revenue, Sutter Health, Series A, 6.250% due 8/15/35 1,062,960 5,000,000 AAA Los Angeles County, CA COP, Antelope Valley Courthouse, Series A, AMBAC-Insured, 5.250% due 11/1/33 5,083,100 3,340,000 AAA Rancho Cucamonga, CA Redevelopment Agency Tax Allocation, (Rancho Redevelopment Project), MBIA-Insured, 5.125% due 9/1/30 3,368,691 2,000,000 AAA Riverside, CA Unified School District GO, Series A, FGIC-Insured, 5.000% due 2/1/27 1,988,620 2,750,000 AAA Sacramento County, CA COP, (Public Facilities Project), MBIA-Insured, 5.375% due 2/1/19 2,899,682 2,500,000 AAA San Francisco, CA City & County Airports Commission, International Airport Revenue, Second Series-27B, FGIC-Insured, 5.000% due 5/1/22 2,521,775
SEE NOTES TO FINANCIAL STATEMENTS. ======================== [GRAPHIC] 6 SCHEDULE OF INVESTMENTS February 28, 2002 (unaudited) (continued)
Face Amount Rating(a) Security Value - --------------------------------------------------------------------------------- California -- 7.1% (continued) $ 1,000,000 AAA San Jose, CA Redevelopment Agency Tax Allocation, (Merged Area Redevelopment Project), MBIA-Insured, 5.000% due 8/1/32 $ 990,690 - -------------------------------------------------------------------------------- 26,439,595 - -------------------------------------------------------------------------------- Colorado -- 14.7% 3,000,000 AAA Arapahoe County, CO Capital Improvement Trust Fund, E-470 Public Highway Authority Revenue, (Pre-Refunded -- Escrowed with U.S. government securities to 8/31/05 Call @ 103), 7.000% due 8/31/26 3,506,520 4,000,000 AAA Colorado Educational & Cultural Facilities Revenue Refunding, (University of Denver Project), AMBAC-Insured, 5.375% due 3/1/23 4,119,200 3,000,000 A Colorado Health Facilities Authority Revenue, Series B, Remarketed 7/8/98, 5.350% due 8/1/15 3,054,180 2,000,000 BBB+ Colorado Springs, CO Airport Revenue, Series A, 7.000% due 1/1/22 (b) 2,055,800 60,000,000 Aaa* Dawson Ridge, CO Metropolitan District No. 1, Series B, (Escrowed to maturity with REFCO Strips), zero coupon due 10/1/22 16,983,600 Denver, CO City & County Airport Revenue, Series C: 3,155,000 A 6.750% due 11/15/22 (b) 3,265,677 10,165,000 A 6.125% due 11/15/25 (b) 10,668,269 8,160,000 A Escrowed to maturity with U.S. government securities, 6.125% due 11/15/25 (b)(c) 9,400,646 845,000 Aaa* Pre-Refunded -- Escrowed with U.S. government securities to 11/15/02 Call @ 102, 6.750% due 11/15/22 (b) 892,726 1,000,000 AAA Denver, CO City & County COP, Series B, AMBAC-Insured, 5.500% due 12/1/25 1,033,420 - -------------------------------------------------------------------------------- 54,980,038 - -------------------------------------------------------------------------------- Connecticut -- 0.3% 1,000,000 AAA Connecticut State Health & Education, (Child Care Facilities Project), Series C, AMBAC- Insured, 5.625% due 7/1/29 1,049,080 - --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. ======================== [GRAPHIC] 7 SCHEDULE OF INVESTMENTS February 28, 2002 (unaudited) (continued)
Face Amount Rating(a) Security Value - ----------------------------------------------------------------------------- Florida -- 8.0% $ 3,000,000 AAA Florida State Board & Educational Capital Outlay GO, FSA-Insured, 5.000% due 6/1/24 $ 2,983,830 3,000,000 AA+ Florida State Board of Education GO, Series A, 5.125% due 6/1/21 3,029,460 1,145,000 AAA Florida State Department of Transportation GO, FGIC-Insured, 5.000% due 7/1/25 1,137,122 10,000,000 A+ Jacksonville, FL Electric Authority, Water & Sewer Revenue, Series A, 5.375% due 10/1/35 10,004,400 5,000,000 BBB- Martin County, FL IDA, (Indiantown Cogeneration Project), Series A, 7.875% due 12/15/25 (b) 5,262,950 1,000,000 AAA Miami Beach, FL Stormwater Revenue, FGIC-Insured, 5.375% due 9/1/30 1,018,970 2,000,000 Aaa* Orange County, FL School Board COP, Series A, MBIA-Insured, 5.250% due 8/1/23 2,032,500 Tampa, FL Revenue, (Florida Aquarium Inc. Project), (Pre-Refunded -- Escrowed with U.S. government securities to 5/1/02 Call @ 102): 2,345,000 NR 7.550% due 5/1/12 (c) 2,414,248 2,000,000 NR 7.750% due 5/1/27 (c) 2,059,680 - ----------------------------------------------------------------------------- 29,943,160 - ----------------------------------------------------------------------------- Georgia -- 2.3% 3,500,000 AAA Augusta, GA Water & Sewer Revenue, FSA-Insured, 5.250% due 10/1/26 3,560,445 Private Colleges & Universities Authority Revenue, (Mercer University Project): 2,180,000 A3* 5.750% due 10/1/21 2,224,232 2,000,000 A3* Series A, 5.250% due 10/1/25 1,997,240 1,000,000 BBB- Savannah, GA EDA Revenue, College of Art & Design Inc., 6.900% due 10/1/29 1,048,430 - ----------------------------------------------------------------------------- 8,830,347 - ----------------------------------------------------------------------------- Hawaii -- 0.5% 2,000,000 A Hawaii State Department of Budget & Finance, Special Purpose Revenue, Kaiser Permanente, Series A, 5.100% due 3/1/14 1,994,660 - -----------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. ======================== [GRAPHIC] 8 SCHEDULE OF INVESTMENTS February 28, 2002 (unaudited) (continued)
