<PAGE>
================================================================================
MANAGED MUNICIPALS
PORTFOLIO INC.
ANNUAL REPORT
May 31, 1997
[GRAPHIC]
================================================================================
<PAGE>
[GRAPHIC]
MANAGED MUNICIPALS
PORTFOLIO INC.
May 31, 1997
================================================================================
Dear Shareholder:
We are pleased to provide the annual report for the Managed Municipals
Portfolio Inc. ("Portfolio") for the year ended May 31, 1997. During the year,
the Portfolio distributed income dividends totaling $0.66 per share and a
capital gain of $0.30 per share. The table below shows the annualized
distribution rates and twelve-month total returns based on the Portfolio's May
31, 1997 net asset value (NAV) per share and its New York Stock Exchange
(NYSE) closing price:
<TABLE>
<CAPTION>
Price Annualized Twelve-Month
Per Share Distribution Rate* Total Return
- -------------- ------------------ ------------
<S> <C> <C>
$11.90 (NAV) 6.05% 6.59%
$11.625 (NYSE) 6.19% 7.89%
</TABLE>
In comparison, closed-end municipal bond funds posted an average total
return based on NAV of 9.25% for the same time period, as reported by Lipper
Analytical Services, Inc. (Lipper Analytical Services, Inc. is a major fund
tracking organization.) The Portfolio's underperformance on NAV was primarily
due to the drop in value of certain pulp recycling facility bonds held by the
Portfolio. The decline in value of these bonds was caused by the decline in the
market price of pulp.
Municipal Market Update
For the past several months ending in May, the bond market experienced a
significant correction in prices. This correction was a reaction not only to the
Federal Reserve's ("Fed") minor tightening of short-term interest rates but more
so to the conservative stance taken by the Fed Chairman, Alan Greenspan. Given a
benign inflationary outlook and moderating economic data, we felt this indicated
a less robust
- ----------
* This distribution assumes monthly dividends at the current rate of $0.06 per
share for twelve months.
- -----------------------------------[GRAPHIC]------------------------------------
1
<PAGE>
economy in the second quarter. We believe that long-term interest rates were
quite cheap. In our view, these factors have led us to a very positive outlook
for long-term interest rates and the municipal bond market through the summer.
The Fed has declined to push the federal funds rate higher at both the May
and July meetings. (The federal funds rate is the interest rate banks charge
each other for overnight loans and an indicator of the direction of interest
rates.) Despite impressive growth in jobs, the producer price index (PPI) and
consumer price index (CPI) have been benign. Second quarter growth has also been
much more moderate than the two previous quarters. Therefore, the Fed's response
has been, in our opinion, appropriate and should be positive for the bond
market.
Portfolio's Investment Strategy
Our basic goal during the recent bond market correction has been to
position the fund in high-grade bonds with long call protection and somewhat
lower coupons. This strategy should not only upgrade the credit quality and
liquidity of the portfolio but give us a better chance to participate in the
price appreciation that we think this market will experience from today's
levels.
During the past quarter, the Portfolio focused on transportation bonds
(21.6% of the Portfolio), general obligation bonds (11.5% of the Portfolio) and
hospital bonds (8.5% of the Portfolio) because we believe they offered good
relative values. At the end of May, the Portfolio's weighted average maturity
was approximately 23.4 years. In addition, as of May 31, 1997, approximately
88.0% of the Portfolio's holdings were rated investment grade by either Standard
& Poor's Corporation or Moody's Investors Services Inc., with 47.2% of the
Portfolio invested in AAA bonds, the highest possible rating. (Standard & Poor's
and Moody's are two major credit reporting and bond rating agencies.)
Municipal Bond Market Outlook
Throughout 1997, the municipal bond market has outperformed its taxable
counterpart significantly. This is due simply to an ongoing imbalance in the
supply and demand for municipal bonds. For the past several years, supply has
been quite moderate, averaging about $170 billion per year. Conversely, demand
has been very strong, due to the significant amount of bond calls that have
reduced the amount of municipal debt outstanding by approximately $200 billion
during the last three years. Since we do not foresee any dramatic changes in
this relationship, we expect municipal debt to continue to show strong
performance relative to taxable debt.
