Managed Municipals
Portfolio Inc.
Annual Report
May 31, 1996
SMITH BARNEY
-------------------------------
A Member of TravelersGroup[ART]
<PAGE>
Managed Municipals
Portfolio Inc.
May 31, 1996
Dear Shareholder:
We are pleased to provide you with the annual report for the Managed
Municipals Portfolio Inc. for the fiscal year ended May 31, 1996. The Portfolio
distributed dividends totaling $0.76 per share over the past twelve months. The
table below details the annualized distribution rates based on the Portfolio's
May 31, 1996 net asset value (NAV) per share and New York Stock Exchange (NYSE)
closing price.
Annualized
Price Per Share Distribution Rate
--------------- -----------------
$12.11 (NAV) 5.95%
$11.69 (NYSE) 6.16%
The Portfolio's total return on net asset value of 2.79% for the past
year was somewhat below the average total returns of 4.40% for closed-end
municipal bond funds, as reported by Lipper Analytical Services Inc., an
independent fund tracking organization.
For your convenience, we have summarized the year's prevailing economic
and market conditions and outlined the investment strategy employed by the
Portfolio during this time. A detailed summary of performance and current
holdings for the Portfolio can be found in the appropriate sections that follow
in the annual report.
Market and Economic Overview
The past year has certainly been an interesting one for the municipal
bond market, characterized by low inflation, somewhat weaker U.S economic
growth, and a modest supply of new issue volume. On the surface, you would think
these conditions would result in a quiet and uneventful bond market. However,
the reality was quite different. The period from June through December 1995 saw
an extension of the year's bond market rally, while the period of January
through May 1996 witnessed a meaningful rise in interest rates and a
corresponding decline in the bond market.
1
<PAGE>
In our view, the catalyst for increased bond market volatility came
primarily from the U.S. government securities market. By the end of 1995, U.S.
Treasuries were driven to extremely low interest rate levels through purchases
by foreign central banks, leveraged hedge funds, and, in some cases, equity fund
managers seeking investment opportunities outside the stock market. Interest
rates have risen this year because many large investors gradually reversed their
positions as the 1995 year-end bond market euphoria began to fade. More
recently, long municipal bond yields have approached 6% plus, and long-term U.S.
securities are yielding approximately 7%. This is the buying opportunity we have
been waiting for, and we will begin to become more aggressive at today's lower
bond prices.
Portfolio Strategy Update
The Managed Municipals Portfolio was well-positioned for the rally that
occurred in 1995 with lower coupon discount bonds our key position. However,
when the market continued to rally past levels that we believed to be its
maximum potential upside, we shortened our maturities, raised coupons, and
became more conservative by late fall 1995. The Portfolio's investment
philosophy was unchanged until recently, when both taxable and tax-exempt yields
retreated by more than 1%. As we became more positive about the municipal bond
market's prospects, we lowered our cash position, extended maturities and
emphasized more high-grade discounts than we have in several months.
As of May 31, 1996, 82% of the Portfolio was rated investment grade
(BBB/Baa and higher) by either Standard and Poor's Corporation or Moody's
Investors Service, Inc., with 32% of the Portfolio invested in triple-A bonds,
the highest possible rating. (Standard and Poor's and Moody's are two major
credit reporting and bond rating agencies.) The Portfolio's largest holdings are
concentrated in general obligation bonds (17.6%), utility bonds (15.6%),
industrial revenue bonds (11.5%), housing (8.9%), and hospital bonds (8.8%). The
average weighted maturity of the Portfolio was approximately 20 years as of May
31, 1996.
In closing, we believe many investors may have become too pessimistic
about the municipal bond market's prospects over the near term. If the economic
and inflation numbers stay moderate, we expect a gradual decline in long-term
interest rates from today's levels. Because of our expectations, we believe
today's municipal bond market represents fair value, and the second half of 1996
should be a more positive environment for municipal bond investors than 1996 has
been so far.