Face Amount Rating(a) Security Value - -------------------------------------------------------------------------------- Illinois -- 6.9% $ 4,095,000 AAA Chicago, IL GO, Series D, FGIC-Insured, 5.500% due 1/1/35 $ 4,204,050 6,000,000 AAA Chicago, IL Skyway Toll Bridge Revenue, AMBAC-Insured, 5.500% due 1/1/31 6,184,800 8,000,000 A Illinois Health Facilities Authority Revenue, OSF Healthcare Systems, 6.250% due 11/15/29 8,257,280 Illinois State GO: 5,000,000 AAA MBIA-Insured, 5.625% due 6/1/25 5,191,400 2,000,000 AAA Series 1, FGIC-Insured, 5.125% due 2/1/20 2,014,580 - -------------------------------------------------------------------------------- 25,852,110 - -------------------------------------------------------------------------------- Indiana -- 1.4% 5,000,000 A1* Indiana Port Commission Revenue Refunding, (Cargill Inc. Project), 6.875% due 5/1/12 5,121,850 - -------------------------------------------------------------------------------- Louisiana -- 1.5% 5,500,000 A1* St. Martin Parish, LA Industrial Revenue, (Cargill Inc. Project), 6.625% due 10/1/12 5,693,930 - -------------------------------------------------------------------------------- Maryland -- 0.1% 10,000,000 NR Maryland State Energy Financing Administration, Solid Waste Disposal Revenue, (Hagerstown Recycling Project), 9.000% due 10/15/16 (b)(d) 350,000 - -------------------------------------------------------------------------------- Massachusetts -- 0.5% 2,000,000 AA+ Massachusetts Bay Transportation Authority, Sales Tax Revenue, Series A, 5.500% due 7/1/30 2,063,120 - -------------------------------------------------------------------------------- Michigan -- 4.9% 2,000,000 AAA Anchor Bay, MI School District GO, Q-SBLF-Insured, 5.000% due 5/1/29 1,959,120 3,000,000 AAA East Lansing, MI School District GO, Q-SBLF-Insured, 5.625% due 5/1/30 3,120,030 2,000,000 AAA Howell, MI Public Schools GO, Q-SBLF-Insured, 5.250% due 5/1/22 2,033,300 Michigan State COP, AMBAC-Insured: 2,345,000 AAA 5.500% due 6/1/19 2,444,100 4,000,000 AAA 5.500% due 6/1/27 4,130,640 8,000,000 NR Michigan State Strategic Fund Resources Recovery, Limited Obligation Revenue, Central Wayne Energy Recovery L.P., Series A, 7.000% due 7/1/27 (b)(d) 4,800,000 - -------------------------------------------------------------------------------- 18,487,190 - --------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. ======================== [GRAPHIC] 9 SCHEDULE OF INVESTMENTS February 28, 2002 (unaudited) (continued)
Face Amount Rating(a) Security Value - ------------------------------------------------------------------------------- Minnesota -- 2.5% $ 1,500,000 AAA Dakota County, MN Community Development Agency, MFH Revenue, FNMA-Collateralized, 5.625% due 2/1/26 $ 1,532,565 2,500,000 A1* Duluth, MN IDA, Seaway Port Authority, Dock & Wharf Revenue, (Cargill Inc. Project), 6.800% due 5/1/12 2,560,925 Minneapolis & St. Paul, MN Community Airport Revenue, FGIC-Insured: 1,000,000 AAA Series A, 5.125% due 1/1/25 996,590 3,000,000 AAA Sub-Series C, 5.250% due 1/1/26 3,018,720 1,225,000 AA+ Minnesota State Housing Financing Agency, Single-Family Mortgage, Series I, 5.500% due 1/1/17 1,272,726 - ------------------------------------------------------------------------------- 9,381,526 - ------------------------------------------------------------------------------- Missouri -- 0.8% 1,000,000 VMIG 1* Missouri State Health & Educational Facilities Authority, St. Louis University, Series B, 1.350% due 10/1/24 (e) 1,000,000 2,000,000 AAA St. Louis, MO Airport Revenue, (Airport Development Program), Series A, MBIA-Insured, 5.000% due 7/1/21 2,011,700 - ------------------------------------------------------------------------------- 3,011,700 - ------------------------------------------------------------------------------- Montana -- 2.0% 8,000,000 NR Montana State Board Investment Resource Recovery Revenue, (Yellowstone Energy L.P. Project), 7.000% due 12/31/19 (b) 7,460,720 - ------------------------------------------------------------------------------- Nevada -- 0.9% 3,500,000 AAA Truckee Meadows, NV Water Authority Revenue, Series A, FSA-Insured, 5.000% due 7/1/25 3,428,950 - ------------------------------------------------------------------------------- New Jersey -- 3.5% 5,200,000 A+ Hudson County, NJ Improvement Authority, 6.625% due 8/1/25 5,361,876 5,000,000 A+ New Jersey Health Care Facilities Financing Authority Revenue, Robert Wood Johnson University Hospital, 5.700% due 7/1/20 5,235,500 2,395,000 AA- New Jersey State Highway Authority, Garden State Parkway General Revenue, 5.625% due 1/1/30 2,526,102 - ------------------------------------------------------------------------------- 13,123,478 - -------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. ======================== [GRAPHIC] 10 SCHEDULE OF INVESTMENTS February 28, 2002 (unaudited) (continued)