- -----------------------------------[GRAPHIC]------------------------------------
2
<PAGE>
In closing, thank you for investing in 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 Vice President and
Investment Officer
July 9, 1997
- -----------------------------------[GRAPHIC]------------------------------------
3
<PAGE>
================================================================================
Schedule of Investments
May 31, 1997
================================================================================
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
================================================================================
===================================
MUNICIPAL BONDS AND NOTES -- 100.0%
===================================
Alaska -- 2.8%
<C> <C> <S> <C>
Valdez, AK Marine Terminal Revenue,
BP Pipelines Inc. Project:
$ 6,000,000 AA Series A, 5.850% due 8/1/25(a) $ 5,902,500
6,000,000 AA Series C, 5.650% due 12/1/28 5,805,000
- --------------------------------------------------------------------------------
11,707,500
- --------------------------------------------------------------------------------
Alabama -- 3.4%
13,810,000 AAA Jefferson County, AL Sewer
Revenue, Series D, FGIC-Insured,
5.700% due 2/1/19 13,844,525
- --------------------------------------------------------------------------------
California -- 11.1%
4,000,000 AAA Anaheim, CA Public Finance Authority,
Lease Revenue, (Public Improvements
Project), Series A, FSA-Insured,
5.000% due 3/1/37 3,595,000
600,000 VMIG 1* California Health Facilities Financing
Authority Revenue, Sutter Hospital,
3.900% due 7/1/12(b) 600,000
8,000,000 AAA California State Department of Water
Reserve, (Central Valley Project
Revenue), Series Q, MBIA-Insured,
5.375% due 12/1/27 7,750,000
3,000,000 AAA California State GO, FGIC-Insured,
5.375% due 6/1/26 2,906,250
California State Public Works Board,
Lease Revenue, AMBAC-Insured:
1,000,000 AAA Department of Corrections, CA
Prison, 5.250% due 1/1/21 950,000
1,000,000 AAA University of California, Series B,
5.375% due 12/1/19 972,500
3,300,000 A- Los Angeles, CA Regional Airport
Improvement Corp., Los Angeles
International Airport Lease Revenue,
6.500% due 1/1/32(c) 3,324,750
</TABLE>
See Notes to
Financial Statements.
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4
<PAGE>
================================================================================
Schedule of Investments
May 31, 1997 (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
================================================================================
<C> <C> <S> <C>
California -- 11.1% (continued)
Los Angeles County, CA Metropolitan,
Transportation Authority, Sales
Tax Revenue:
$ 2,000,000 AAA AMBAC-Insured, 5.250% due 7/1/23 $ 1,867,500
MBIA-Insured:
7,700,000 AAA 5.250% due 7/1/17 7,382,375
3,000,000 AAA 5.250% due 7/1/18 2,872,500
3,140,000 AAA Rancho Mirage, CA Redevelopment
Agency Tax Allocation, (Redevelopment
Plan-1984 Project), Series M,
MBIA-Insured, 5.000% due 4/1/24 2,841,700
2,750,000 AAA Sacramento County, CA Public
Facilities Project, MBIA-Insured,
5.375% due 2/1/19 2,660,625
7,500,000 AAA San Diego, CA Public Finance Authority,
Sewer Revenue, FGIC-Insured,
5.000% due 5/15/20 6,928,125
1,000,000 AAA San Francisco, CA Building Authority
Lease Revenue, AMBAC-Insured,
5.250% due 12/1/21 955,000
- --------------------------------------------------------------------------------
45,606,325
- --------------------------------------------------------------------------------
Colorado -- 12.2%
3,000,000 Baa* Arapahoe County, CO Capital
Improvement, Public Highway Authority,
7.000% due 8/31/26(d) 3,236,250
2,000,000 BBB+ Colorado Springs, CO Airport Revenue,
Series A, 7.000% due 1/1/22(c) 2,110,000
3,500,000 AA Colorado Springs, CO Utilities Revenue
Refunding & Improvement, Series A,
5.125% due 11/15/23 3,272,500
100,000,000 Aaa* Dawson Ridge, CO Metropolitan
District No. 1, Series B,
(Escrowed to Maturity with
Refco Strips), zero coupon
due 10/1/22 18,500,000
Denver, CO City & County Airport
Revenue, Series C:
4,000,000 BBB 6.750% due 11/15/22(c) 4,205,000
18,325,000 BBB 6.125% due 11/15/25(c) 18,531,156
</TABLE>
See Notes to
Financial Statements.
