<PAGE>
Managed Municipals
Portfolio Inc.
Quarterly Report
August 31, 1999
[LOGO OF MANAGED MUNICIPALS PORTFOLIO INC.]
<PAGE>
[LOGO OF MANAGED MUNICIPALS PORTFOLIO INC.]
Managed Municipals
Portfolio Inc.
August 31, 1999
Dear Shareholder:
We are pleased to provide the first quarter report for the Managed
Municipal Portfolio, Inc. ("Fund") for the period ended August 31, 1999.
Over the three-month period covered by this report, the Fund distributed
income dividends totaling $0.15 per share. The table below shows the
annualized distribution rate and three-month total return based on the
Fund's August 31, 1999 Net Asset Value ("NAV") per share and its New York
Stock Exchange ("NYSE") closing price:
Price Annualized Three-Month
Per Share Distribution Rate* Total Return
------------- ------------------ --------------
$11.34 (NAV) 5.29% (3.86)%
$10.00 (NYSE) 6.00% (2.24)%
In comparison, general closed-end municipal bond funds posted an
average total return on NAV of a negative 2.32% for the same time period,
as reported by Lipper, Inc. (Lipper is a major fund-tracking organization.)
Municipal Bond Market Update
We believe that the municipal bond market is approaching a temporary
bottom. The Federal Reserve Board ("Fed") has implemented two monetary
policy adjustments -- a 25 basis point increase in June and a 25 basis
point increase in August -- and we believe rate increases should remain
unchanged for the foreseeable future. We also believe that fixed income
markets are returning to "normal" in the aftermath of forced liquidations
by major hedge funds and negatively impacted global markets in late 1998.
In our opinion, long U.S. Treasury yields represent good value and
municipal bonds are trading at roughly 95%-96% of governments. This
comparison helps to substantiate the fact that municipal securities are
trading at low valuations relative to governments
---------
* This distribution assumes a current monthly income dividend rate of $0.05
per share for twelve months.
1
<PAGE>
since, under normal market conditions, municipal securities have
historically yielded roughly 85% of similar maturity Treasuries.
As a result of last year's crisis (and ensuing credit crunch), the
spread between the yields on municipal securities and Treasuries have
widened. The robust state of the U.S. economy contributed to the
second-highest municipal securities issuance volume in history in 1998. The
ability of the market to absorb such high volume indicates the steady
demand for tax-exempt investments and reflects overall investor confidence.
The recent upward pressure on municipal yields appears to result
largely from two factors: 1) the lack of demand for municipal bonds by the
traditional institutional sectors that have supported the municipal market;
and 2) additional pressures resulting from the pre-Y2K avalanche of issues
in the taxable market, which has attracted institutional investors who
would otherwise buy municipals.
Yields have rebounded sharply, up nearly three quarters of 1% since the
beginning of 1999. The slope of the municipal yield curve has remained
extremely steep, with 20-year municipals yielding roughly 120 basis points
more than one-year paper. (The yield curve measures the difference between
short- and long-term rates.) In the U.S. Treasury market, the difference
between one-year and 30-year bond yields is only 80 basis points.
Fund's Investment Strategy
As of August 31, 1999, about 89% of the Fund's holdings were rated
investment grade (BBB/Baa and higher)** by either Standard & Poor's Ratings
Group or Moody's Investors Service Inc., with approximately 51% of the Fund
invested in AAA/Aaa-rated bonds, the highest possible rating.
We maintain a positive outlook on municipal securities. Additionally,
we believe that buying bonds with relatively longer maturities (20 to 30
years) and lower coupons (5% and a bit lower) will enable us to be more
aggressively positioned for a possible drop in long-term interest rates
later this year.
Until recently, our investment strategy had been focused primarily on
buying high-grade, short-maturity bonds in anticipation of the ensuing
increase in interest rates. Currently, with recent interest rate increases
behind us, we are aggressive buyers of longer, high-grade discount bonds.
---------
*Investment-grade bonds are those rated Aaa, Aa, A and Baa by Moody's
Investors Service, Inc. or AAA, AA, A and BBB by Standard and Poor's
Rating Group, or that have an equivalent rating by any nationally
recognized statistical rating organization, or determined by the manager
to be of equivalent quality.
2
<PAGE>
We believe that investor sentiment has weakened and the market has taken on
a negative psychology.
The Fund has initiated a program whereby it may repurchase shares of
its common stock in the open market. It is the Fund's intention to
repurchase shares of its stock at such times, prices and amounts deemed
advisable. There can be no assurance that the Board of Directors will
continue this program.