2
<PAGE>
Thank you for investing in the Managed Municipals Portfolio Inc. We look
forward to continuing to help you achieve your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Joseph P. Deane
Heath B. McLendon Joseph P. Deane
Chairman and Vice President and
Chief Executive Officer Investment Officer
July 12, 1996
3
<PAGE>
Schedule of Investments
May 31, 1996
<TABLE>
<CAPTION>
Face
Amount Rating Security Value
===================================================================================================================
Municipal Bonds and Notes -- 98.3%
<S> <C> <C> <C>
California -- 9.3%
$3,000,000 AAA Anaheim, CA PFA Revenue, FGIC-Insured,
5.750% due 10/1/22 $ 2,872,500
1,725,000 AA- California HFA Revenue, Series B,
5.700% due 2/1/25 1,619,344
1,500,000 AAA California Health Facilities Financing
Authority Revenue, Insured Health
Facility-Mark Twain, MBIA-Insured,
6.000% due 7/1/19 1,486,875
6,225,000 AAA California Public Works Board, Department
of Correction Prison, MBIA-Insured,
Series D, 5.375% due 6/1/18 5,742,563
2,000,000 AAA California Statewide, Community Development
Housing Revenue, FNMA-Insured,
6.400% due 6/1/28(a) 1,972,500
2,500,000 AAA Cerritos, CA PFA Revenue, AMBAC-Insured,
5.750% due 11/1/22 2,412,500
1,000,000 AAA El Dorado County Public Agency Financing
Authority Revenue, FGIC-Insured,
5.600% due 2/15/12 972,500
3,300,000 A- Los Angeles, CA Regional Airport Improvement
Corporation, Los Angeles International Airport
Lease Revenue, 6.500% due 1/1/32(a) 3,147,375
12,575,000 AAA Los Angeles, CA Waste Water System Revenue,
Series A, MBIA-Insured, 5.700% due 6/1/20 12,072,000
5,500,000 AAA Los Angeles County, CA Transportation
Authority, MBIA-Insured,
5.625% due 7/1/18 5,238,750
1,000,000 AAA Tracy, CA Area Public Facilities Agency,
Community Facilities, District No. 87-I-H,
MBIA-Insured, 5.875% due 10/1/13 978,750
- -------------------------------------------------------------------------------------------------------------------
38,515,657
- -------------------------------------------------------------------------------------------------------------------
Colorado -- 11.2%
7,000,000 Baa* Arapahoe County, CO Public Highway
Authority, 7.000% due 8/31/26 7,210,000
2,000,000 BBB+ Colorado Springs, CO Airport Revenue,
Series A, 7.000% due 1/1/22(a) 2,070,000
100,000,000 Aaa* Dawson Ridge Metropolitan District No.1,
Series B, zero coupon due 10/1/22 15,750,000
</TABLE>
See Notes to
Financial Statements.
4
<PAGE>
Schedule of Investments
May 31, 1996 (continued)
<TABLE>
<CAPTION>
Face
Amount Rating Security Value
===================================================================================================================
Colorado -- 11.2% (continued)
Denver, CO Airport Revenue, Series C:
<S> <C> <C> <C>
$4,000,000 BBB 6.750% due 11/15/22(a) $ 4,050,000
18,325,000 BBB 6.125% due 11/15/25(a) 17,202,594
- -------------------------------------------------------------------------------------------------------------------
46,282,594
- -------------------------------------------------------------------------------------------------------------------
Connecticut -- 3.0%
Connecticut State Development Authority
Obligation, Series A:
1,300,000 AA- 5.400% due 12/15/10 1,251,250
1,500,000 AA- 5.550% due 12/15/15 1,423,125
Connecticut State, GO, Series A:
4,000,000 AA- 5.375% due 5/15/12 3,845,000
3,000,000 AA- 5.800% due 3/15/12 3,011,250
3,000,000 AA- 5.800% due 3/15/13 3,000,000
- -------------------------------------------------------------------------------------------------------------------
12,530,625
- -------------------------------------------------------------------------------------------------------------------
Florida -- 3.9%
4,000,000 AA Florida State, Dade County Road,
5.125% due 7/1/17 3,620,000
2,000,000 AAA Escambia County, FL School Board COP,
Series 1, MBIA-Insured, 5.500% due 2/1/16 1,907,500
5,000,000 BBB- Martin County, FL IDA, (Indiantown
Cogeneration Project), Series A,
7.875% due 12/15/25(a) 5,562,500
Tampa, FL Revenue Bonds, (Aquarium Project):
3,000,000 NR 7.550% due 5/1/12 2,955,000
2,000,000 NR 7.750% due 5/1/27(c) 1,962,500
- -------------------------------------------------------------------------------------------------------------------
16,007,500
- -------------------------------------------------------------------------------------------------------------------
Illinois -- 0.8%
1,000,000 AA- Chicago, IL Gas Supply, 6.100% due 6/1/25 981,250
2,500,000 AAA Illinois Health Facilities Authority Revenue,
Trinity Medical Center, FSA-Insured,
6.000% due 7/1/28 2,446,875
- -------------------------------------------------------------------------------------------------------------------
3,428,125
- -------------------------------------------------------------------------------------------------------------------
Indiana -- 6.3%
18,305,000 A Indiana Bond Bank, Revenue Guarantee,
State Revolving Fund, Series A,
6.000% due 2/1/15 18,190,594
</TABLE>
See Notes to
Financial Statements.