Face Amount Rating(a) Security Value - -------------------------------------------------------------------------------- New Mexico -- 0.5% $ 1,670,000 AAA New Mexico Mortgage Financing Authority, Single-Family Mortgages, Series D-3, 5.625% due 9/1/28 $ 1,710,147 - -------------------------------------------------------------------------------- New York -- 4.5% 3,000,000 AAA Nassau Health Care Corp., NY Health Systems Revenue, Nassau County Guaranteed, FSA-Insured, 5.750% due 8/1/29 3,164,730 3,500,000 AA New York City, NY Municipal Water Financing Authority, Water & Sewer System Revenue, Series D, 5.250% due 6/15/25 3,546,900 3,000,000 AAA New York State Dormitory Authority Revenue, Series B, FSA-Insured, 5.500% due 5/15/30 3,108,720 3,000,000 AAA New York State Thruway Authority, Highway & Bridge Revenue, Series B-1, FGIC-Insured, 5.400% due 4/1/17 3,151,290 4,000,000 AA- Triborough Bridge & Tunnel Authority, NY GO, Series A, 5.000% due 1/1/32 3,914,760 - -------------------------------------------------------------------------------- 16,886,400 - -------------------------------------------------------------------------------- North Dakota -- 2.1% 8,000,000 AAA Oliver County, ND PCR, AMBAC-Insured, 5.300% due 1/1/27 8,061,040 - -------------------------------------------------------------------------------- Ohio -- 11.4% 4,500,000 Aa2* Bexley, OH City School District GO, 5.125% due 12/1/27 4,483,710 2,000,000 AAA Canton, OH City School District GO, Series A, MBIA-Insured, 5.500% due 12/1/20 2,088,640 Cincinnati, OH Water System Revenue: 1,345,000 AA+ 5.000% due 12/1/20 1,347,851 1,700,000 AA+ 5.125% due 12/1/21 1,716,694 4,500,000 AAA Cleveland, OH Airport System Revenue, Series A, FSA-Insured, 5.000% due 1/1/31 4,412,115 2,000,000 AAA Cuyahoga County, OH Hospital Revenue Refunding, University Hospitals Health System Inc., AMBAC-Insured, 5.500% due 1/15/30 2,051,340 10,000,000 Aaa* Hamilton County, OH Sales Tax Revenue, AMBAC-Insured, 5.250% due 12/1/32 10,103,900
SEE NOTES TO FINANCIAL STATEMENTS. ======================== [GRAPHIC] 11 SCHEDULE OF INVESTMENTS February 28, 2002 (unaudited) (continued)
Face Amount Rating(a) Security Value - -------------------------------------------------------------------------------- Ohio -- 11.4% (continued) $ 4,000,000 AAA Lucas County, OH Hospital Revenue, Promedia Healthcare Obligation Group, AMBAC-Insured, 5.375% due 11/15/29 $ 4,064,640 3,025,000 Aaa* Muskingum County, OH GO Refunding, County Facilities Improvement, MBIA-Insured, 5.125% due 12/1/19 3,084,018 1,375,000 AAA Ohio State Higher Educational Facility Commission Revenue, (University of Dayton Project), AMBAC-Insured, 5.500% due 12/1/25 1,432,764 2,500,000 AAA Portage County, OH GO, MBIA-Insured, 5.250% due 12/1/17 2,591,450 1,500,000 Aaa* Trumbull County, OH MBIA-Insured, 5.200% due 12/1/20 1,537,005 2,000,000 AAA University of Cincinnati, OH General Receipts Revenue, Series A, FGIC-Insured, 5.250% due 6/1/24 2,036,320 1,500,000 AAA Warrensville Heights, OH City School District, School Improvements, FGIC-Insured, 5.625% due 12/1/20 1,592,850 - -------------------------------------------------------------------------------- 42,543,297 - -------------------------------------------------------------------------------- Oregon -- 2.2% 3,210,000 AA Clackamas County, OR Hospital Facilities Authority Revenue, Legacy Health System, 5.750% due 5/1/16 3,423,369 5,000,000 Aaa* Clackamas County, OR School District No. 007J GO, Lake Oswego, MBIA-Insured, 5.000% due 6/1/26 4,964,900 - -------------------------------------------------------------------------------- 8,388,269 - -------------------------------------------------------------------------------- Pennsylvania -- 0.7% 2,500,000 AAA Allegheny County, PA Sanitary Authority, Sewer Revenue, MBIA-Insured, 5.375% due 12/1/24 2,559,350 - -------------------------------------------------------------------------------- Puerto Rico -- 1.4% 5,000,000 A- Puerto Rico Public Finance Corp. Revenue, Series E, 5.750% due 8/1/30 5,108,800 - -------------------------------------------------------------------------------- South Carolina -- 2.4% 2,000,000 A3* Myrtle Beach, SC COP, Myrtle Beach Convention Center, (Pre-Refunded -- Escrowed with U.S. government securities to 7/1/02 Call @ 102), 6.875% due 7/1/07 (c) 2,075,500
SEE NOTES TO FINANCIAL STATEMENTS. ======================== [GRAPHIC] 12 SCHEDULE OF INVESTMENTS February 28, 2002 (unaudited) (continued)
Face Amount Rating(a) Security Value - ------------------------------------------------------------------------------- South Carolina -- 2.4% (continued) $ 3,000,000 AAA South Carolina State Public Service Authority Revenue, Series B, FSA- Insured, 5.125% due 1/1/37 $ 2,963,760 South Carolina Transportation Infrastructure Bank Revenue, Series A: 3,000,000 AAA AMBAC-Insured, 5.500% due 10/1/30 3,101,310 1,000,000 Aaa* MBIA-Insured, 5.125% due 10/1/31 999,200 - ---------------------------------------------------------------------------- 9,139,770 - ---------------------------------------------------------------------------- Tennessee -- 1.4% 1,150,000 NR Hardeman County, TN Correctional Facilities Corp., 7.750% due 8/1/17 1,144,767 Sevier County, TN Public Building Authority, Local Government Improvements: 800,000 VMIG 1* Project IV-H-1, 1.300% due 6/1/25 (e) 800,000 100,000 VMIG 1* Series IV-3, 1.300% due 6/1/25 (e) 100,000 3,000,000 Aa2* Tennessee State GO, Series A, 5.250% due 3/1/17 3,116,940 - ---------------------------------------------------------------------------- 5,161,707 - ---------------------------------------------------------------------------- Texas -- 3.3% 1,160,000 AAA Burleson, TX ISD, GO, PSFG, 6.750% due 8/1/24 1,285,164 Fort Worth, TX International Airport Facility Improvement Corp. Revenue, (American Airlines Inc. Project): 8,000,000 BB- 6.375% due 5/1/35 (c) 6,076,640 2,000,000 BB- Series A, 5.950% due 5/1/29 (b) 1,942,720 2,000,000 BB- Series B, 6.050% due 5/1/29 (b) 1,883,020 1,000,000 AAA Harris County, TX Health Facilities, Development Corp., Hospital Revenue, School Health Care Systems, Series B, (Escrowed to maturity with U.S. government securities), 5.750% due 7/1/27 1,105,430 - ---------------------------------------------------------------------------- 12,292,974 - ---------------------------------------------------------------------------- Virginia -- 3.7% Virginia State HDA, MFH: 1,655,000 AA+ Series D, 6.250% due 1/1/15 1,730,054 1,235,000 AAA Series H, AMBAC-Insured, 6.300% due 11/1/15 1,305,346