Municipal Bond Market Outlook
Our outlook for the municipal bond market is optimistic. We think that
the actions of the Fed were preemptively conservative. It is our opinion
that inflation should remain in check, at least in the near term. A
possible easing of economic activity as a result of Y2K ramifications could
prove positive for fixed income markets.
Looking ahead, we believe that the U.S. economy should remain strong in
the coming months with muted inflationary pressures. Recent economic
conditions have created opportunities for municipal securities to catch up
with Treasuries, and we continue to see good value at the long end of the
market.
With long-term municipal bond yields in the 5.75% range and inflation
under control, "real," inflation-adjusted yields on longer intermediate and
long-term municipals are quite attractive. Following the Fed's August 24,
1999 short-term interest rate increase of 0.25%, we do not anticipate
further policy change for the remainder of 1999 amid optimism that the Fed
has acted sufficiently to curb inflationary pressures. As always, we will
be monitoring these events closely.
In closing, thank you for investing in the Managed Municipals
Portfolio, Inc. We look forward to continuing to help you pursue your
financial goals.
Sincerely,
/s/Heath B. Mclendon /s/Joseph P. Deane
Heath B. McLendon Joseph P. Deane
Chairman Vice President and
Investment Officer
September 23, 1999
3
<PAGE>
- --------------------------------------------------------------------------------
Take Advantage of the Fund's Dividend Reinvestment Plan!
Did you know that Fund investors who reinvest their dividends are taking
advantage of one of the most effective wealth-building tools available
today? Systematic investments put time to work for you through the strength
of compounding.
As an investor in the Fund, you can participate in its Dividend
Reinvestment Plan ("Plan"), a convenient, simple and efficient way to
reinvest your dividends and capital gains, if any, in additional shares of
the Fund. Below is a short summary of how the Plan works.
Plan Summary
If you are a Plan participant who has not elected to receive your dividends
in the form of a cash payment, then your dividend and capital gain
distributions will be reinvested automatically in additional shares of the
Fund.
The number of common stock shares in the Fund you will receive in lieu of a
cash dividend is determined in the following manner. If the market price of
the common stock is equal to or exceeds the net asset value per share
("NAV") on the determination date, you will be issued shares by the Fund at
a price reflecting the NAV, or 95% of the market price, whichever is
greater.
If the market price is less than the NAV at the time of valuation (the
close of business on the determination date), or if the Fund declares a
dividend or capital gains distribution payable only in cash, the Plan Agent
(First Data Investor Services Group, Inc.) will buy common stock for your
account in the open market.
If the Plan Agent begins to purchase additional shares in the open market
and the market price of the shares subsequently rises above the previously
determined NAV before the purchases are completed, the Plan Agent will
attempt to terminate purchases and have the Fund issue the remaining
dividend or distribution in shares at the greater of the previously
determined NAV or 95% of the market price. In that case, the number of Fund
shares you receive will be based on the weighted average of prices paid for
shares purchased in the open market and the price at which the Fund issues
the remaining shares.
Restated Plan Adopted
A more complete description of the current Plan appears in this report
beginning on page 27. The descriptions herein are based on a restated
version of the Plan, which was recently adopted to reflect current
practices of the Plan Agent and for the purpose of standardizing the terms
among all closed-end Mutual Funds managed by SSB Citi Fund Management LLC,
formerly known as SSBC Fund Management Inc.
To find out more detailed information about the Plan and about how you can
participate, please call First Data Investor Services Group, Inc. at (800)
331-1710.
