<PAGE>
MANAGED MUNICIPALS
PORTFOLIO INC.
SEMI-ANNUAL REPORT
November 30, 1996
[GRAPHIC]
SMITH BARNEY
- --------------------------------
A Member of TravelersGroup[LOGO]
<PAGE>
[GRAPHIC]
MANAGED MUNICIPALS
PORTFOLIO INC.
- --------------------------------------------------------------------------------
November 30, 1996
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to provide you with the semi-annual report for the Managed
Municipals Portfolio, Inc. ("Portfolio") for the period ended November 30, 1996.
Over the six-month period covered by this report, the Portfolio distributed
dividends totaling $0.36 per share. The table below details the annualized
distribution rates and the six-month total returns based on the Portfolio's
November 30, 1996 net asset value (NAV) per share and New York Stock Exchange
(NYSE) closing price:
Price Annualized
Per Share Distribution Rate Total Return
--------- ----------------- ------------
$12.51 (NAV) 5.76% 6.54%
$11.75 (NYSE) 6.13% 0.07%
In comparison, closed-end municipal bond funds posted an average total return
of 7.52% based on NAV for the same time period, as reported by Lipper Analytical
Services, Inc. (Lipper is an independent fund tracking organization.) The
Portfolio's performance trailed that of its Lipper peer group because unlike
many closed-end municipal bond funds, the Portfolio does not use leverage.
Leveraged funds have the potential to generate stronger performance returns
during bond market rallies, but also tend to suffer from greater principal
losses during market declines.
Market and Economic Overview
Throughout 1996, the U.S. economy has continued to enjoy a healthy recovery
which began over six years ago. The unemployment rate has fallen from around
7.50% in 1992, to just over 5.00% in 1996. Consumer price inflation has remained
virtually unchanged since the end of 1991, and producer prices still appear to
be declining on a long-term basis. Although there were little signs of inflation
in 1996, the strength of the U.S. economy, particularly during the first two
quarters of 1996, caused inflation fears to rise among many investors throughout
most of
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the year. In addition, the debate over whether or not the Federal Reserve Board
would raise interest rates continued to linger over the U.S. bond markets, which
added to bond market volatility between April and September. However, during the
third quarter of 1996, U.S. economic growth moderated and fears of inflation
subsided. As a result, the bond market in general and municipal bonds
specifically, responded positively to benign inflation numbers and moderate
economic growth. The election results with the Republicans maintaining control
of Congress was clearly a plus as far as the bond market was concerned. It
provided an excellent backdrop for lower interest rates and the market responded
with a powerful post-election rally.
Portfolio's Investment Strategy
The Portfolio's main investment thrust during the reporting period was to
concentrate primarily on high grade discount coupon bonds because they would
maximize performance in a lower interest rate environment. In addition, we have
attempted to increase the call protection of the bonds in the Portfolio, and at
today's attractive spreads, have added a larger number of insured bonds for
increased marketability. Our goal is to provide shareholders with an attractive
level of tax-exempt income consistent with a good total return, believing that
this is the best way to maximize shareholder value.
As of November 30, 1996, approximately 84% of the Portfolio's holdings were
rated investment grade (BBB/Baa and higher) by either Standard and Poor's
Corporation or Moody's Investors Service Inc., with about 43% 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 transportation bonds (16.4%),
utility bonds (13.9%), general obligation bonds (12.0%) and hospital bonds
(10.6%). As of November 30, 1996 the average weighted maturity of the Portfolio
was 22.5 years.
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Outlook
We believe our current investment strategy of focusing on high grade discount
coupon bonds will enable the Portfolio to be well-positioned going into the
first quarter of 1997. Interest rates should continue to decline, but as the
Spring approaches we will take a fresh look at the level of interest rates, the
rate of U.S. economic growth and the pattern of foreign capital flows into the
U.S., and reassess our position at that time.