5
<PAGE>
Schedule of Investments
May 31, 1996 (continued)
<TABLE>
<CAPTION>
Face
Amount Rating Security Value
===================================================================================================================
Indiana -- 6.3% (continued)
<S> <C> <C> <C>
$2,500,000 Aaa* Indiana HFA Single Family Mortgage Revenue,
Series A-1, GNMA-FNMA collaterialized,
6.250% due 7/1/28 $ 2,515,625
5,000,000 Aa3* Indiana Port Commission Revenue Refunding
Project, (Cargill Inc. Project),
6.875% due 5/1/12 5,356,250
- -------------------------------------------------------------------------------------------------------------------
26,062,469
- -------------------------------------------------------------------------------------------------------------------
Louisiana -- 1.4%
5,500,000 Aa3* Saint Martin Parish, LA Industrial Project,
(Cargill Inc. Project), 6.625% due 10/1/12 5,781,875
- -------------------------------------------------------------------------------------------------------------------
Maryland -- 2.5%
10,000,000 NR Maryland State Energy Financing Admin-
istration, Solid Waste Disposal Revenue,
(Hagerstown Project), 9.000% due 10/15/16(c) 9,225,000
1,000,000 AA Maryland Industrial Development Financing
Authority Revenue, Holy Cross Health System
Corporation, 5.700% due 12/1/10 990,000
- -------------------------------------------------------------------------------------------------------------------
10,215,000
- -------------------------------------------------------------------------------------------------------------------
Massachusetts -- 5.5%
13,770,000 AAA Massachusetts State HFA, Series A,
MBIA-Insured, 6.100% due 7/1/15 13,942,125
10,000,000 NR Massachusetts State IDA, Massachusetts
Recycling Association, 9.000% due 8/1/16(c) 8,650,000
- -------------------------------------------------------------------------------------------------------------------
22,592,125
- -------------------------------------------------------------------------------------------------------------------
Michigan -- 6.2%
2,000,000 NR Michigan State Strategic Funding, Limited
Obligation Revenue, (Blue Water Fiber
Project), 8.000% due 1/1/12(a) 1,775,000
Michigan State HDA:
2,000,000 AAA MBIA-Insured, 6.150% due 10/1/15 2,010,000
Single Family Mortgage Revenue:
1,750,000 AA+ 6.000% due 12/1/15 1,750,000
2,415,000 AA+ 6.050% due 12/1/17 2,415,000
16,375,000 NR Midland County, Economic Development
Corporation, PCR, Limited Obligation,
Series B, 9.500% due 7/23/09(a) 17,889,687
- -------------------------------------------------------------------------------------------------------------------
25,839,687
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to
Financial Statements.
6
<PAGE>
Schedule of Investments
May 31, 1996 (continued)
<TABLE>
<CAPTION>
Face
Amount Rating Security Value
===================================================================================================================
Minnesota -- 4.6%
<S> <C> <C>
$ 2,500,000 Aa3* Duluth, MN Seaway Port Authority, IDA,
Dock & Wharf Revenue, (Cargill Inc.
Project), 6.800% due 5/1/12 $ 2,653,125
15,305,000 BBB- St. Paul, MN Housing and Redevelopment
Authority, Health East,
9.750% due 11/1/17(c) 16,452,875
- -------------------------------------------------------------------------------------------------------------------
19,106,000
- -------------------------------------------------------------------------------------------------------------------
Missouri -- 0.6%
2,500,000 AAA Missouri St. Health & Education Facilities
Authority, St. Louis University,
AMBAC-Insured, 5.125% due 10/1/16 2,284,375
- -------------------------------------------------------------------------------------------------------------------
Montana -- 1.8%
8,000,000 NR Montana State Board Investment Resources
Recovery, (Yellowstone Energy Project),
7.000% due 12/31/19(a) 7,440,000
- -------------------------------------------------------------------------------------------------------------------
Nevada -- 1.9%
8,000,000 AAA Clark County, NV School District, Series A,
MBIA-Insured, 5.875% due 6/15/14 7,900,000
- -------------------------------------------------------------------------------------------------------------------
New Jersey -- 2.6%
5,200,000 A+ Hudson County, NJ Improvement Authority,
6.625% due 8/1/25 5,362,500
1,880,000 AAA Monmouth County, NJ Improvement Authority
Revenue, Governmental Loan, FSA-Insured,
5.300% due 7/15/09 1,811,850
1,000,000 AAA New Jersey State Housing & Mortgage,
MBIA-Insured, 6.350%, due 10/1/27(a) 1,008,750
2,910,000 A+ South Jersey Port Corporation, MBIA-Insured,
5.600% due 1/1/23 2,669,925
- -------------------------------------------------------------------------------------------------------------------
10,853,025
- -------------------------------------------------------------------------------------------------------------------
New Mexico -- 0.2%
1,000,000 AAA Las Cruces, NM Utility Revenue, MBIA-Insured,
5.500% due 12/1/11(a) 957,500
- -------------------------------------------------------------------------------------------------------------------
New York -- 8.8%
8,000,000 BBB City University, NY COP, John Jay College,
5.750% due 8/15/04(c) 8,050,000
3,000,000 AA New York St. Housing Corporation Revenue,
(Battery Park City Project),
5.500% due 11/1/20 2,688,750
</TABLE>
See Notes to
Financial Statements.