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5
<PAGE>
================================================================================
Schedule of Investments
May 31, 1997 (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
================================================================================
<C> <C> <S> <C>
Colorado -- 12.2% (continued)
$ 400,000 VMIG 1* Moffat County, CO PCR, (Pacificorp
Projects), 4.150% due 5/1/13(b) $ 400,000
- --------------------------------------------------------------------------------
50,254,906
- --------------------------------------------------------------------------------
Connecticut -- 0.3%
1,200,000 AA- Connecticut State Community Development
Authority, Special Obligation, Series A,
5.550% due 12/15/15 1,183,500
- --------------------------------------------------------------------------------
Florida -- 9.3%
10,000,000 AAA Dade County, FL Water & Sewer
Systems Revenue, FGIC-Insured,
5.250% due 10/1/26 9,500,000
Florida Board of Education,
Capital Outlay Refunding:
2,000,000 AA+ Series A, 5.250% due 6/1/22 1,887,500
Series D:
10,800,000 AA+ 5.125% due 6/1/18 10,152,000
2,500,000 AA+ 5.200% due 6/1/23 2,340,625
5,000,000 BBB- Martin County, FL IDA, (Indiantown
Cogeneration Project), Series A,
7.875% due 12/15/25(c) 5,625,000
3,500,000 AAA Orange County, FL School Board, Series A,
MBIA-Insured, 5.375% due 8/1/22 3,364,375
Tampa, FL Revenue Bonds,
(Florida Aquarium Inc. Project):
2,900,000 NR 7.550% due 5/1/12 3,306,000
2,000,000 NR 7.750% due 5/1/27(d) 2,297,500
- --------------------------------------------------------------------------------
38,473,000
- --------------------------------------------------------------------------------
Illinois -- 2.8%
3,000,000 AAA Chicago, IL Midway Airport Revenue,
MBIA-Insured, 5.500% due 1/1/29 2,891,250
8,000,000 AAA Chicago, IL Skyway Toll Bridge
Revenue, Series 1996, MBIA-Insured,
5.500% due 1/1/23 7,720,000
1,000,000 AAA Metropolitan Pier & Exposition
Authority, IL, (McCormick Plan
Exposition Project), Series A,
AMBAC-Insured, 5.250% due 6/15/27 937,500
- --------------------------------------------------------------------------------
11,548,750
- --------------------------------------------------------------------------------
</TABLE>
See Notes to
Financial Statements.
- -----------------------------------[GRAPHIC]------------------------------------
6
<PAGE>
================================================================================
Schedule of Investments
May 31, 1997 (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
================================================================================
<C> <C> <S> <C>
Indiana -- 1.6%
$ 5,000,000 Aa3* Indiana Port Commission Revenue
Refunding Project, (Cargill Inc. Project),
6.875% due 5/1/12(d) $ 5,418,750
1,000,000 VMIG 1* Jasper County, IN PCR, Northern
Industrial Public Service, Series B,
4.150% due 6/1/13(b) 1,000,000
- --------------------------------------------------------------------------------
6,418,750
- --------------------------------------------------------------------------------
Louisiana -- 1.4%
5,500,000 Aa3* Saint Martin Parish, LA Industrial Revenue,
(Cargill Inc. Project), 6.625% due 10/1/12 5,898,750
- --------------------------------------------------------------------------------
Maryland -- 0.8%
10,000,000 NR Maryland State Energy Financing
Administration, Solid Waste
Disposal Revenue, Limited
Obligation, (Hagerstown Project),
9.000% due 10/15/16(d) 3,300,000
- --------------------------------------------------------------------------------
Massachusetts -- 3.0%
Massachusetts Bay Transportation
Authority, Series B:
2,000,000 AAA AMBAC-Insured, 5.375% due 3/1/20 1,937,500
4,760,000 AAA FSA-Insured, 5.250% due 3/1/26 4,510,100
10,000,000 NR Massachusetts State IDA, Solid Waste
Disposal Revenue, Massachusetts
Recycling Association, Series A,
9.000% due 8/1/16(d) 4,000,000
2,000,000 AAA Massachusetts State Water Resource
Authority, Series C, MBIA-Insured,
5.250% due 12/1/20 1,872,500
- --------------------------------------------------------------------------------
12,320,100
- --------------------------------------------------------------------------------
Michigan -- 5.8%
2,000,000 AA- Michigan State Public Power Agency
Revenue, (Bell River Project), Series B,
5.000% due 1/1/19 1,815,000
2,000,000 NR Michigan State Strategic Funding, Limited
Obligation Revenue, (Blue Water Fiber
Project), 8.000% due 1/1/12(d) 1,340,000
16,375,000 NR Midland County, MI Education
Development Corporation, PCR,
Limited Obligation, Series B,
9.500% due 7/23/09(c) 17,910,156
</TABLE>
See Notes to
Financial Statements.
- -----------------------------------[GRAPHIC]------------------------------------
7
<PAGE>
================================================================================
Schedule of Investments
May 31, 1997 (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
================================================================================
<C> <C> <S> <C>
Michigan -- 5.8% (continued)
$ 3,000,000 AAA Pinckney Michigan Community Schools,
FGIC-Insured, 5.500% due 5/1/27 $ 2,910,000
- --------------------------------------------------------------------------------
23,975,156
- --------------------------------------------------------------------------------
Minnesota -- 0.7%
2,500,000 Aa3* Duluth, MN Seaway Port Authority, IDA,
Dock & Wharf Revenue, (Cargill Inc.