In closing, 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/J P Deane
Heath B. McLendon Joseph P. Deane
Chairman and Vice President and
Chief Executive Officer Investment Officer
December 24, 1996
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- --------------------------------------------------------------------------------
Schedule of Investments
November 30, 1996 (unaudited)
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<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
=================================================================================================
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- 100.0%
Alaska -- 4.4%
Valdez, AK Marine Terminal Revenue,
BP Pipelines Inc. Project:
$12,000,000 AA Series A, 5.850% due 8/1/25 $11,760,000
6,000,000 AA Series B, 5.500% due 10/1/28 5,737,500
2,435,000 AA Series C, 5.650% due 12/1/28 2,383,256
- -------------------------------------------------------------------------------------------------
19,880,756
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Alabama -- 1.2%
5,000,000 AAA Birmingham Baptist Medical Center,
Alabama Special Care Facilities, Baptist
Health Systems Inc., MBIA-Insured,
5.800% due 11/15/16 5,087,500
Pinal, AZ Industrial Development Authority,
PCR, Newmont, (Magma Copper Project):
100,000 P-1* Series A, 3.700% due 12/1/09(c) 100,000
100,000 P-1* Series 1984, 3.350% due 12/1/09(c) 100,000
- --------------------------------------------------------------------------------------------------
5,287,500
- --------------------------------------------------------------------------------------------------
California -- 10.1%
California Public Works Board, Lease Revenue,
Department of Corrections, CA Prison,
MBIA-Insured:
Series B:
8,435,000 AAA 5.625% due 11/1/16 8,540,438
3,000,000 AAA 5.625% due 11/1/19 3,026,250
6,225,000 AAA Series D, 5.375% due 6/1/18 6,108,281
5,000,000 AAA California State GO, FGIC-Insured,
5.375% due 6/1/26 4,925,000
1,000,000 VMIG 1* California State RAN, Series C,
3.500% due 6/30/97(c) 1,000,000
1,500,000 AAA East Bay CA Municipal Utility District No. 001,
Series E, FGIC-Insured, 5.000% due 4/1/15 1,417,500
3,300,000 BBB Los Angeles, CA Regional Airport Improvement
Corp., Los Angeles International Airport
Lease Revenue, 6.500% due 1/1/32(a) 3,328,875
2,000,000 AAA Los Angeles County, CA Metropolitan
Transportation Authority, Sales Tax Revenue,
AMBAC-Insured, 5.250% due 7/1/23 1,922,500
4,000,000 AAA Northern California Transmission Agency,
Series A, MBIA-Insured, 5.250% due 5/1/20 3,855,000
</TABLE>
See Notes to Financial Statements.
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Schedule of Investments
November 30, 1996 (unaudited)(continued)
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<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
=================================================================================================
<S> <C> <C> <C>
California -- 10.1% (continued)
$ 3,140,000 AAA Rancho Mirage, California Redevelopment
Agency Tax Allocation, (Redevelopment
Plan-1984 Project), Series M,
MBIA-Insured, 5.000% due 4/1/24 $ 2,928,050
7,000,000 AAA San Franscisco Building Authority Lease
Revenue, AMBAC-Insured, 5.250%
due 12/1/16 6,842,500
2,000,000 AAA University of California Revenue, Multiple
Purpose Projects, Series C, AMBAC-Insured,
5.000% due 9/1/23 1,852,500
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45,746,894
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Colorado -- 11.3%
3,000,000 Baa* Arapahoe County, CO Capital Improvement,
Public Highway Authority,
7.000% due 8/31/26(b) 3,326,250
2,000,000 BBB+ Colorado Springs, CO Airport Revenue,
Series A, 7.000% due 1/1/22(a) 2,125,000
5,000,000 AA Colorado Springs, CO Utilities Revenue
Refunding & Improvement, Series A,
5.125% due 11/15/23 4,781,250
100,000,000 Aaa* Dawson Ridge Metropolitan District No.1,
Series B, (Escrowed to Maturity
with U.S. Government Securities),
zero coupon due 10/1/22 18,000,000
Denver, CO City & County Airport Revenue,
Series C:
4,000,000 BBB 6.750% due 11/15/22(a) 4,220,000
18,325,000 BBB 6.125% due 11/15/25(a) 18,554,062
- -------------------------------------------------------------------------------------------------
51,006,562
- -------------------------------------------------------------------------------------------------
Connecticut -- 0.3%
1,500,000 AA- Connecticut State Community Development
Authority, Special Obligation, Series A,
5.550% due 12/15/15 1,509,375
- -------------------------------------------------------------------------------------------------
District of Columbia -- 1.6%
District of Columbia Revenue:
4,000,000 AAA American University, AMBAC-Insured,
5.625% due 10/1/26 3,990,000
3,000,000 AAA Howard University, MBIA-Insured,
5.750% due 10/1/17 3,026,250
- -------------------------------------------------------------------------------------------------
7,016,250
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</TABLE>
See Notes to Financial Statements.