SEE NOTES TO FINANCIAL STATEMENTS. ======================== [GRAPHIC] 13 SCHEDULE OF INVESTMENTS February 28, 2002 (unaudited) (continued)
Face Amount Rating(a) Security Value - ------------------------------------------------------------------------------- Virginia -- 3.7% (continued) $10,000,000 AAA Series H, Sub-Series H-1, MBIA-Insured, 5.350% due 7/1/31 $ 10,145,800 600,000 AA+ Series K, 5.800% due 11/1/10 640,380 - ------------------------------------------------------------------------------- 13,821,580 - ------------------------------------------------------------------------------- Washington -- 3.7% Chelan County, WA GO, Public Utilities, District No. 1, Columbus River Rock: 22,685,000 AAA Series A, MBIA-Insured, zero coupon due 6/1/22 7,731,275 4,750,000 AA Series B, Remarketed 7/1/92, Mandatory put 7/1/19, 6.750% due 7/1/62 (b) 5,139,738 1,000,000 AAA Washington State GO, Series 02-A, FSA-Insured, 5.000% due 7/1/25 979,700 - ------------------------------------------------------------------------------- 13,850,713 - ------------------------------------------------------------------------------- Wisconsin -- 1.5% 4,070,000 AA- Wisconsin State GO, Series B, 6.600% due 1/1/22 (b) 4,128,038 Wisconsin State Health & Educational Facilities Authority Revenue, MBIA-Insured: 1,100,000 A Kenosha Hospital & Medical Center Project, 5.700% due 5/15/20 1,092,509 250,000 AAA The Medical College of Wisconsin Inc. Project, MBIA-Insured, 5.400% due 12/1/16 260,283 - ------------------------------------------------------------------------------- 5,480,830 - ------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100% (COST -- $372,365,990**) $374,598,957 - -------------------------------------------------------------------------------
(a)All ratings are by Standard & Poor's Ratings Service, except for those which are identified by an asterisk (*), are rated by Moody's Investors Service, Inc. (b)Income from this issue is considered a preference item for purposes of calculating the alternative minimum tax. (c)Pre-Refunded bonds escrowed by U.S. government securities and bonds escrowed to maturity with U.S. government securities are considered by the investment advisor to be triple-A rated even if issuer has not applied for new ratings. (d)Security is currently in default. (e)Variable rate obligation payable at par on demand at any time on no more than seven days notice. ** Aggregate cost for Federal income tax purposes is substantially the same. See pages 16 and 17 for definitions of ratings and certain security descriptions. SEE NOTES TO FINANCIAL STATEMENTS. ======================== [GRAPHIC] 14 SUMMARY OF INVESTMENTS BY COMBINED RATINGS February 28, 2002 (unaudited) Percentage of Moody's and/or Standard & Poor's Total Investments Aaa AAA 52.4% Aa AA 12.6 A A 23.6 Baa BBB 2.2 Ba BB 3.8 VMIG 1 A-1 0.5 NR NR 4.9 ----- 100.0% ===== [GRAPHIC] 15 BOND RATINGS (unaudited) The definitions of the applicable rating symbols are set forth below: Standard & Poor's Ratings Service ("Standard and Poor's") -- Ratings from "AA" to "B" may be modified by the addition of a plus (+) or minus (-) sign to show relative standings within the major rating categories. AAA --Bonds rated "AAA" have the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA --Bonds rated "AA" have a very strong capacity to pay interest and repay principal and differs from the highest rated issue only in a small degree. A --Bonds rated "A" have a strong capacity to pay interest and repay principal although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB --Bonds rated "BBB" are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than in higher rated categories. BB --Bonds rated "BB" and "B" are regarded, on balance, as predominantly speculative and B with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. "BB" indicates the lowest degree of speculation and "B" the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. Moody's Investors Service, Inc. ("Moody's") -- Numerical modifiers 1, 2 and 3 may be applied to each generic rating from "Aa" to "Ba," where 1 is the highest and 3 the lowest ranking within its generic category. Aaa --Bonds rated "Aaa" are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa --Bonds rated "Aa" are judged to be of high quality by all standards. Together with the "Aaa" group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large in "Aaa" securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in "Aaa" securities. A --Bonds rated "A" possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future. Baa --Bonds rated "Baa" are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba --Bonds that are rated "Ba" are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. NR --Indicates that the bond is not rated by Standard & Poor's or Moody's.