4
<PAGE>
<TABLE>
<CAPTION>
Schedule of Investments
August 31, 1999 (unaudited)
Face
Amount Ratings(a) Security Value
========================================================================================
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES -- 100.0%
Arizona -- 1.0%
$ 4,000,000 AAA Mesa, AZ IDA Revenue, Discovery Health
Systems, Series A, 5.625% due 1/1/29 $ 3,940,000
- ----------------------------------------------------------------------------------------
California -- 8.1%
4,540,000 Baa3* California Educational Facilities Authority
Revenue, (Pooled College & University
Projects), Series A, 5.625% due 7/1/23 4,290,300
1,000,000 AAA California State Public Works Board, Lease
Revenue, Department of Corrections,
California Prison, AMBAC-Insured,
5.250% due 1/1/21 953,750
1,000,000 AAA Campbell, CA Unified School District, GO,
FGIC-Insured, 5.000% due 8/1/17 941,250
3,300,000 A- Los Angeles, CA Regional Airport Improvement
Corp., Los Angeles International Airport
Lease Revenue, 6.500% due 1/1/32(b) 3,349,500
Los Angeles County, CA Metropolitan,
Transportation Authority, Sales Tax Revenue,
MBIA-Insured:
7,700,000 AAA 5.250% due 7/1/17 7,507,500
3,000,000 AAA 5.250% due 7/1/18 2,898,750
3,000,000 AA Metropolitan Water District, Southern California
Waterworks Revenue Refunding, Series A,
5.000% due 7/1/16 2,853,750
3,140,000 AAA Rancho Mirage, CA Redevelopment Agency,
Tax Allocation Refunding, (1984 Project),
Series A, MBIA-Insured, 5.000% due 4/1/24 2,837,775
4,250,000 AAA Riverside County, CA COP, (1997 Lease
Refunding Project), MBIA-Insured,
5.125% due 11/1/17 4,080,000
2,750,000 AAA Sacramento County, CA COP, (Public
Facilities Project), MBIA-Insured,
5.375% due 2/1/19 2,698,438
- ----------------------------------------------------------------------------------------
32,411,013
- ----------------------------------------------------------------------------------------
Colorado -- 12.1%
3,000,000 AAA Arapahoe County, CO Capital Improvement,
Public Highway Authority, (Pre-Refunded--
Escrowed with U.S government
securities to 8/31/05 Call @ 103),
7.000% due 8/31/26(c) 3,431,250
</TABLE>
See Notes to
5 Financial statements.
<PAGE>
Schedule of Investments
August 31, 1999 (unaudited)(continued)
<TABLE>
<CAPTION>
Face
Amount Ratings(a) Security Value
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Colorado -- 12.1% (continued)
Colorado Health Facilities Authority Revenue:
$ 1,000,000 AA Catholic Health Initiatives, Series A,
5.000% due 12/1/28 $ 852,500
3,000,000 A Series B, 5.350% due 8/1/15 2,857,500
2,500,000 AAA Sisters of Charity Leavenworth,
MBIA-Insured, 5.125% due 12/1/18 2,334,375
2,000,000 BBB+ Colorado Springs, CO Airport Revenue,
Series A, 7.000% due 1/1/22(b) 2,117,500
60,000,000 Aaa* Dawson Ridge, CO Metropolitan District
No. 1, Series B, (Escrowed to maturity with
Refco Strips), zero coupon due 10/1/22 13,050,000
Denver, CO City & County Airport Revenue,
Series C:
8,160,000 BBB+ Escrowed to maturity with U.S. government
securities, 6.125% due 11/15/25(b)(d) 8,761,800
845,000 AAA Pre-Refunded -- Escrowed with U.S.
government securities to 11/15/02
Call @ 102, 6.750% due 11/15/22(b) 917,881
3,155,000 BBB+ 6.750% due 11/15/22(b)(c) 3,340,356
10,165,000 BBB+ 6.125% due 11/15/25(b) 10,431,831
- ----------------------------------------------------------------------------------------
48,094,993
- ----------------------------------------------------------------------------------------
Connecticut -- 0.6%
1,000,000 AAA Connecticut State Health & Education
Child Care Facilities, AMBAC-Insured,
5.625% due 7/1/29 993,750
1,200,000 AA Connecticut State Community Development
Authority, Special Obligation, Series A,
5.550% due 12/15/15 1,206,000
- ----------------------------------------------------------------------------------------
2,199,750
- ----------------------------------------------------------------------------------------
Florida -- 4.4%
2,000,000 AAA Broward County, FL Airport System Revenue,
Passenger Facility, Series H-2,
AMBAC-Insured, 4.750% due 10/1/23 1,720,000
2,480,000 AAA Florida State Turnpike Authority Revenue
Refunding, FGIC-Insured,
5.000% due 7/1/16 2,359,100
5,000,000 BBB- Martin County, FL IDA, (Indiantown
Cogeneration Project), Series A,
7.875% due 12/15/25(b) 5,143,750
</TABLE>
See Notes to
6 Financial statements
<PAGE>
Schedule of Investments