Project), 6.800% due 5/1/12 2,690,625
- --------------------------------------------------------------------------------
Missouri -- 0.8%
2,000,000 AAA Kansas City, MO Municipal Assistance
Refunding Corp., Series A, MBIA-
Insured, 5.000% due 4/15/20 1,847,500
1,650,000 AAA Missouri State Health & Education
Facilities Authority, St. Lukes/Shawnee
Mission, Series A, MBIA-Insured,
5.375% due 11/15/21 1,588,125
- --------------------------------------------------------------------------------
3,435,625
- --------------------------------------------------------------------------------
Montana -- 1.8%
8,000,000 NR Montana State Board Investment
Resources Recovery, (Yellowstone
Energy Project), 7.000% due 12/31/19 7,620,000
- --------------------------------------------------------------------------------
Nebraska -- 0.9%
4,000,000 AAA Nebraska Public Power District
Revenue, Series A, MBIA-Insured,
5.250% due 1/1/28 3,745,000
- --------------------------------------------------------------------------------
New Jersey -- 1.3%
5,200,000 A+ Hudson County, NJ Improvement
Authority, 6.625% due 8/1/25 5,538,000
- --------------------------------------------------------------------------------
New York -- 11.2%
2,000,000 AAA New York City Municipal Water
Financing Authority, Water & Sewer
System Revenue, Series A,
FSA-Insured, 5.375% due 6/15/26 1,927,500
1,090,000 AAA New York State Dormitory Authority
Lease Revenue, Health Facilities
Improvement Program, Series A,
FSA-Insured, 5.500% due 5/15/16 1,080,463
</TABLE>
See Notes to
Financial Statements.
- -----------------------------------[GRAPHIC]------------------------------------
8
<PAGE>
================================================================================
Schedule of Investments
May 31, 1997 (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
================================================================================
<C> <C> <S> <C>
New York -- 11.2% (continued)
New York State Dormitory Authority
Revenue, AMBAC-Insured:
$ 3,000,000 AAA City University, 5.375% due 7/1/25 $ 2,861,250
2,620,000 AAA Barnard College, 5.250% due 7/1/26 2,466,075
7,000,000 AAA Montefiore Medical Center,
5.250% due 2/1/15 6,737,500
New York State Local Government
Assistance Corp:
3,055,000 A Series C, 5.000% due 4/1/21 2,753,319
16,000,000 A Series D, 5.000% due 4/1/23 14,360,000
New York State Medcare Mental
Health Services, FSA-Insured:
3,000,000 AAA 5.250% due 2/15/19 2,823,750
4,300,000 AAA 5.250% due 2/15/21 3,999,000
8,000,000 AA New York Triborough Bridge & Tunnel
Authority, 5.000% due 1/1/24 7,280,000
- --------------------------------------------------------------------------------
46,288,857
- --------------------------------------------------------------------------------
Ohio -- 0.7%
1,000,000 AAA Cleveland-Cuyahoga County, OH
Port Authority Revenue, Rock &
Roll Hall of Fame, AMBAC-Insured,
5.400% due 12/1/15 975,000
2,000,000 AAA Lorrain County, OH Hospital Revenue,
Catholic Health Care Partners,
MBIA-Insured, 5.500% due 9/1/27 1,947,500
100,000 VMIG 1* Ohio Air Quality Gas & Electric,
3.550% due 9/1/30(b) 100,000
- --------------------------------------------------------------------------------
3,022,500
- --------------------------------------------------------------------------------
South Carolina -- 0.5%
2,000,000 BBB+ Myrtle Beach, SC COP, Myrtle Beach
Convention Center, 6.875% due 7/1/07 2,115,000
- --------------------------------------------------------------------------------
Tennessee -- 0.3%
1,150,000 NR Hardeman County, TN Correctional
Facility Corp., 7.750% due 8/1/17 1,162,938
- --------------------------------------------------------------------------------
Texas -- 11.5%
2,000,000 AAA Brownsville, TX Utility Systems Revenue,
AMBAC-Insured, 5.250% due 9/1/20 1,897,500
Burleson, TX ISD, PSFG:
1,160,000 Aaa* 6.750% due 8/1/24 1,262,950
</TABLE>
See Notes to
Financial Statements.
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9
<PAGE>
================================================================================
Schedule of Investments
May 31, 1997 (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
================================================================================
<C> <C> <S> <C>
Texas -- 11.5% (continued)
$ 2,840,000 Aaa* Pre-Refunded -- Escrowed with U.S.
Government Securities to 8/1/06
Call @ 100, 6.750% due 8/1/24 $ 3,216,300
800,000 VMIG 1* Gulf Coast Waste Disposal Authority,
PCR, (Amoco Oil Co. Project),
4.100% due 10/1/17(b) 800,000
4,000,000 AA Harris County, TX Health Facilities
Development Corporation Revenue,
School Health Care Systems,
Series B, 5.750% due 7/1/27 3,950,000
8,000,000 AAA Harris County, TX Toll Road,
FGIC-Insured, 5.375% due 8/15/20 7,710,000
Houston, TX Water & Sewer System
Revenue, FGIC-Insured:
5,000,000 AAA Series A, 5.375% due 12/1/27 4,800,000
1,500,000 AAA Series C, 5.375% due 12/1/27 1,440,000
2,000,000 AAA Leander, TX ISD, PSFG,
5.625% due 8/15/18 1,995,000
5,000,000 AAA Nueces River Authority, TX Water
Supply Facilities, FSA-Insured,
5.500% due 3/1/27 4,868,750
4,000,000 AA San Antonio, TX Electric & Gas,
5.500% due 2/1/20 3,930,000
12,000,000 AAA Texas State Turnpike Authority, Dallas
North Thruway Revenue, President
George Bush Turnpike, FGIC-Insured,
5.250% due 1/1/23 11,415,000
- --------------------------------------------------------------------------------
47,285,500
- --------------------------------------------------------------------------------
Utah -- 1.8%
8,000,000 A+ Intermountain Power Agency, Utah
Power Supply Revenue Refunding,
Series D, 5.000% due 7/1/21 7,260,000
- --------------------------------------------------------------------------------
Virginia -- 4.3%
4,700,000 A* Harrisonburg, VA Redevelopment
and Housing Authority, (Jail &
Courthouse Project), Public Facility
Lease Revenue, 6.500% due 9/1/14 4,864,500
</TABLE>
See Notes to
Financial Statements.