[GRAPHIC] 16 SHORT-TERM SECURITY RATINGS (unaudited) SP-1 --Standard & Poor's highest rating indicating very strong or strong capacity to pay principal and interest; those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign. A-1 --Standard & Poor's highest commercial paper and variable-rate demand obligation (VRDO) rating indicating that the degree of safety regarding timely payment is either overwhelming or very strong; those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign. VMIG 1 --Moody's highest rating for issues having a demand feature -- VRDO. P-1 --Moody's highest rating for commercial paper and for VRDO prior to the advent of the VMIG 1 rating. SECURITY DESCRIPTIONS (unaudited) ABAG --Association of Bay Area Governments AIG --American International Guaranty AMBAC --AMBAC Indemnity Corporation BAN --Bond Anticipation Notes BIG --Bond Investors Guaranty CDA --Community Development Administration CGIC --Capital Guaranty Insurance Company CHFCLI --California Health Facility Construction Loan Insurance COP --Certificate of Participation EDA --Economic Development Authority ETM --Escrowed To Maturity FAIRS --Floating Adjustable Interest Rate Securities FGIC --Financial Guaranty Insurance Company FHA --Federal Housing Administration FHLMC --Federal Home Loan Mortgage Corporation FNMA --Federal National Mortgage Association FRTC --Floating Rate Trust Certificates FSA --Financial Security Assurance GIC --Guaranteed Investment Contract GNMA --Government National Mortgage Association GO --General Obligation HDA --Housing Development Authority HDC --Housing Development Corporation HFA --Housing Finance Authority IDA --Industrial Development Authority IDB --Industrial Development Board IDR --Industrial Development Revenue INFLOS --Inverse Floaters ISD --Independent School District LOC --Letter of Credit MBIA --Municipal Bond Investors Assurance Corporation MFH --Multi-Family Housing MVRICS --Municipal Variable Rate Inverse Coupon Security PCR --Pollution Control Revenue PFA --Public Finance Authority PSFG --Permanent School Fund Guaranty Q-SBLF --Qualified School Bond Loan Fund RAN --Revenue Anticipation Notes RIBS --Residual Interest Bonds RITES --Residual Interest Tax-Exempt Securities SYCC --Structured Yield Curve Certificate TAN --Tax Anticipation Notes TECP --Tax Exempt Commercial Paper TOB --Tender Option Bonds TRAN --Tax and Revenue Anticipation Notes VAN --Veterans Administration VRDD --Variable Rate Daily Demand VRWE --Variable Rate Wednesday Demand [GRAPHIC] 17 STATEMENT OF ASSETS AND LIABILITIES (unaudited)
February 28, 2002 - -------------------------------------------------------------------------------- ASSETS: Investments, at value (Cost -- $372,365,990) $374,598,957 Interest receivable 4,875,758 Receivable for securities sold 190,000 - ------------------------------------------------------------------------------- Total Assets 379,664,715 - ------------------------------------------------------------------------------- LIABILITIES: Payable for securities purchased 1,980,200 Dividends payable 326,734 Investment advisory fee payable 89,911 Payable to bank 73,803 Administration fee payable 57,828 Accrued expenses 105,862 - ------------------------------------------------------------------------------- Total Liabilities 2,634,338 - ------------------------------------------------------------------------------- Total Net Assets $377,030,377 - ------------------------------------------------------------------------------- NET ASSETS: Par value of capital shares $ 31,849 Capital paid in excess of par value 387,408,505 Overdistributed net investment income (306,239) Accumulated net realized loss from security transactions (12,336,705) Net unrealized appreciation of investments 2,232,967 - ------------------------------------------------------------------------------- Total Net Assets (Equivalent to $11.84 a share on 31,848,644 shares of $0.001 par value outstanding; 500,000,000 shares authorized) $377,030,377 - -------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. ======================== [GRAPHIC] 18 STATEMENT OF OPERATIONS (unaudited)
Nine Months Ended February 28, 2002 - ------------------------------------------------------------------------------ INVESTMENT INCOME: Interest $15,709,851 - ----------------------------------------------------------------------------- EXPENSES: Investment advisory fee (Note 3) 1,981,420 Administration fee (Note 3) 566,120 Shareholder communications 120,668 Shareholder and system servicing fees 74,724 Audit and legal 42,541 Directors' fees 40,101 Registration fees 22,438 Custody 12,921 Pricing service fees 12,063 Other 61,978 - ----------------------------------------------------------------------------- Total Expenses 2,934,974 Less: Investment advisory fee waiver (Note 3) (1,169,139) - ----------------------------------------------------------------------------- Net Expenses 1,765,835 - ----------------------------------------------------------------------------- Net Investment Income 13,944,016 - ----------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 4): Realized Gain From Security Transactions (excluding short-term securities): Proceeds from sales 87,026,316 Cost of securities sold 85,483,776 - ----------------------------------------------------------------------------- Net Realized Gain 1,542,540 - ----------------------------------------------------------------------------- Increase in Net Unrealized Appreciation (Note 1) 2,097,842 - ----------------------------------------------------------------------------- Net Gain on Investments 3,640,382 - ----------------------------------------------------------------------------- Increase in Net Assets From Operations $ 17,584,398 - -----------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. ======================== [GRAPHIC] 19 STATEMENTS OF CHANGES IN NET ASSETS