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- --------------------------------------------------------------------------------
Schedule of Investments
November 30, 1996 (unaudited)(continued)
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<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
=================================================================================================
<S> <C> <C> <C>
Florida -- 8.3%
$ 2,000,000 AAA Broward County, FL Professional Sports
Facility, (Civic Arena Project), Series A,
MBIA-Insured, 5.625% due 9/1/28 $ 2,010,000
3,085,000 AAA Calloway/Bay County, FL Waste Water
Revenue, FGIC-Insured, 5.500% due 9/1/26 3,088,856
6,000,000 AAA Dade County, FL School Board COP, Series B,
AMBAC-Insured, 5.600% due 8/1/26 6,045,000
2,000,000 AAA Escambia County, FL School Board COP,
Series 1, MBIA-Insured, 5.500% due 2/1/16 2,017,500
Florida Board of Education, Capital Outlay
Refunding, Series D:
10,800,000 AA 5.125% due 6/1/18 10,287,000
2,000,000 AA 5.200% due 6/1/23 1,890,000
800,000 VMIG 1* Jacksonville, FL PCR, Power & Light Co.
Project, zero coupon due 5/1/29(c) 800,000
5,000,000 BBB- Martin County, FL IDA, (Indiantown
Cogeneration Project), Series A,
7.875% due 12/15/25(a) 5,750,000
Tampa, FL Revenue Bonds,
(Florida Aquarium Inc. Project):
3,000,000 NR 7.550% due 5/1/12 3,483,750
2,000,000 NR 7.750% due 5/1/27 2,340,000
- -------------------------------------------------------------------------------------------------
37,712,106
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Illinois -- 5.1%
3,000,000 AAA Chicago, IL Midway Airport Revenue,
MBIA-Insured, 5.500% due 1/1/29 2,932,500
Chicago, IL Skyway Toll Bridge Revenue,
Series 1996, MBIA-Insured:
2,000,000 AAA 5.375% due 1/1/10 2,012,500
9,600,000 AAA 5.500% due 1/1/23 9,420,000
5,645,000 AAA Chicago, IL Waste Water Transmission
Revenue, FGIC-Insured,
5.000% due 1/1/15 5,320,413
2,500,000 AAA Illinois Health Facilities Authority Revenue,
Trinity Medical Center, FSA-Insured,
6.000% due 7/1/28 2,565,625
1,000,000 AAA Metropolitan Pier & Exposition Authority,
(McCormick Plan Exposition Project),
Series A, AMBAC-Insured,
5.250% due 6/15/27 963,750
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23,214,788
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</TABLE>
See Notes to Financial Statements.