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10
<PAGE>
================================================================================
Schedule of Investments
May 31, 1997 (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
================================================================================
<C> <C> <S> <C>
Virginia -- 4.3% (continued)
Virginia College Building Authority,
Virginia Educational Facilities Revenue,
21st Century College Program:
$ 3,590,000 AA 5.250% due 8/1/13 $ 3,527,175
3,805,000 AA 5.250% due 8/1/14 3,714,631
Virginia State Housing Development
Authority, Multi-Family Housing:
1,655,000 AA+ Series D, 6.250% due 1/1/15 1,702,581
1,235,000 AAA Series H, AMBAC-Insured,
6.300% due 11/1/15 1,275,138
600,000 AA+ Series K, 5.800% due 11/1/10 615,750
2,000,000 AA Virginia State Transportation Board,
Transportation Contract Revenue,
Series A, 5.125% due 5/15/21 1,870,000
- --------------------------------------------------------------------------------
17,569,775
- --------------------------------------------------------------------------------
Washington -- 6.9%
Chelan County, WA GO Public Utilities:
District No. 1, Columbus River Rock,
MBIA-Insured, Series A:
20,685,000 AAA Zero coupon due 6/1/21 5,171,250
11,340,000 AAA Zero coupon due 6/1/22 2,679,075
22,295,000 AAA Zero coupon due 6/1/29 3,455,725
4,750,000 A+ District No. 1, Series 1993-A,
District No. 4, Remarketed, mandatory
put 7/1/19, 6.750% due 7/1/62(d) 4,922,188
11,000,000 AA- Washington State Health Care Facilities,
Authority Revenue, Sisters of
Providence Hospital,
7.875% due 10/1/10(d) 11,990,000
- --------------------------------------------------------------------------------
28,218,238
- --------------------------------------------------------------------------------
West Virginia -- 1.3%
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(c)(d) 500,000
10,000,000 NR American Power Paper Recycling
Project, 7.750% due 12/1/11(c)(d) 5,000,000
- --------------------------------------------------------------------------------
5,500,000
- --------------------------------------------------------------------------------
</TABLE>
See Notes to
Financial Statements.
- -----------------------------------[GRAPHIC]------------------------------------
11
<PAGE>
================================================================================
Schedule of Investments
May 31, 1997 (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
================================================================================
<C> <C> <S> <C>
Wisconsin -- 1.5%
$ 4,070,000 AA Wisconsin State GO, Series B,
6.600% due 1/1/22(c) $ 4,298,937
Wisconsin State Health and Educational
Facilities Authority, MBIA-Insured:
1,000,000 AAA Aurora Health Care Project, 936,250
5.250% due 8/15/23
1,000,000 AAA Medical College, 5.400% due 12/1/16 953,750
- --------------------------------------------------------------------------------
6,188,937
- --------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS AND NOTES
(COST -- $419,051,159**) $412,172,257
================================================================================
</TABLE>
(a) Security partially segregated by Custodian for futures contracts
commitments.
(b) Variable rate municipal bonds and notes are payable upon not more than one
business day's notice.
(c) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(d) Security segregated by Custodian for open purchase 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.
================================================================================
Summary of Investments by Combined Ratings
May 31, 1997 (unaudited)
================================================================================
<TABLE>
<CAPTION>
================================================================================
Percent of
Moody's and/or Standard & Poor's Total Investments
================================================================================
================================================================================
<S> <C> <C>
Aaa AAA 47.2%
Aa AA 21.7
A A 10.4
Baa BBB 8.7
VMIG 1 A-1 0.7
NR NR 11.3
-----
100.0%
=====
</TABLE>
================================================================================
See Notes to
Financial Statements.
- -----------------------------------[GRAPHIC]------------------------------------
12
<PAGE>
================================================================================
Bond Ratings
================================================================================
All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's"),
except those identified by an asterisk (*) are rated by Moody's Investors
Service Inc. ("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.