7
<PAGE>
Schedule of Investments
May 31, 1996 (continued)
<TABLE>
<CAPTION>
Face
Amount Rating Security Value
=================================================================================================================
New York -- 8.8% (continued)
<S> <C> <C> <C>
New York City, NY GO:
$6,490,000 BBB+ 5.750% due 2/15/07 $6,238,512
4,500,000 BBB+ 5.750% due 3/15/07 4,325,625
New York City Municipal Water Financing
Authority, Water & Sewer System Revenue:
4,000,000 A- 5.500% due 6/15/20 3,660,000
2,090,000 A- 5.500% due 6/15/23 1,904,512
6,000,000 A- 6.000% due 6/15/25 5,835,000
3,960,000 AAA New York State Dormitory Authority,
City University AMBAC-Insured,
5.250% due 7/1/11 3,781,800
- -----------------------------------------------------------------------------------------------------------------
36,484,199
- -----------------------------------------------------------------------------------------------------------------
North Dakota -- 0.7%
3,000,000 AAA Mercer County, ND PCR, Basin Electric
Power Revenue, AMBAC-Insured,
6.050% due 1/1/19 3,015,000
- -----------------------------------------------------------------------------------------------------------------
Ohio -- 0.7%
3,000,000 AAA Ohio State Water Development Authority
Revenue, Fresh Water Services, AMBAC-
Insured, 5.900% due 12/1/21 2,992,500
- -----------------------------------------------------------------------------------------------------------------
South Carolina -- 2.2%
5,800,000 AAA Charleston County, SC COP, MBIA-Insured,
5.500% due 12/1/15 5,437,500
1,700,000 Aa* South Carolina Housing Financial &
Development Authority Mortgage Revenue,
Heritage Apartments, FHA-Insured,
6.150% due 7/1/25 1,668,125
2,000,000 BBB+ Myrtle Beach, SC COP, Myrtle Beach
Convention Center, 6.875% due 7/1/07 2,085,000
- -----------------------------------------------------------------------------------------------------------------
9,190,625
- -----------------------------------------------------------------------------------------------------------------
Texas -- 8.3%
5,500,000 Aaa* Arlington, TX Independent School District,
PSFG, 5.750% due 2/15/21 5,314,375
3,000,000 AAA Bexar County, TX HFA, FSA-Insured,
6.100% due 11/15/23 3,026,250
4,000,000 Aaa* Burleson, TX Independent School District,
PSFG, 6.750% due 8/1/24 4,210,000
2,000,000 Aaa* Leander, TX Independent School District,
PSFG, 5.625% due 8/15/18 1,890,000
</TABLE>
See Notes to
Financial Statements.
8
<PAGE>
Schedule of Investments
May 31, 1996 (continued)
<TABLE>
<CAPTION>
Face
Amount Rating Security Value
===================================================================================================================
Texas -- 8.3% (continued)
<S> <C> <C> <C>
$6,000,000 AAA Matagorda County, TX Central Power
Lighting, MBIA-Insured,
6.100% due 7/1/28 $ 5,962,500
12,250,000 BB Sam Rayburn, TX Municipal Power Agency,
Supply Systems Revenue Refunding,
Series A, 6.750% due 10/1/14(c) 11,132,188
3,000,000 AAA Sherman,TX Independent School District,
PSFG, 5.750% due 2/15/25 2,868,750
- -------------------------------------------------------------------------------------------------------------------
34,404,063
- -------------------------------------------------------------------------------------------------------------------
Virginia -- 3.1%
4,700,000 A* Harrisonburg, VA Redevelopment and
Housing Authority, Public Facility Lease
Revenue, (Jail & Courthouse Project),
6.500% due 9/1/14 4,823,375
Virginia State Housing Development Authority,
Multi-Family Housing:
Series D:
1,210,000 AA+ 5.700% due 1/1/09 1,200,925
1,390,000 AA+ 5.900% due 7/1/11 1,386,525
1,655,000 AA+ 6.250% due 1/1/15 1,650,863
1,715,000 AA+ 6.250% due 7/1/15 1,710,712
1,235,000 AA+ Series H, 6.300% due 11/1/15 1,256,612
600,000 AA+ Series K, 5.800% due 11/1/10 606,750
- -------------------------------------------------------------------------------------------------------------------
12,635,762
- -------------------------------------------------------------------------------------------------------------------
Washington -- 8.2%
4,750,000 A+ Chelan County, WA GO Public Utilities District,
Series 1993A, District 4, Remarketed,
(mandatory put 7/1/19),
6.750% due 7/1/62 4,845,000
Washington State, GO:
3,000,000 AA Series 93A, 5.750% due 10/1/17 2,898,750
4,000,000 AA Series A, 5.750% due 9/1/19 3,835,000
11,300,000 AA- Washington State Health Care Facilities,
Sisters of Providence Hospital,
7.875% due 10/1/10(c) 12,133,375
Washington State Public Power,
(Nuclear Project No. 3):
6,250,000 AA Series B, 5.625% due 7/1/12(c) 5,867,188
</TABLE>
See Notes to
Financial Statements.
9
<PAGE>
Schedule of Investments
May 31, 1996 (continued)
<TABLE>
<CAPTION>
Face
Amount Rating Security Value
============================================================================================================
<S> <C> <C> <C>
Washington -- 8.2% (continued)
Series C:
$ 3,555,000 AA 5.375% due 7/1/15 $ 3,181,725
1,500,000 AA 5.375% due 7/1/15 1,342,500
- ------------------------------------------------------------------------------------------------------------
34,103,538
- ------------------------------------------------------------------------------------------------------------
West Virginia -- 1.9%
Marion County, WV Community Solid Waste
Disposal Facilities Revenue:
1,000,000 NR American Fiber Resource Project, Series B,
9.250% due 12/1/11(a) 750,000
10,000,000 NR American Power Paper Recycling Project,
7.750% due 12/1/11(a) 7,000,000
- ------------------------------------------------------------------------------------------------------------
7,750,000
- ------------------------------------------------------------------------------------------------------------
Wisconsin -- 2.6%
4,070,000 AA Wisconsin State GO, Series B,
6.600% due 1/1/22(a) 4,227,713
6,770,000 AAA Wisconsin State Health and Educational
Facilities Authority, (Marquette University
Project), MBIA-Insured, 5.500% due 12/1/11 6,541,512
- ------------------------------------------------------------------------------------------------------------
10,769,225
- ------------------------------------------------------------------------------------------------------------
Total Municipal Bonds and Notes
(Cost -- $408,074,473) 407,141,469
============================================================================================================
</TABLE>
See Notes to
Financial Statements.