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- --------------------------------------------------------------------------------
Schedule of Investments
November 30, 1996 (unaudited) (continued)
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<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
=================================================================================================
<S> <C> <C> <C>
Indiana -- 1.8%
$ 5,000,000 Aa3* Indiana Port Commission Revenue
Refunding Project, (Cargill Inc. Project),
6.875% due 5/1/12(b) $5,468,750
2,500,000 Aaa* Indiana State HFA, Single-Family Mortgage
Revenue, Series A-1, GNMA/FNMA-
Collateralized, 6.250% due 7/1/28 2,565,625
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8,034,375
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Louisiana -- 1.3%
5,500,000 Aa3* Saint Martin Parish, LA Industrial Project,
(Cargill Inc. Project), 6.625% due 10/1/12 5,946,875
- -------------------------------------------------------------------------------------------------
Maryland -- 2.3%
2,000,000 Aa* Maryland State CDA, Department of Housing
& Community Development, Series A,
5.875% due 7/1/16 2,012,500
10,000,000 NR Maryland State Energy Financing
Administration, Solid Waste Disposal
Revenue, Limited Obligation, (Hagerstown
Project), 9.000% due 10/15/16(a) 8,300,000
- -------------------------------------------------------------------------------------------------
10,312,500
- -------------------------------------------------------------------------------------------------
Massachusetts -- 2.7%
4,760,000 AAA Massachusetts Bay Transportation Authority,
Series B, FSA-Insured, 5.250% due 3/1/26 4,593,400
10,000,000 NR Massachusetts State IDA, Solid Waste Disposal
Revenue, Massachusetts Recycling
Association, Series A, 9.000% due 8/1/16(a)(b) 5,000,000
2,800,000 AAA Massachusetts State Turnpike Authority
Revenue, Series A, MBIA-Insured,
5.000% due 1/1/20 2,614,500
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12,207,900
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Michigan -- 5.0%
1,440,000 AA Michigan Municipal Bond Authority Pooled,
Project Revenue, 5.625% due 10/1/19 1,452,600
2,000,000 NR Michigan State Strategic Funding, Limited
Obligation Revenue, (Blue Water Fiber
Project), 8.000% due 1/1/12(a) 1,502,500
16,375,000 NR Midland County, MI Economic Development
Corp., PCR, Limited Obligation,
Series B, 9.500% due 7/23/09(a) 17,951,094
1,700,000 VMIG 1* University of Michigan Revenue, Series A,
3.800% due 12/1/17(c) 1,700,000
- -------------------------------------------------------------------------------------------------
22,606,194
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</TABLE>
See Notes to Financial Statements.
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<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
November 30, 1996 (unaudited)(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
=================================================================================================
<S> <C> <C> <C>
Minnesota -- 4.2%
$ 2,500,000 Aa3* Duluth, MN Seaway Port Authority, IDA,
Dock & Wharf Revenue, (Cargill Inc.
Project), 6.800% due 5/1/12 $ 2,715,625
15,085,000 Baa* St. Paul, MN Housing & Redevelopment
Authority, Health East Project, Series D,
9.750% due 11/1/17 16,084,683
- -------------------------------------------------------------------------------------------------
18,800,308
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Mississippi -- 0.3%
1,400,000 VMIG 1* Jackson County, MS PCR, (Chevron USA
Inc. Project), 3.300% due 12/1/16(c) 1,400,000
- -------------------------------------------------------------------------------------------------
Missouri -- 0.4%
2,000,000 AAA Kansas City, MO Municipal Assistance Corp.,
Series A, MBIA-Insured, Leasehold-H-Roe
Bartle, 5.000% due 4/15/20 1,887,500
- -------------------------------------------------------------------------------------------------
Montana -- 1.7%
8,000,000 NR Montana State Board Investment Resources
Recovery, (Yellowstone Energy Project),
7.000% due 12/31/19(a) 7,860,000
- -------------------------------------------------------------------------------------------------
Nebraska -- 0.8%
4,000,000 AAA Nebraska Public Power District Revenue,
Series A, MBIA-Insured, 5.250% due 1/1/28 3,835,000
- -------------------------------------------------------------------------------------------------
Nevada -- 1.8%
8,000,000 AAA Clark County, NV School District, Series A,
MBIA-Insured, 5.875% due 6/15/14 8,240,000
- -------------------------------------------------------------------------------------------------
New Hampshire -- 0.7%
3,000,000 Aa* New Hampshire State Housing Finance
Authority, Single-Family Mortgage Revenue,
6.300% due 1/1/26(a) 3,067,500
- -------------------------------------------------------------------------------------------------
New Jersey -- 1.9%
5,200,000 A+ Hudson County, NJ Improvement Authority,
6.625% due 8/1/25 5,596,500
2,910,000 A+ South Jersey Port Corp., Marine Terminal,
Series G, MBIA-Insured,
5.600% due 1/1/23 2,884,538
- -------------------------------------------------------------------------------------------------
8,481,038
- -------------------------------------------------------------------------------------------------
New York -- 7.4%
4,000,000 Baa1* City University, NY COP, John Jay College,
5.750% due 8/15/04 4,095,000
</TABLE>
See Notes to Financial Statements.