Nine Months Ended February 28, 2002 Year Ended (unaudited) May 31, 2001 -------------------------------------------------------------------------- OPERATIONS: Net investment income $ 13,944,016 $ 19,132,327 Net realized gain 1,542,540 3,688,224 Increase in net unrealized appreciation 2,097,842 21,646,189 -------------------------------------------------------------------------- Increase in Net Assets From Operations 17,584,398 44,466,740 -------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2): Net investment income (14,331,890) (19,162,536) -------------------------------------------------------------------------- Decrease in Net Assets From Distributions to Shareholders (14,331,890) (19,162,536) -------------------------------------------------------------------------- FUND SHARE TRANSACTIONS (NOTE 8): Treasury stock acquired -- (3,648,358) -------------------------------------------------------------------------- Decrease in Net Assets From Fund Share Transactions -- (3,648,358) -------------------------------------------------------------------------- Increase in Net Assets 3,252,508 21,655,846 NET ASSETS: Beginning of period 373,777,869 352,122,023 -------------------------------------------------------------------------- End of period* $377,030,377 $373,777,869 -------------------------------------------------------------------------- * Includes undistributed (overdistributed) net investment income of: $(306,239) $22,877 --------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. ======================== [GRAPHIC] 20 NOTES TO FINANCIAL STATEMENTS (unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES Managed Municipals Portfolio Inc. ("Fund"), a Maryland corporation, is registered under the Investment Company Act of 1940, as amended, as a non-diversified, closed-end management investment company. The significant accounting policies consistently followed by the Fund are: (a) security transactions are accounted for on trade date; (b) securities are valued at the mean between bid and ask prices provided by an independent pricing service that are based on transactions in municipal obligations, quotations from municipal bond dealers, market transactions in comparable securities and various relationships between securities; (c) securities maturing within 60 days or less are valued at cost plus accreted discount, or minus amortized premium, which approximates value; (d) gains or losses on sale of securities are calculated by using the specific identification method; (e) interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis; (f) dividends and distributions to shareholders are recorded on the ex-dividend date; (g) the Fund intends to comply with the applicable provisions of the Internal Revenue Code of 1986, as amended, pertaining to regulated investment companies and to make distributions of taxable income sufficient to relieve it from substantially all Federal income and excise taxes; (h) the character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America; and (i) estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. In November 2000, the American Institute of Certified Public Accountants ("AICPA") issued a revised Audit and Accounting Guide for Investment Companies ("Guide"). This revised version is effective for financial statements issued for fiscal years beginning after December 15, 2000. The revised Guide requires the Fund to amortize premium and accrete all discounts on all fixed-income securities. The Fund adopted this requirement effective June 1, 2001. This change does not affect the Fund's net asset value, but does change the classification of certain amounts in the statement of operations. For the nine-month period ended February 28, 2002, interest income increased by $20,105 and the change in net unrealized appreciation of investments decreased by $20,105. In addition, the Fund recorded adjustments to increase the cost of securities and increase accumulated undistributed net investment income by $58,758 to reflect the cumulative effect of this change up to the date of the adoption. [GRAPHIC] 21 NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) 2. EXEMPT-INTEREST DIVIDENDS AND OTHER DISTRIBUTIONS The Fund intends to satisfy conditions that will enable interest from municipal securities, which is exempt from regular Federal income tax and from designated state income taxes, to retain such tax-exempt status when distributed to the shareholders of the Fund. Capital gain distributions, if any, are taxable to shareholders, and are declared and paid at least annually. 3. INVESTMENT ADVISORY AGREEMENT, ADMINISTRATION AGREEMENT AND OTHER TRANSACTIONS Smith Barney Fund Management LLC ("SBFM"), a subsidiary of Salomon Smith Barney Holdings Inc., which, in turn, is a subsidiary of Citigroup Inc. ("Citigroup"), acts as investment adviser to the Fund. The Fund pays SBFM a fee calculated at an annual rate of 0.70% of the average daily net assets of the Fund. This fee is calculated daily and paid monthly. For the nine months ended February 28, 2002, SBFM waived $1,169,139 of its investment advisory fee. SBFM also acts as the Fund's administrator for which the Fund pays a fee calculated at an annual rate of 0.20% of the average daily net assets. This fee is calculated daily and paid monthly. All officers and one Director of the Fund are employees of Citigroup or its affiliates. 4. INVESTMENTS During the nine months ended February 28, 2002, the aggregate cost of purchases and proceeds from sales of investments (including maturities, but excluding short-term securities) were as follows: - ---------------------------------------------------------------------------- Purchases $81,892,540 - ---------------------------------------------------------------------------- Sales 87,026,316 - ---------------------------------------------------------------------------- At February 28, 2002, aggregate gross unrealized appreciation and depreciation of investments for Federal income tax purposes were substantially as follows: - ----------------------------------------------------------------------------- Gross unrealized appreciation $ 17,375,954 Gross unrealized depreciation (15,142,987) - ------------------------------------------------------------------------------ Net unrealized appreciation $ 2,232,967 - ----------------------------------------------------------------------------- [GRAPHIC] 22 NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) 5. FUTURES CONTRACTS Initial margin deposits made upon entering into futures contracts are recognized as assets. Securities equal to the initial margin amount are segregated by the custodian in the name of the broker. Additional securities are also segregated up to the current market value of the futures contracts. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by "marking-to-market" on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments are received or made and recognized as assets due from or liabilities due to broker, depending upon whether unrealized gains or losses are incurred. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transactions and the Fund's basis in the contract. The Fund enters into such contracts to hedge a portion of its portfolio. The Fund bears the market risk that arises from changes in the value of the financial instruments and securities indices (futures contracts). At February 28, 2002, the Fund did not hold any futures contracts. 6. SECURITIES TRADED ON A WHEN-ISSUED BASIS In a when-issued transaction, the Fund commits to purchasing securities for which specific information is not yet known at the time of the trade. Securities purchased on a when-issued basis are not settled until they are delivered to the Fund. Beginning on the date the Fund enters into the when-issued transaction, the custodian maintains cash, U.S. government securities or other liquid high grade debt obligations in a segregated account equal in value to the purchase price of the when-issued security. These transactions are subject to market fluctuations and their current value is determined in the same manner as for other securities. At February 28, 2002, the Fund did not hold any when-issued securities. 