10
<PAGE>
Schedule of Investments
May 31, 1996 (continued)
<TABLE>
<CAPTION>
Face
Amount Rating Security Value
==========================================================================================================
<S> <C>
Short-Term Tax-Exempt Investments(b) -- 1.7%
Alabama -- 0.1%
$ 500,000 VMIG 1*Columbia, Al Industrial Development
Board PCR, (Alabama Power Co. Project),
Series E, 3.700% due 10/1/22 $ 500,000
- ----------------------------------------------------------------------------------------------------------
Louisiana -- 0.0%
100,000 Aaa* East Baton Rouge Parish PCR, (Rhone-
Poulene Income Project), 3.850% due 6/1/11 100,000
- ----------------------------------------------------------------------------------------------------------
Michigan -- 0.7%
3,000,000 P-1* Michigan State, Strategic Dow Chemical,
3.700% due 2/1/09 3,000,000
- ----------------------------------------------------------------------------------------------------------
Texas -- 0.9%
500,000 VMIG 1*Gulf Coast Waste Disposal Authority,
Texas PCR, (Amoco Oil Company Project),
4.000% due 6/1/24 500,000
3,100,000 VMIG 1*Sabine River, TX PCR Utility Electric,
3.800% due 4/1/30 3,100,000
- ----------------------------------------------------------------------------------------------------------
3,600,000
- ----------------------------------------------------------------------------------------------------------
Short-term Tax-exempt Investments
(Cost -- $7,200,000) $ 7,200,000
==========================================================================================================
Total Investments -- 100%
(Cost -- $415,274,473**) $414,341,469
==========================================================================================================
</TABLE>
(a) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Variable rate municipal bonds and notes are payable upon not more than one
business day's notice.
(c) Security partially segregated by custodian for futures contracts
commitments.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 13 and 14 for definition of ratings and certain security
descriptions.
See Notes to
Financial Statements.
11
<PAGE>
Summary of Investments by Combined Ratings
May 31, 1996
Percent of
Moody's and/or Standard & Poor's Total Investments
Aaa AAA 32.0%
Aa AA 19.8
A A 12.2
Baa BBB 17.7
Ba BB 2.7
P-1 SP-1 0.7
VMIG 1 A-1 1.0
NR NR 13.9
-----
100.0%
=====
See Notes to
Financial Statements.
12
<PAGE>
Bond Ratings
All ratings are by Standard & Poor's Corporation ("Standard & Poor's"), except
those identified by an asterisk (*) are rated by Moody's Investors Services
("Moody's"). The definitions of the applicable rating symbols are set forth
below:
Standard & Poor's -- Ratings from "AA" to "BB" 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 it is 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" have less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to meet
timely interest and principal payments.
Moody's-- Numerical modifiers 1, 2 and 3 may be applied to each generic
rating from "Aa" to "Baa", where 1 is the highest and 3 the lowest ranking
within its generic category.
Aaa -- Bonds that are 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 that are 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 that are 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 that are 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.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
13
<PAGE>
Short-Term Securities Ratings
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
ABAG -- Association of Bay Area Governors
AIG -- American International Guaranty
AMBAC -- American Municipal Bond Assurance Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
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 -- Federal Savings Association
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage
Association
GO -- General Obligation
HDC -- Housing Development Corporation
HDA -- Housing Development Authority
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
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCR -- Pollution Control Revenue
PFA -- Public Finance Authority
PSFG -- Permanent School Fund Guaranty
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt Securities
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation
Notes
SYCC -- Structured Yield Curve Certificate
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
14
<PAGE>
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
May 31, 1996
=================================================================================
<S> <C>
Assets:
Investments, at value (Cost -- $415,274,473) $414,341,469
Interest receivable 7,908,814
Receivable for securities sold 4,033,427
Receivable from broker 115,625
- ---------------------------------------------------------------------------------
Total Assets 426,399,335
- ---------------------------------------------------------------------------------
Liabilities:
Payable to bank 30,314
Payable for securities purchased 6,820,256
Dividends payable 1,004,988
Investment advisory fees payable 252,406
Administration fees payable 73,052
Accrued expenses 293,841
- ---------------------------------------------------------------------------------
Total Liabilities 8,474,857
- ---------------------------------------------------------------------------------
Total Net Assets $417,924,478
=================================================================================
Net Assets:
Par value of capital shares $ 34,498
Capital paid in excess of par value 412,278,884
Undistributed net investment income 1,451,333
Accumulated net realized gain on security transactions
and futures 5,100,267
Net unrealized depreciation of investments and futures (940,504)
- ---------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $12.11 a share on 34,498,420 shares of
$0.001 par value outstanding: 500,000,000 shares authorized) $417,924,478
=================================================================================
</TABLE>
See Notes to
Financial Statements.