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- --------------------------------------------------------------------------------
Schedule of Investments
November 30, 1996 (unaudited)(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
=================================================================================================
<S> <C> <C> <C>
New York -- 7.4% (continued)
$3,000,000 AAA New York City Education Construction Fund
Revenue, AMBAC-Insured, 5.500% due 4/1/26 $3,003,750
3,500,000 AAA New York City Municipal Water Financing
Authority, Water & Sewer System Revenue,
Series B, MBIA-Insured, 5.500% due 6/15/19 3,482,500
2,500,000 VMIG 1* New York City, NY, GO Series A-4,
3.900% due 8/1/22(c) 2,500,000
300,000 VMIG 1* New York City, NY, Series B, MBIA-Insured,
zero coupon due 8/15/05(c) 300,000
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 1,098,175
3,960,000 AAA New York State Dormitory Authority Revenue,
City University, AMBAC-Insured,
5.250% due 7/1/11 3,945,150
6,000,000 A New York State Local Government Assistance
Corp., Series D, 5.000% due 4/1/23 5,550,000
4,300,000 AAA New York State Medcare Mental Health
Services, FSA-Insured, 5.250% due 2/15/21 4,085,000
1,000,000 AAA New York State Urban Development Corp.
Revenue, Series D, Correctional Facilities,
MBIA-Insured, 5.500% due 1/1/25 998,750
4,500,000 Aa* Triborough Bridge & Tunnel Authority,
5.000% due 1/1/24 4,201,875
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33,260,200
- -------------------------------------------------------------------------------------------------
North Carolina -- 1.0%
4,000,000 AAA New Hanover County, NC Hospital Revenue,
(New Hanover Medical Center Project),
AMBAC-Insured, 5.750% due 10/1/16 4,105,000
- -------------------------------------------------------------------------------------------------
South Carolina -- 0.5%
2,000,000 BBB+ Myrtle Beach, SC COP, (Myrtle Beach
Convention Center Project),
6.875% due 7/1/07 2,142,500
- -------------------------------------------------------------------------------------------------
Texas -- 7.7%
4,000,000 AAA Austin, TX Utility System Revenue,
MBIA-Insured, 5.600% due 5/1/25 4,010,000
Burleson, TX Independent School District:
1,160,000 Aaa* PSFG, 6.750% due 8/1/24 1,286,150
</TABLE>
See Notes to Financial Statements.