7. CAPITAL LOSS CARRYFORWARD At May 31, 2001, the Fund had, for Federal income tax purposes, approximately $13,879,000 of unused capital loss carryforwards available to offset future capital gains. To the extent that these carryforward losses are used to offset capital gains, it is probable that the gains so offset will not be distributed. Expirations occur on May 31 of the years below: 2007 2008 - ----------------------------------------------------------------------------- Carryforward Amounts $240,000 $13,639,000 - ----------------------------------------------------------------------------- [GRAPHIC] 23 NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) 8. CAPITAL SHARES At February 28, 2002, the Fund had 500,000,000 shares of common stock authorized with a par value of $0.001 per share. On June 21, 1999, the Fund commenced a share repurchase plan. Since the inception of the repurchase plan, the Fund repurchased (and retired) 2,758,300 shares with a total cost of $26,171,171. For the year ended May 31, 2001, the Fund repurchased (and retired) 370,700 shares with a total cost of $3,648,358. On January 16, 2001, the Fund suspended the share repurchase plan. [GRAPHIC] 24 FINANCIAL HIGHLIGHTS For a share of capital stock outstanding throughout each year ended May 31, unless otherwise noted:
2002/(1)/ 2001 2000 1999 1998 1997 - ------------------------------------------------------------------------------------ Net Asset Value, Beginning of Period $11.74 $10.93 $11.97 $12.37 $11.90 $12.11 - ----------------------------------------------------------------------------------- Income (Loss) From Operations: Net investment income/(2)(3)/ 0.44 0.60 0.58 0.58 0.54 0.67 Net realized and unrealized gain (loss) 0.11 0.79 (1.14) (0.32) 0.83 0.08 - ----------------------------------------------------------------------------------- Total Income (Loss) From Operations 0.55 1.39 (0.56) 0.26 1.37 0.75 - ----------------------------------------------------------------------------------- Gain From Repurchase of Treasury Stock -- 0.02 0.12 -- -- -- - ----------------------------------------------------------------------------------- Less Distributions From: Net investment income (0.45) (0.60) (0.60) (0.54) (0.61) (0.66) Net realized gains -- -- -- (0.12) (0.29) (0.30) - ----------------------------------------------------------------------------------- Total Distributions (0.45) (0.60) (0.60) (0.66) (0.90) (0.96) - ----------------------------------------------------------------------------------- Net Asset Value, End of Period $11.84 $11.74 $10.93 $11.97 $12.37 $11.90 - ----------------------------------------------------------------------------------- Total Return, Based on Market Value/(4)/ 5.07%++ 20.69% (3.88)% 0.11% 2.08% 7.89% - ----------------------------------------------------------------------------------- Total Return, Based on Net Asset Value/(4)/ 5.18%++ 13.90% (2.82)% 2.66% 12.14% 6.59% - ----------------------------------------------------------------------------------- Net Assets, End of Period (millions) $377 $374 $352 $414 $428 $411 - -----------------------------------------------------------------------------------
[GRAPHIC] 25 FINANCIAL HIGHLIGHTS (continued) For a share of capital stock outstanding throughout each year ended May 31, unless otherwise noted:
2002/(1)/ 2001 2000 1999 1998 1997 - --------------------------------------------------------------------------------- Ratios to Average Net Assets: Expenses/(2)/ 0.63%+ 0.68% 0.89% 0.94% 0.99% 1.00% Net investment income/(3)/ 4.94+ 5.15 5.19 4.72 4.35 5.56 - --------------------------------------------------------------------------------- Portfolio Turnover Rate 22% 58% 35% 23% 87% 113% - --------------------------------------------------------------------------------- Market Value, End of Period $10.75 $10.67 $9.375 $10.375 $11.00 $11.625 - ---------------------------------------------------------------------------------
(1) For the nine months ended February 28, 2002 (unaudited). (2) The investment adviser waived a portion of its fees for the nine months ended February 28, 2002, and the years ended May 31, 2001 and 2000. In addition, the investment adviser and administrator waived a portion of their fees for the year ended May 31, 1999. If such fees were not waived, the per share decreases in net investment income and actual expense ratios would have been as follows: Per share decreases in Expense ratios net investment income without fee waivers ---------------------- ------------------- 2002 $0.04 1.04%+ 2001 0.04 1.01 2000 0.02 1.04 1999 0.01 1.02 (3) Without the adoption of the change in the accounting method discussed in Note 1, the ratio of net investment income to average net assets would have been 4.93%. Per share, ratios and supplemental data for the periods prior to June 1, 2001 have not been restated to reflect this change in presentation. In addition, the impact of this change to net investment income was less than $0.01 per share. (4) The total return calculation assumes that dividends are reinvested in accordance with the Fund's dividend reinvestment plan. ++ Total return is not annualized, as it may not be representative of the total return for the year. + Annualized. [GRAPHIC] 26 FINANCIAL DATA (unaudited) For a share of capital stock outstanding throughout each period:
NYSE Net Dividend Record Payable Closing Asset Dividend Reinvestment Date Date Price+ Value+ Paid Price ------------------------------------------------------- 6/22/99 6/25/99 $10.563 $11.67 $0.050 $10.61 7/27/99 7/30/99 10.063 11.67 0.050 10.03 8/24/99 8/27/99 9.813 11.29 0.050 9.95 9/21/99 9/24/99 9.688 11.24 0.050 9.70 10/26/99 10/29/99 9.625 10.85 0.050 10.85 11/22/99 11/26/99 9.563 11.08 0.050 9.25 12/27/99 12/30/99 9.000 10.90 0.050 9.10 1/26/00 1/28/00 9.563 10.76 0.050 9.48 2/22/00 2/25/00 9.500 10.85 0.050 9.52 3/28/00 3/31/00 9.313 11.18 0.050 9.46 4/25/00 4/28/00 9.313 11.14 0.050 9.36 5/23/00 5/26/00 9.188 10.79 0.050 9.33 6/27/00 6/30/00 9.750 11.20 0.050 9.91 7/25/00 7/28/00 9.688 11.37 0.050 9.89 8/22/00 8/25/00 10.000 11.54 0.050 10.04 9/26/00 9/29/00 9.688 11.42 0.050 9.80 10/24/00 10/27/00 9.688 11.49 0.050 9.78 11/20/00 11/24/00 9.750 11.47 0.050 9.80 12/26/00 12/29/00 9.938 11.85 0.050 10.25 1/23/01 1/26/01 10.688 11.92 0.050 10.70 2/20/01 2/23/01 10.770 11.88 0.050 10.81 3/27/01 3/30/01 10.450 11.89 0.050 10.58 4/24/01 4/27/01 10.370 11.65 0.050 10.55 5/22/01 5/25/01 10.650 11.71 0.050 10.69 6/26/01 6/29/01 10.400 11.80 0.050 10.61 7/24/01 7/27/01 10.590 11.88 0.050 10.71 8/28/01 8/31/01 10.830 12.09 0.050 11.00 9/25/01 9/28/01 10.330 11.87 0.050 10.65 10/23/01 10/26/01 10.640 11.93 0.050 10.82 11/27/01 11/30/01 10.580 11.83 0.050 10.51 12/24/01 12/28/01 10.310 11.63 0.050 10.43 1/22/02 1/25/02 10.600 11.81 0.050 10.74 2/19/02 2/22/02 10.600 11.77 0.050 10.72 ------------------------------------------------------