15
<PAGE>
Statement of Operations
For the Year Ended May 31, 1996
<TABLE>
<CAPTION>
=================================================================================
<S> <C>
Investment Income:
Interest $ 27,332,816
- ---------------------------------------------------------------------------------
Expenses:
Investment advisory fees (Note 2) 3,021,241
Administration fees (Note 2) 863,212
Shareholder communications 200,000
Audit and legal 58,000
Directors' fees 49,000
Registration fees 39,000
Shareholder and system servicing fees 28,000
Custody 20,000
Pricing service fees 15,000
Other 25,112
- ---------------------------------------------------------------------------------
Total Expenses 4,318,565
- ---------------------------------------------------------------------------------
Net Investment Income 23,014,251
- ---------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on
Investments and Futures (Notes 4 and 5):
Realized Gain (Loss) From:
Security transactions (excluding short-term securities) 8,243,073
Future contracts (917,062)
- ---------------------------------------------------------------------------------
Net Realized Gain 7,326,011
- ---------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation) of
Investments and Futures:
Beginning of year 18,314,331
End of year (940,504)
- ---------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (19,254,835)
- ---------------------------------------------------------------------------------
Net Loss on Investments and Futures (11,928,824)
- ---------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 11,085,427
=================================================================================
</TABLE>
See Notes to
Financial Statements.
16
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
5/31/96 5/31/95
====================================================================================================
<S> <C> <C>
Operations:
Net investment income $ 23,014,251 $ 24,693,217
Net realized gain (loss) 7,326,011 (1,996,370)
Increase (decrease) in net unrealized appreciation (19,254,835) 19,275,790
- ----------------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 11,085,427 41,972,637
- ----------------------------------------------------------------------------------------------------
Distributions to Shareholders From:
Net investment income (25,858,323) (23,147,994)
Net realized gains (222,483) (8,697,201)
- ----------------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (26,080,806) (31,845,195)
- ----------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (14,995,379) 10,127,442
Net Assets:
Beginning of year 432,919,857 422,792,415
- ----------------------------------------------------------------------------------------------------
End of year* $417,924,478 $432,919,857
====================================================================================================
* Includes undistributed net
investment income of: $ 1,451,333 $ 4,295,405
====================================================================================================
</TABLE>
See Notes to
Financial Statements.
17
<PAGE>
Notes to Financial Statements
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, as
applicable; (d) gains or losses on the sale of securities are calculated by
using the specific identification method; (e) interest income, adjusted for
amortization of premium and accretion of original issue discount, is recorded on
the accrual basis; market discount is recognized upon the disposition of the
security; (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 generally accepted accounting
principles. At May 31, 1996, reclassifications are made to the Fund's capital
accounts to reflect permanent book/tax differences and income and gains
available for distributions under income tax regulations. Net investment income,
net realized gains and net assets were not affected by this change; 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 addition, certain prior year numbers have been restated to reflect
current year's presentation. Net investment income, net realized gains, and net
assets were not affected in this change.
2. Investment Advisory Agreement, Administration
Agreement and Other Transactions
Smith Barney Mutual Funds Management Inc. ("SBMFM"), a subsidiary of Smith
Barney Holdings Inc. ("SBH"), through its Greenwich Street Advisors division,
acts as investment adviser to the Fund. The Fund pays SBMFM 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.
18
<PAGE>
Notes to Financial Statements
(continued)
SBMFM 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.
In addition, The Boston Company Advisors, Inc. ("Boston Advisors"), an
indirect wholly owned subsidiary of Mellon Bank, acted as sub-administrator to
the Fund. SBMFM paid Boston Advisors a portion of its administration fee at a
rate agreed upon from time to time between SBMFM and Boston Advisors. As of July
14, 1995 this relationship was terminated.
All officers and one Director of the Fund are employees of Smith Barney
Inc.
3. 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 gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
4. Securities Transactions
For the year ended May 31, 1996, the aggregate cost of purchases and
proceeds from sales of investment securities (including maturities, but
excluding short-term securities) were $193,188,062 and $184,540,932
respectively.
At May 31, 1996, aggregate gross unrealized appreciation for all securities
in which there was an excess of market value over tax cost amounted to
approximately $9,433,197 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value amounted
to approximately $10,366,201 or a net unrealized depreciation of $933,004.
5. Futures Contracts
Initial margin deposits are made upon entering into futures contracts and
are recognized as assets. The initial margin is segregated by the custodian as
is noted in the schedule of investments. 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
made or received 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 transaction and
the Fund's basis in the contract.
19
<PAGE>
Notes to Financial Statements
(continued)
At May 31, 1996, the Fund had the following open futures contracts:
<TABLE>
<CAPTION>
Futures Expiration # of Basis Market Unrealized
contracts sold Month/Year Contracts Value Value Loss
<S> <C> <C> <C> <C> <C>
Municipal Bond Index 6/96 100 11,170,625 11,178,125 $(7,500)
</TABLE>
The aggregate market value of cash or eligible securities pledged to cover
margin requirements for open future positions at May 31, 1996 was $73,473,126.
6. Off Balance Sheet Risk
During the year ended May 31, 1996, the Fund had entered into transactions
with off-balance-sheet risk in order to reduce its exposure to market risk.
These financial instruments include the short selling of futures. These
instruments contain off-balance-sheet risk whereby change in market values of
the instruments may be in excess of the amounts recognized in the schedule of
investments.