- -----------------------------------[GRAPHIC]------------------------------------
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
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 -- 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
- -----------------------------------[GRAPHIC]------------------------------------
14
<PAGE>
================================================================================
Statement of Assets and Liabilities
================================================================================
<TABLE>
<CAPTION>
May 31, 1997
=============================================================================================
<S> <C>
ASSETS:
Investments, at value (Cost -- $419,051,159) $412,172,257
Cash 19,998
Receivable for securities sold 3,326,317
Interest receivable 7,438,307
- ---------------------------------------------------------------------------------------------
Total Assets 422,956,879
- ---------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 10,267,625
Dividends payable 973,389
Investment advisory fees payable 250,137
Administration fees payable 72,404
Accrued expenses 107,531
- ---------------------------------------------------------------------------------------------
Total Liabilities 11,671,086
- ---------------------------------------------------------------------------------------------
Total Net Assets $411,285,793
=============================================================================================
NET ASSETS:
Par value of capital shares $ 34,552
Capital paid in excess of par value 412,905,152
Undistributed net investment income 1,535,649
Accumulated net realized gain from
security transactions and futures contracts 3,689,342
Net unrealized depreciation of investments (6,878,902)
- ---------------------------------------------------------------------------------------------
TOTAL NET ASSETS
(Equivalent to $11.90 a share on 34,552,414 shares of $0.001
par value outstanding: 500,000,000 shares authorized) $411,285,793
=============================================================================================
</TABLE>
See Notes to
Financial Statements.
- -----------------------------------[GRAPHIC]------------------------------------
15
<PAGE>
================================================================================
Statement of Operations
================================================================================
<TABLE>
<CAPTION>
Year
Ended
5/31/97
================================================================================
<S> <C>
INVESTMENT INCOME:
Interest $ 27,274,958
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3) 2,913,886
Administration fees (Note 3) 832,539
Shareholder communications 207,433
Audit and legal 51,348
Directors' fees 48,866
Registration fees 30,095
Shareholder and system servicing fees 20,408
Custody 19,148
Pricing service fees 11,968
Other 8,067
- --------------------------------------------------------------------------------
Total Expenses 4,143,758
- --------------------------------------------------------------------------------
Net Investment Income 23,131,200
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 4 AND 5):
Realized Gain From:
Security transactions (excluding short-term securities) 8,327,047
Futures contracts 164,375
- --------------------------------------------------------------------------------
Net Realized Gain 8,491,422
- --------------------------------------------------------------------------------
Change in Net Unrealized Depreciation of Investments:
Beginning of year (940,504)
End of year (6,878,902)
- --------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (5,938,398)
- --------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 2,553,024
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 25,684,224
================================================================================
</TABLE>
See Notes to
Financial Statements.
- -----------------------------------[GRAPHIC]------------------------------------
16
<PAGE>
================================================================================
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
5/31/97 5/31/96
================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 23,131,200 $ 23,014,251
Net realized gain 8,491,422 7,326,011
Increase in net unrealized depreciation (5,938,398) (19,254,835)
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 25,684,224 11,085,427
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income (22,772,196) (25,858,323)
Net realized gains (10,177,035) (222,483)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (32,949,231) (26,080,806)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6:)
Net asset value of shares issued
for reinvestment of dividends 626,322 --
- --------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions 626,322 --
- --------------------------------------------------------------------------------
Decrease in Net Assets (6,638,685) (14,995,379)
NET ASSETS:
Beginning of year 417,924,478 432,919,857
- --------------------------------------------------------------------------------
End of year* $ 411,285,793 $ 417,924,478
================================================================================
* Includes undistributed net
investment income of: $ 1,535,649 $ 1,451,333
================================================================================
</TABLE>
See Notes to
Financial Statements.
- -----------------------------------[GRAPHIC]------------------------------------
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, which
approximates value; (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, 1997, reclassifications were made to the Portfolio's
capital accounts to reflect permanent book/tax differences and income and gains
available for distributions under income tax regulations; 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 amounts have been restated to reflect
current year's presentation. Net investment income, net realized gains and net
assets were not affected by this change.
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.
- -----------------------------------[GRAPHIC]------------------------------------
18
<PAGE>
================================================================================
Notes to Financial Statements
(continued)
================================================================================
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 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.
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.
All officers and one Director of the Fund are employees of Smith Barney
Inc.
4. Investments
For the year ended May 31, 1997, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
<TABLE>
================================================================================
<S> <C>
Purchases $474,713,186
- --------------------------------------------------------------------------------
Sales 476,091,938
================================================================================
</TABLE>
At May 31, 1997, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
================================================================================
<S> <C>
Gross unrealized appreciation $ 12,868,444
Gross unrealized depreciation (19,747,346)
- --------------------------------------------------------------------------------
Net unrealized depreciation $ (6,878,902)
================================================================================
</TABLE>
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 made or received and recognized as
- -----------------------------------[GRAPHIC]------------------------------------
19
<PAGE>
================================================================================
Notes to Financial Statements
(continued)
================================================================================
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) and the credit risk
should a counterparty fail to perform under such contracts.