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- --------------------------------------------------------------------------------
Schedule of Investments
November 30, 1996 (unaudited)(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
=================================================================================================
<S> <C> <C> <C>
Texas -- 7.7% (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 $ 3,251,800
4,000,000 AAA Harris County, TX Toll Road, FGIC-Insured,
5.375% due 8/15/20 3,935,000
2,000,000 AAA Leander, TX ISD, PSFG, 5.625% due 8/15/18 2,025,000
12,250,000 BB Sam Rayburn, TX Municipal Power Agency,
Series A, 6.750% due 10/1/14(b) 11,545,625
9,000,000 AAA Texas State Turnpike Authority, Dallas
North Thruway Revenue, President
George Bush Turnpike, FGIC-Insured,
5.250% due 1/1/23 8,752,500
- -------------------------------------------------------------------------------------------------
34,806,075
- -------------------------------------------------------------------------------------------------
Utah -- 4.3%
21,000,000 Aa* Intermountain Power Agency, Utah Power
Supply Revenue Refunding, Series D,
5.500% due 7/1/21 19,477,500
- -------------------------------------------------------------------------------------------------
Virginia -- 2.7%
4,700,000 A* Harrisonburg, VA Redevelopment (Jail &
Courthouse Project), and Housing
Authority, Public Facility Lease Revenue,
6.500% due 9/1/14 4,917,375
Virginia State Housing Development
Authority, Multi-Family Housing:
Series D:
1,655,000 AA+ 6.250% due 1/1/15 1,688,100
1,715,000 AA+ 6.250% due 7/1/15 1,749,300
1,235,000 AA+ Series H, 6.300% due 11/1/15 1,278,225
600,000 AA+ Series K, 5.800% due 11/1/10 620,250
2,000,000 AA Virginia State Transportation Board,
Transportation Contract Revenue,
Series A, 5.125% due 5/15/21 1,917,500
- -------------------------------------------------------------------------------------------------
12,170,750
- -------------------------------------------------------------------------------------------------
Washington -- 5.7%
4,750,000 A+ Chelan County, WA GO Public Utilities,
District No. 001, Series 1993A, District 4,
Remarketed, (manadatory put 7/1/19),
6.750% due 7/1/62(a)(b) 4,975,625
</TABLE>
See Notes to Financial Statements.
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<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
November 30, 1996 (unaudited)(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
=================================================================================================
<S> <C> <C> <C>
Washington -- 5.7% (continued)
$11,000,000 AA- Washington State Health Care Facilities,
Authority Revenue, Sisters of
Providence Hospital,
7.875% due 10/1/10 $ 11,880,000
Washington State Public Power, FSA-Insured:
4,000,000 AAA Series B, Nuclear Project No. 2,
5.625% due 7/1/12 4,010,000
Series C:
3,555,000 AAA Nuclear Project No. 1,
5.375% due 7/1/15 3,426,131
1,500,000 AAA Nuclear Project No. 3,
5.375% due 7/1/15 1,445,625
- -------------------------------------------------------------------------------------------------
25,737,381
- -------------------------------------------------------------------------------------------------
West Virginia -- 1.2%
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) 500,000
10,000,000 NR American Power Paper Recycling Project,
7.750% due 12/1/11(a) 5,000,000
- -------------------------------------------------------------------------------------------------
5,500,000
- -------------------------------------------------------------------------------------------------
Wisconsin -- 2.3%
4,070,000 AA Wisconsin State GO, Series B,
6.600% due 1/1/22(a) 4,370,162
Wisconsin State Health and Educational
Facilities Authority, MBIA-Insured:
3,000,000 AAA Aurora Health Care Project,
5.250% due 8/15/23 2,868,750
3,000,000 AAA Marquette University Project,
5.500% due 12/1/11 3,015,000
- -------------------------------------------------------------------------------------------------
10,253,912
- -------------------------------------------------------------------------------------------------
Total Municipal Bonds and Notes
(Cost -- $445,111,077**) $451,506,739
=================================================================================================
</TABLE>
(a) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Security segregated by Custodian for open purchase commitments.
(c) Variable rate municipal bonds and notes are payable upon not more than one
business day's notice.