20
<PAGE>
Financial Highlights
For a share of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
1996 1995 1994 1993(1)
===================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $ 12.55 $ 12.26 $ 13.00 $ 12.00
- -----------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.67 0.72 0.67 0.63
Net realized and unrealized gain
(loss) on investments (0.35) 0.49 (0.23) 0.97
- -----------------------------------------------------------------------------------
Total Income From Operations 0.32 1.21 0.44 1.60
- -----------------------------------------------------------------------------------
Offering Costs Charged
to Paid-In Capital -- -- -- (0.02)
- -----------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.75) (0.67) (0.67) (0.55)
Net realized gains (0.01) (0.25) (0.51) (0.03)
- -----------------------------------------------------------------------------------
Total Distributions (0.76) (0.92) (1.18) (0.58)
- -----------------------------------------------------------------------------------
Net Asset Value, End of Year $ 12.11 $ 12.55 $ 12.26 $ 13.00
- -----------------------------------------------------------------------------------
Total Return 2.79% 8.40% 2.27% 7.02%++
- -----------------------------------------------------------------------------------
Net Assets, End of Year (000s) $417,924 $432,920 $422,792 $443,938
- -----------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.00% 1.02% 1.00% 0.98%+
Net investment income 5.35 5.97 5.15 5.48+
- -----------------------------------------------------------------------------------
Portfolio Turnover Rate 45% 93% 72% 169%
===================================================================================
Market Value, End of Year $ 11.69 $ 11.50 $ 11.50 $ 12.25
===================================================================================
</TABLE>
(1) For the period from June 26, 1992 (commencement of operations) to May 31,
1993.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
21
<PAGE>
Independent Auditors' Report
The Shareholders and Board of Directors of
Managed Municipals Portfolio Inc.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of the Managed Municipals Portfolio Inc.
as of May 31, 1996, and the related statements of operations, changes in net
assets, and financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of changes
in net assets for the year ended May 31, 1995 and the financial highlights for
each of the years in the two-year period then ended and for the period from June
26, 1992 (commencement of operations) to May 31, 1993 were audited by other
auditors whose report thereon, dated July 12, 1995, expressed an unqualified
opinion on that statement of changes in net assets and those financial
highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1996 by correspondence with the custodian. As to securities purchased or
sold but not received or delivered, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Managed Municipals
Portfolio Inc. as of May 31, 1996 and the results of its operations, changes in
its net assets, and financial highlights for the year then ended, in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
July 12, 1996
22
<PAGE>
Quarterly Results of Operations
May 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Net Realized and Net Increase
Unrealized Gain (Decrease) in Net
Investment Net Investment (Loss) on Assets From
Income Income Investments Operations
----------------------------------------------------------------------------------------------
Per Per Per Per
Quarter Ended Total Share Total Share Total Share Total Share
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
August 31,
1993 $6,954,864 $0.20 $5,796,493 $0.17 $ 14,702,966 $ 0.43 $ 20,499,459 $ 0.60
November 30,
1993 6,803,020 0.17 5,731,243 0.17 (1,381,672) (0.08) 4,349,571 0.09
February 28,
1994 6,678,467 0.19 5,549,454 0.16 (4,168,370) (0.12) 1,381,084 0.04
May 31,
1994 7,004,102 0.24 5,910,189 0.17 (17,312,645) (0.46) (11,402,456) (0.29)
August 31,
1994 7,178,807 0.21 6,027,342 0.18 (782,448) (0.02) 5,244,894 0.16
November 30,
1994 7,092,384 0.20 6,096,465 0.17 (32,730,626) (0.95) (26,634,161) (0.78)
February 28,
1995 7,280,844 0.21 6,181,630 0.18 35,883,360 1.04 42,064,990 1.22
May 31,
1995 7,348,720 0.21 6,387,780 0.19 14,909,134 0.42 21,296,914 0.61
August 31,
1995 6,836,154 0.20 5,726,578 0.17 (4,006,671) (0.12) 1,719,907 0.05
November 30,
1995 6,832,879 0.20 5,725,758 0.17 9,842,182 0.29 15,567,940 0.45
February 29,
1996 6,815,655 0.19 5,690,615 0.16 (268,190) (0.01) 5,422,425 0.16
May 31,
1996 6,848,128 0.20 5,871,300 0.17 (17,496,145) (0.51) (11,624,845) (0.34)
====================================================================================================================
</TABLE>
23
<PAGE>
Financial Data
May 31, 1996 (unaudited)
For a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Capital
NYSE Net Gains Dividend
Closing Asset Dividend Dividend Reinvestment
Payable Date Price+ Value+ Paid Paid Price
============================================================================
<S> <C> <C> <C> <C> <C>
September 30, 1994 $11.000 $11.98 $0.061 -- $11.43
October 31, 1994 11.125 11.79 0.061 -- 10.81
November 30, 1994 10.375 10.99 0.061 -- 10.58
December 30, 1994 10.250 11.33 -- $0.140 10.87
January 31, 1995 11.000 11.56 0.061 -- 11.33
February 28, 1995 11.375 12.07 0.061 -- 11.46
March 31, 1995 11.375 12.26 0.061 -- 11.56
April 28, 1995 11.375 12.41 0.061 -- 11.54
May 31, 1995 11.250 12.41 0.061 0.112 11.89
June 30, 1995 11.875 12.49 0.064 -- 11.86
July 31, 1995 11.750 12.33 0.064 -- 11.84
August 25, 1995 12.000 12.20 0.064 -- 11.90
September 29, 1995 11.750 12.38 0.064 -- 11.87
October 27, 1995 11.750 12.46 0.064 -- 11.92
November 24, 1995 12.062 12.59 0.064 -- 11.99
December 29, 1995 12.125 12.69 0.064 -- 12.30
January 26, 1996 12.500 12.66 0.064 -- 12.51
February 23, 1996 12.250 12.68 0.064 -- 12.14
March 29, 1996 11.750 12.43 0.060 -- 11.61
April 26, 1996 11.375 12.24 0.060 -- 11.53
May 31, 1996 11.688 12.25 0.060 -- 11.65
============================================================================
</TABLE>
+ As of record date
24
<PAGE>
Dividend Reinvestment Plan
(unaudited)
Under the Portfolio's Dividend Reinvestment Plan (the "Plan"), a
shareholder whose Common Stock is registered in his own name will have all
distributions reinvested automatically by First Data Investor Services Group,
Inc. ("First Data") (formerly known as "The Shareholder Services Group, Inc.")