At May 31, 1997, there were no open futures contracts.
6. Capital Shares
During the year ended May 31, 1997, capital stock transactions were as
follows:
<TABLE>
<CAPTION>
Shares Amount
================================================================================
<S> <C> <C>
Shares issued on reinvestment 53,994 $626,322
================================================================================
</TABLE>
- -----------------------------------[GRAPHIC]------------------------------------
20
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of capital stock outstanding throughout each year:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993(1)
====================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $12.11 $12.55 $12.26 $13.00 $12.00
- ----------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.67 0.67 0.72 0.67 0.63
Net realized and unrealized
gain (loss) 0.08 (0.35) 0.49 (0.23) 0.97
- ----------------------------------------------------------------------------------------------------
Total Income From Operations 0.75 0.32 1.21 0.44 1.60
- ----------------------------------------------------------------------------------------------------
Offering Costs Charged
to Paid-In Capital -- -- -- -- (0.02)
- ----------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.66) (0.75) (0.67) (0.67) (0.55)
Net realized gains (0.30) (0.01) (0.25) (0.51) (0.03)
- ----------------------------------------------------------------------------------------------------
Total Distributions (0.96) (0.76) (0.92) (1.18) (0.58)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $11.90 $12.11 $12.55 $12.26 $13.00
- ----------------------------------------------------------------------------------------------------
Total Return,
Based on Market Value 7.89% 8.26% 8.40% 2.98% 7.02%++
- ----------------------------------------------------------------------------------------------------
Total Return,
Based on Net Asset Value* 6.59% 2.79% 10.96% 3.45% 13.58%++
- ----------------------------------------------------------------------------------------------------
Net Assets, End of Year (000s) $411,286 $417,924 $432,920 $422,792 $443,938
- ----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.00% 1.00% 1.02% 1.00% 0.98%+
Net investment income 5.56 5.35 5.97 5.15 5.48+
- ----------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 113% 45% 93% 72% 169%
- ----------------------------------------------------------------------------------------------------
Market Value, End of Year $11.625 $11.690 $11.500 $11.500 $12.250
====================================================================================================
</TABLE>
(1) For the period from June 26, 1992 (commencement of operations) to May 31,
1993.
* The total return assumes the purchase and redemption of shares using the
Portfolio's net asset value rather than the market value. Dividends are
reinvested in accordance with the Portfolio's dividend reinvestment plan.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- -----------------------------------[GRAPHIC]------------------------------------
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, 1997, the related statement of operations for the year then ended
and the statements of changes in net assets and financial highlights for each of
the years in the two-year period 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 audits. The financial highlights for each of
the years in the two-year period ended May 31, 1995 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 those financial highlights.
We conducted our audits 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, 1997 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Managed Municipals Portfolio Inc. as of May 31, 1997, the results of its
operations for the year then ended and the changes in its net assets and
financial highlights for each of the years in the two-year period then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
New York, New York
July 14, 1997
- -----------------------------------[GRAPHIC]------------------------------------
22
<PAGE>
================================================================================
Quarterly Results of Operations
(unaudited)
================================================================================
<TABLE>
<CAPTION>
Net Realized and Net Increase
Unrealized (Decrease) in
Investment Net Investment Gain (Loss) on Net 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,
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)
August 31,
1996 7,112,514 0.21 6,061,372 0.18 (2,945,507) (0.09) 3,115,865 0.09
November 30,
1996 6,873,415 0.20 5,826,055 0.17 17,188,697 0.50 23,014,752 0.67
February 28,
1997 6,706,752 0.19 5,680,888 0.16 (9,381,274) (0.27) (3,700,386) (0.11)
May 31,
1997 6,582,277 0.19 5,562,885 0.16 (2,308,892) (0.06) 3,253,993 0.10
=============================================================================================================
</TABLE>
- -----------------------------------[GRAPHIC]------------------------------------
23
<PAGE>
================================================================================
Financial Data
(unaudited)
================================================================================
For a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
NYSE Net Dividend
Record Payable Closing Asset Dividend Reinvestment