+ As of record date. [GRAPHIC] 27 DIVIDEND REINVESTMENT PLAN (unaudited) Under the Fund's Dividend Reinvestment Plan ("Plan"), a shareholder whose shares of common stock are registered in his own name will have all distributions from the Fund reinvested automatically by PFPC Global Fund Services ("PFPC"), as purchasing agent under the Plan, unless the shareholder elects to receive cash. Distributions with respect to shares registered in the name of a broker-dealer or other nominee (that is, in street name) will be reinvested by the broker or nominee in additional shares under the Plan, unless the service is not provided by the broker or nominee or the shareholder elects to receive distributions in cash. Investors who own common stock registered in street name should consult their broker-dealers for details regarding reinvestment. All distributions to shareholders who do not participate in the Plan will be paid by check mailed directly to the record holder by or under the direction of PFPC as dividend paying agent. The number of shares of common stock distributed to participants in the Plan in lieu of a cash dividend is determined in the following manner. When the market price of the common stock is equal to or exceeds the net asset value per share of the common stock on the determination date (generally, the record date for the distribution), Plan participants will be issued shares of common stock by the Fund at a price equal to the greater of net asset value determined as described below under "Net Asset Value" or 95% of the market price of the common stock. If the market price of the common stock is less than the net asset value of the common stock at the time of valuation (which is the close of business on the determination date), or if the Fund declares a dividend or capital gains distribution payable only in cash, PFPC will buy common stock in the open market, on the NYSE or elsewhere, for the participants' accounts. If following the commencement of the purchases and before PFPC has completed its purchases, the market price exceeds the net asset value of the common stock as of the valuation time, PFPC will attempt to terminate purchases in the open market and cause the Fund to issue the remaining portion of the dividend or distribution in shares at a price equal to the greater of (a) net asset value as of the valuation time or (b) 95% of the then current market price. In this case, the number of shares received by a Plan participant will be based on the weighted average of prices paid for shares purchased in the open market and the price at which the Fund issues the remaining shares. To the extent PFPC is unable to stop open market purchases and cause the Fund to issue the remaining shares, the average per share purchase price paid by PFPC may exceed the net asset value of the common stock as of the valuation time, resulting in the acquisition of fewer shares than if the dividend or capital gains [GRAPHIC] 28 DIVIDEND REINVESTMENT PLAN (unaudited) (continued) distribution had been paid in common stock issued by the Fund at such net asset value. PFPC will begin to purchase common stock on the open market as soon as practicable after the determination date for the dividend or capital gains distribution, but in no event shall such purchases continue later than 30 days after the payment date for such dividend or distribution, or the record date for a succeeding dividend or distribution, except when necessary to comply with applicable provisions of the federal securities laws. PFPC maintains all shareholder accounts in the Plan and furnishes written confirmations of all transactions in each account, including information needed by a shareholder for personal and tax records. The automatic reinvestment of dividends and capital gains distributions will not relieve Plan participants of any income tax that may be payable on the dividends or capital gains distributions. Common stock in the account of each Plan participant will be held by PFPC in uncertificated form in the name of the Plan participant. Plan participants are subject to no charge for reinvesting dividends and capital gains distributions under the Plan. PFPC's fees for handling the reinvestment of dividends and capital gains distributions will be paid by the Fund. No brokerage charges apply with respect to shares of common stock issued directly by the Fund under the Plan. Each Plan participant will, however, bear a proportionate share of any brokerage commissions actually incurred with respect to any open market purchases made under the Plan. Experience under the Plan may indicate that changes to it are desirable. The Fund reserves the right to amend or terminate the Plan as applied to any dividend or capital gains distribution paid subsequent to written notice of the change sent to participants at least 30 days before the record date for the dividend or capital gains distribution. The Plan also may be amended or terminated by PFPC, with the Fund's prior written consent, on at least 30 days' written notice to Plan participants. All correspondence concerning the plan should be directed by mail to PFPC Global Fund Services, P.O. Box 8030, Boston, Massachusetts 02266-8030 or by telephone at (800) 331-1710. -------------------------- Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Fund may purchase shares of its common stock in the open market. [GRAPHIC] 29 Managed Municipals Portfolio Inc. DIRECTORS Allan J. Bloostein Dwight B. Crane Paolo M. Cucchi Robert A. Frankel Paul Hardin William R. Hutchinson Heath B. McLendon, Chairman George M. Pavia Charles F. Barber, Emeritus OFFICERS Heath B. McLendon President and Chief Executive Officer Lewis E. Daidone Senior Vice President and Treasurer Joseph P. Deane Vice President and Investment Officer David Fare Investment Officer Paul A. Brook Controller Christina T. Sydor Secretary INVESTMENT ADVISER AND ADMINISTRATOR Smith Barney Fund Management LLC 333 W34th Street New York, New York 10001 TRANSFER AGENT PFPC Global Fund Services P.O. Box 8030 Boston, Massachusetts 02266-8030 CUSTODIAN State Street Bank and Trust Company 225 Franklin Street Boston, Massachusetts 02110 [GRAPHIC] 30 [GRAPHIC] THIS REPORT IS ONLY INTENDED FOR SHAREHOLDERS OF THE MANAGED MUNICIPALS PORTFOLIO INC. IT IS NOT A PROSPECTUS, CIRCULAR OR REPRESENTATION INTENDED FOR USE IN THE PURCHASE OR SALE OF SHARES OF THE FUND OR OF ANY SECURITIES MENTIONED IN THE REPORT. FD0879 4/02 -----END PRIVACY-ENHANCED MESSAGE-----