** 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.
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<PAGE>
- --------------------------------------------------------------------------------
Summary of Investments by Combined Ratings
November 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
Percent of
Moody's and/or Standard & Poor's Total Investments
================================================================================
Aaa AAA 43.1%
Aa AA 22.8
A A 5.6
Baa BBB 12.7
Ba BB 2.6
VMIG 1 A-1 2.0
NR NR 11.2
-----
100.0%
=====
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- --------------------------------------------------------------------------------
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
ISD -- Independent School District
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
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
November 30, 1996
================================================================================
<S> <C>
Assets:
Investments, at value (Cost -- $445,111,077) $451,506,739
Interest receivable 7,528,482
Receivable for securities sold 3,023,920
- --------------------------------------------------------------------------------
Total Assets 462,059,141
- --------------------------------------------------------------------------------
Liabilities:
Payable for securities purchased 28,982,186
Dividends payable 988,157
Investment advisory fees payable 252,128
Administration fees payable 72,973
Payable to bank 5,955
Accrued expenses 122,078
- --------------------------------------------------------------------------------
Total Liabilities 30,423,477
- --------------------------------------------------------------------------------
Total Net Assets $431,635,664
================================================================================
Net Assets:
Par value of capital shares $ 34,498
Capital paid in excess of par value 412,278,884
Undistributed net investment income 919,329
Accumulated net realized gain from security transactions
and futures contracts 12,007,291
Net unrealized appreciation of investments 6,395,662
- --------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $12.51 a share on 34,498,420 shares of $0.001
par value outstanding: 500,000,000 shares authorized) $431,635,664
================================================================================
</TABLE>
See Notes to Financial Statements.
[GRAPHIC]
15
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
11/30/96
================================================================================
<S> <C>
Investment Income:
Interest $ 13,985,929
- --------------------------------------------------------------------------------
Expenses:
Investment advisory fees (Note 2) 1,475,906
Administration fees (Note 2) 421,688
Shareholder communications 104,000
Audit and legal 26,007
Directors' fees 24,500
Registration fees 15,545
Shareholder and system servicing fees 10,902
Custody 9,600
Pricing service fees 6,001
Other 4,353
- --------------------------------------------------------------------------------
Total Expenses 2,098,502
- --------------------------------------------------------------------------------
Net Investment Income 11,887,427
- --------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments
and Futures Contracts (Notes 4 and 5):
Realized Gain From:
Security transactions (excluding short-term securities) 6,850,961
Futures contracts 56,063
- --------------------------------------------------------------------------------
Net Realized Gain 6,907,024
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments:
Beginning of period (940,504)
End of period 6,395,662
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 7,336,166
- --------------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 14,243,190
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 26,130,617
================================================================================
</TABLE>
See Notes to Financial Statements.
[GRAPHIC]
16
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
11/30/96 Year Ended
(unaudited) 5/31/96
===========================================================================================
<S> <C> <C>
Operations:
Net investment income $ 11,887,427 $ 23,014,251
Net realized gain 6,907,024 7,326,011
Increase (decrease) in net unrealized appreciation 7,336,166 (19,254,835)
- -------------------------------------------------------------------------------------------
Increase in Net Assets From Operations 26,130,617 11,085,427
- -------------------------------------------------------------------------------------------
Distributions to Shareholders
From (Note 3):
Net investment income (12,419,431) (25,858,323)
Net realized gains -- (222,483)
- -------------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (12,419,431) (26,080,806)
- -------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets 13,711,186 (14,995,379)
Net Assets:
Beginning of period 417,924,478 432,919,857
- -------------------------------------------------------------------------------------------
End of period* $431,635,664 $417,924,478
===========================================================================================
* Includes undistributed net
investment income of: $ 919,329 $ 1,451,333
===========================================================================================
</TABLE>
See Notes to Financial Statements.
[GRAPHIC]
17
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
(unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Managed Municipals Portfolio Inc. ("Fund"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended, as a non-
diversified, closed-end management investment company.
The significant accounting policies consistently followed by the Fund are: (a)
security transactions are accounted for on trade date; (b) securities are valued
at the mean between bid and ask prices provided by an independent pricing
service that are based on transactions in municipal obligations, quotations from
municipal bond dealers, market transactions in comparable securities and various
relationships between securities; (c) securities maturing within 60 days or less
are valued at cost plus accreted discount, or minus amortized premium, which
approximates market 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) expenses are charged to the Fund; (h) 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; (i) 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 were 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 (j) 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.
[GRAPHIC]
18
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
(unaudited) (continued)
- --------------------------------------------------------------------------------
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.
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.