as 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 Common Stock under the Plan, but only if the service is
provided by the broker or nominee, and the broker or nominee makes an election
on behalf of the shareholder to participate in the Plan. Distributions with
respect to Common Stock registered in the name of Smith Barney will
automatically be reinvested by Smith Barney in additional shares under the Plan
unless the shareholder elects to receive distributions in cash. A shareholder
who holds Common Stock registered in the name of a broker or other nominee may
not be able to transfer the Common Stock to another broker or nominee and
continue to participate in the Plan. Investors who own Common Stock registered
in street name should consult their broker or nominee for details regarding
reinvestment.
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. Whenever
the market price of the Fund's Common Stock is equal to or exceeds the net asset
value per share, participants will be issued shares of Common Stock valued at
the greater (i) the net asset value per share or (ii) 95% of the then current
market price. If the net asset value per share of Common Stock at the time of
valuation exceeds the market price of the Common Stock, First Data will buy
shares of the Fund's Common Stock on the open market, on the New York Stock
Exchange, Inc. or elsewhere, beginning on the payment date of the dividend or
distribution, until it has expended for such purchases all of the cash that
would otherwise be payable to the participants.
First Data may commence purchasing shares beginning on the record date for
the dividend or distribution. The number of purchased shares that will then be
credited to the participants' accounts will be based on the average per share
purchase price of the shares so purchased, including brokerage commissions. If
First Data commences purchases in the open market and the market price of the
shares subsequently exceeds net asset value before the completion of the
purchases, First Data will attempt to terminate purchases in the open market and
cause the Fund to issue the remaining dividend or distribution in shares at net
asset value per share. In this case, the number of shares of Common Stock
received by the 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.
25
<PAGE>
Dividend Reinvestment Plan
(unaudited) (continued)
Plan participants are not subject to any charge for reinvesting dividends
or capital gains distributions. Each Plan participant will, however, bear a
proportionate share of brokerage commissions incurred with respect to First
Data's open market purchases of shares of Common Stock in connection with
reinvestment of dividends or capital gains distributions.
A participant in the Plan will be treated for Federal income tax purposes
as having received, on the dividend payment date, a dividend or distribution in
an amount equal to the cash that the participant could have received instead of
shares of Common Stock.
A shareholder may terminate participation in the Plan at any time by
notifying First Data in writing. A termination will be effective immediately if
notice is received by First Data not less than 10 days before any dividend or
distribution record date. Otherwise, the termination will be effective, and only
with respect to any subsequent dividends or distributions, on the first trading
day after the dividend or distribution has been credited to the participant's
account in additional shares of Common Stock of the Fund. Upon termination
according to a participant's instructions, First Data will either (a) issue
certificates for the whole shares credited to a Plan account and a check
representing any fractional shares or (b) sell the shares in the market. There
will be $5.00 fee assessed for liquidation service, plus brokerage commissions,
and First Data is authorized to sell a sufficient number of a participant's
shares to cover such amounts.
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 at
market prices shares of its common stock in the open market.
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. 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.
The Plan is described in more detail on pages 17-19 of the Fund's
Prospectus dated September 28, 1994. Information concerning the Plan may be
obtained from First Data at (800) 331-1710.
Tax Information
(unaudited)
For the year ended May 31, 1996, 100% of the dividends paid by the Fund
from net investment income were tax-exempt for regular Federal income tax.
26
<PAGE>
Managed Municipals
Portfolio Inc.
Directors
Charles F. Barber
Allan J. Bloostein
Martin Brody
Dwight B. Crane
Robert A. Frankel
William R. Hutchinson
Heath B. McLendon, Chairman
Officers
Heath B. McLendon
Chief Executive Officer
Jessica M. Bibliowicz
President
Lewis E. Daidone
Senior Vice President
and Treasurer
Joseph P. Deane
Vice President and
Investment Officer
David Fare
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
Investment Adviser and Administrator
Smith Barney Mutual Funds
Management Inc.
388 Greenwich Street
New York, New York 10013
Transfer Agent
First Data Investor Services
Group, Inc.
P.O. Box 1376
Boston, Massachusetts 02104
Custodian
PNC Bank, N.A.
17th & Chestnut Streets
Philadelphia, Pennsylvania 19103
27
<PAGE>
[This page intentionally left blank]
<PAGE>
This report is sent to the shareholders of the
Managed Municipals Portfolio Inc.
for their information. 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.
FD2246 7/96