Date Date Price+ Value+ Paid Price
================================================================================================
<S> <C> <C> <C> <C> <C>
6/23/94 6/30/94 $11.750 $12.11 $0.061 $11.86
7/22/94 7/29/94 11.625 12.32 0.061 11.90
8/24/94 8/31/94 11.375 12.29 0.061 11.64
9/23/94 9/30/94 10.875 11.98 0.061 11.43
10/24/94 10/31/94 11.000 11.79 0.061 10.81
11/22/94 11/30/94 10.375 10.99 0.061 10.58
12/22/94* 12/30/94 10.375 11.33 0.140 10.87
1/24/95 1/31/95 11.063 11.56 0.061 11.33
2/21/95 2/28/95 11.375 12.07 0.061 11.46
3/24/95 3/31/95 11.375 12.26 0.061 11.56
4/21/95 4/28/95 11.375 12.41 0.061 11.54
5/23/95 5/31/95 11.250 12.41 0.061 11.89
5/23/95* 5/31/95 11.250 12.41 0.112 11.89
6/23/95 6/30/95 11.625 12.49 0.064 11.86
7/26/95 7/31/95 11.750 12.33 0.064 11.84
8/22/95 8/25/95 11.750 12.20 0.064 11.90
9/26/95 9/29/95 11.750 12.38 0.064 11.87
10/24/95 10/27/95 11.750 12.46 0.064 11.92
11/20/95 11/24/95 11.875 12.59 0.064 11.99
12/26/95 12/29/95 12.125 12.69 0.064 12.30
1/23/96 1/26/96 12.500 12.66 0.064 12.51
2/20/96 2/23/96 12.250 12.68 0.064 12.14
3/26/96 3/29/96 11.750 12.43 0.060 11.61
4/23/96 4/26/96 11.250 12.24 0.060 11.53
5/28/96 5/31/96 11.813 12.25 0.060 11.65
6/25/96 6/28/96 11.500 12.05 0.060 11.49
7/23/96 7/26/96 11.875 12.05 0.060 11.87
8/27/96 8/30/96 11.688 12.12 0.060 11.72
9/24/96 9/27/96 11.625 12.13 0.060 11.64
10/22/96 10/25/96 11.625 12.23 0.060 11.57
11/25/96 11/29/96 11.500 12.44 0.060 11.57
12/23/96* 12/27/96 11.375 12.12 0.295 11.73
1/28/97 1/31/97 11.625 11.88 0.060 11.75
2/25/97 2/28/97 11.750 12.07 0.060 11.78
3/24/97 3/27/97 11.500 11.73 0.060 11.53
4/22/97 4/25/97 11.563 11.60 0.060 11.57
5/27/97 5/30/97 11.375 11.82 0.060 11.68
================================================================================================
</TABLE>
+ As of record date.
* Capital gain distribution.
- -----------------------------------[GRAPHIC]------------------------------------
24
<PAGE>
================================================================================
Additional Shareholder Information
(unaudited)
================================================================================
On September 12, 1996, the annual meeting of the shareholders of the Fund
was held for the purpose of voting on the following matters:
1. To approve or disapprove for the Fund, the election of Charles F.
Barber, Allan J. Bloostein, Martin Brody, Dwight B. Crane, Robert A.
Frankel, William R. Hutchinson and Heath B. McLendon as Directors; and
2. To approve or disapprove the selection of KPMG Peat Marwick LLP as the
independent auditors for the current fiscal year of the Fund.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
% of Votes % of
Directors Votes For Shares Voted Against Shares Voted
===========================================================================================
<S> <C> <C> <C> <C>
Charles F. Barber 31,911,672.550 98.523% 478,416.503 1.477%
Allan J. Bloostein 32,019,757.330 98.857 370,331.717 1.143
Martin Brody 31,960,071.550 98.672 430,017.503 1.328
Dwight B. Crane 32,034,184.330 98.901 355,904.707 1.099
Robert A. Frankel 32,000,017.330 98.796 390,071.717 1.204
William R. Hutchinson 31,987,128.220 98.756 402,960.830 1.244
Heath B. McLendon 32,037,578.330 98.912 352,510.717 1.088
===========================================================================================
</TABLE>
The results of the vote on Proposal 2 were as follows:
<TABLE>
<CAPTION>
% of Votes % of Votes % of
Votes For Shares Voted Against Shares Voted Abstained Shares Voted
==================================================================================================
<S> <C> <C> <C> <C> <C>
32,006,725.230 98.816% 117,249.000 0.362% 266,114.819 0.822%
==================================================================================================
</TABLE>
- -----------------------------------[GRAPHIC]------------------------------------
25
<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") 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, as soon as practicable after the record 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.
- -----------------------------------[GRAPHIC]------------------------------------
26
<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.
Information concerning the Plan may be obtained from First Data 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]------------------------------------
27
<PAGE>
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Tax Information
(unaudited)
================================================================================
For Federal tax purposes the Fund hereby designates for the fiscal year
ended May 31, 1997:
o long-term capital gain distributions paid of $4,829,780
o 100.00% of the dividends paid by the Fund from net investment income
as tax-exempt for regular Federal income tax purposes.
- -----------------------------------[GRAPHIC]------------------------------------
28
<PAGE>
MANAGED MUNICIPALS
PORTFOLOIO INC.
Directors
Allan J. Bloostein
Martin Brody
Dwight B. Crane
Robert A. Frankel
William R. Hutchinson
Heath B. McLendon, Chairman
Charles F. Barber, Emeritus
Officers
Heath B. McLendon
Chief Executive Officer
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
<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 7/97
================================================================================