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 gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
4. Investments
For the six months ended November 30, 1996, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
=======================================================================
Purchases $272,951,867
- -----------------------------------------------------------------------
Sales 251,233,687
=======================================================================
At November 30, 1996, the aggregate gross unrealized appreciation and
depreciation of investments were as follows:
=========================================================================
Gross unrealized appreciation $ 19,892,325 *
Gross unrealized depreciation (13,496,663)*
- -------------------------------------------------------------------------
Gross unrealized appreciation $ 6,395,662 *
=========================================================================
* Substantially the same for Federal income tax purposes.
[GRAPHIC]
19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
(unaudited)(continued)
- --------------------------------------------------------------------------------
5. Futures Contracts
Initial margin deposits made upon entering into futures contracts are
recognized as assets. The initial margin is segregated by the custodian and 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 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 November 30, 1996, there were no open futures contracts.
[GRAPHIC]
20
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
1996(1) 1996 1995 1994 1993(2)
=================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.11 $12.55 $12.26 $13.00 $12.00
- -------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.34 0.67 0.72 0.67 0.63
Net realized and unrealized
gain (loss) 0.42 (0.35) 0.49 (0.23) 0.97
- -------------------------------------------------------------------------------------------------
Total Income From Operations 0.76 0.32 1.21 0.44 1.60
- -------------------------------------------------------------------------------------------------
Offering Costs Charged
to Paid-In Capital -- -- -- -- (0.02)
- -------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.36) (0.75) (0.67) (0.67) (0.55)
Net realized gains -- (0.01) (0.25) (0.51) (0.03)
- -------------------------------------------------------------------------------------------------
Total Distributions (0.36) (0.76) (0.92) (1.18) (0.58)
- -------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.51 $12.11 $12.55 $12.26 $13.00
- -------------------------------------------------------------------------------------------------
Total Return, Based on Market Value 0.07%+++ 12.22% 8.40% 2.27% 7.02%+++
- -------------------------------------------------------------------------------------------------
Total Return, Based on Net Asset Value 6.54%+++ 2.83% 10.96% 3.45% 13.58%+++
- -------------------------------------------------------------------------------------------------
Net Assets, End of Period (000s) $431,636 $417,924 $432,920 $422,792 $443,938
- -------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 0.99%+ 1.00% 1.02% 1.00% 0.98%+
Net investment income 5.64+ 5.35 5.97 5.15 5.48+
- -------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 59% 45% 93% 72% 169%
- -------------------------------------------------------------------------------------------------
Market Value, End of Period $11.75 $11.69 $11.50 $11.50 $12.25
=================================================================================================
</TABLE>
(1) For the six months ended November 30, 1996 (unaudited).
(2) 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.
[GRAPHIC]
21
<PAGE>
- --------------------------------------------------------------------------------
Quarterly Results of Operations
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Realized and Net Increase
Unrealized Gain (Decrease) in
Investment Net Investment (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
===================================================================================================================
</TABLE>
[GRAPHIC]
22
<PAGE>
- --------------------------------------------------------------------------------
Financial Data
(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>
June 30, 1994 11.500 $12.11 $0.061 -- $11.86
July 31, 1994 11.625 12.32 0.061 -- 11.90
August 31, 1994 11.500 12.29 0.061 -- 11.64
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
June 28, 1996 11.500 12.05 0.060 -- 11.49
July 26, 1996 11.875 12.05 0.060 -- 11.87
August 30, 1996 11.625 12.12 0.060 -- 11.72
September 27, 1996 11.625 12.13 0.060 -- 11.64
October 25, 1996 11.625 12.23 0.060 -- 11.57
November 29, 1996 11.500 12.46 0.060 -- 11.57
================================================================================
</TABLE>
+ As of record date.
[GRAPHIC]
23
<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]
24
<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 at
market prices shares of its common stock in the open market.
[GRAPHIC]
25
<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>
There were no broker non-votes.
[GRAPHIC]
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
[GRAPHIC]
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.
FD0837 1/97