August 31, 1999 (unaudited)(continued)
<TABLE>
<CAPTION>
Face
Amount Ratings(a) Security Value
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Florida -- 4.4% (continued)
$ 3,500,000 AAA Orange County, FL Tourist Development
Tax Revenue, Series A, AMBAC-Insured,
4.750% due 10/1/24 $ 3,001,250
Tampa, FL Revenue Bonds, (Florida
Aquarium Inc. Project):
2,650,000 NR 7.550% due 5/1/12(c) 2,905,063
2,000,000 NR 7.750% due 5/1/27(c) 2,202,500
- ----------------------------------------------------------------------------------------
17,331,663
- ----------------------------------------------------------------------------------------
Georgia -- 0.5%
2,000,000 A3* Private Colleges & Universities Authority
Revenue, (Mercer University Project),
Series A, 5.250% due 10/1/25 1,825,000
- ----------------------------------------------------------------------------------------
Hawaii -- 1.4%
2,000,000 A Hawaii State Department of Budget & Finance,
Special Purpose Revenue, Kaiser Permanente,
Series A, 5.100% due 3/1/14 1,865,000
4,010,000 AAA Hawaii State GO, Series CP, FGIC-Insured,
5.000% due 10/1/15 3,779,425
- ----------------------------------------------------------------------------------------
5,644,425
- ----------------------------------------------------------------------------------------
Illinois -- 1.4%
2,000,000 Aaa* Illinois Health Facilities Authority Revenue,
Memorial Health Systems, MBIA-Insured,
5.250% due 10/1/18 1,887,500
4,000,000 AAA Illinois State GO, FGIC-Insured,
5.250% due 12/1/20 3,790,000
- ----------------------------------------------------------------------------------------
5,677,500
- ----------------------------------------------------------------------------------------
Indiana -- 1.3%
5,000,000 A1* Indiana Port Commission Revenue Refunding,
(Cargill Inc. Project), 6.875% due 5/1/12(c) 5,356,250
- ----------------------------------------------------------------------------------------
Kansas -- 0.1%
500,000 A+ Kansas Development Financing Authority,
Health Facilities Revenue, Children's Mercy
Hospital, Series N, 5.250% due 5/15/18 464,375
- ----------------------------------------------------------------------------------------
Louisiana -- 2.3%
4,000,000 AAA Louisiana Local Government, Environment
Facilities, Community Development Authority
Revenue, (Capital Projects & Equipment
Acquisition), AMBAC-Insured,
4.500% due 12/1/18 3,400,000
</TABLE>
See Notes to
7 Financial statements
<PAGE>
Schedule of Investments
August 31, 1999 (unaudited)(continued)
<TABLE>
<CAPTION>
Face
Amount Ratings(a) Security Value
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Louisiana -- 2.3% (continued)
$ 5,500,000 Aa3* Saint Martin Parish, LA Industrial Revenue,
(Cargill Inc. Project), 6.625% due 10/1/12 $ 5,898,750
- ----------------------------------------------------------------------------------------
9,298,750
- ----------------------------------------------------------------------------------------
Maryland -- 1.3%
10,000,000 NR Maryland State Energy Financing
Administration, Solid Waste Disposal
Revenue, Limited Obligation, (Hagerstown
Project), 9.000% due 10/15/16(b)(e) 2,200,000
3,500,000 A Maryland State Health & Higher Education
Facilities Authority Revenue,
Loyola College Issue, 5.000% due 10/1/39 2,996,875
- ----------------------------------------------------------------------------------------
5,196,875
- ----------------------------------------------------------------------------------------
Massachusetts -- 3.6%
2,000,000 Aaa* Massachusetts State College Building
Authority Revenue, MBIA-Insured,
5.375% due 5/1/39 1,857,500
1,000,000 AAA Massachusetts State Health & Educational
Facilities Authority Revenue, (Northeastern
University Project), Series I, MBIA-Insured,
5.000% due 10/1/29 880,000
2,000,000 AAA Massachusetts State Housing Finance
Agency, Housing Development, Series B,
MBIA-Insured, 5.300% due 12/1/17 1,937,500
5,000,000 AAA Massachusetts State Turnpike Authority,
Metropolitan Highway System Revenue,
Series A, AMBAC-Insured,
4.750% due 1/1/34 4,112,500
1,000,000 Aaa* Massachusetts State Water Pollution
Abatement Revenue Refunding,
(New Bedford Project), Series A,
FGIC-Insured, 4.750% due 2/1/26 842,500
Massachusetts State Water Resource Authority:
1,380,000 AAA Series A, FSA-Insured, 4.750% due 8/1/27 1,167,825
3,000,000 AAA Series B, MBIA-Insured, 5.000% due 12/1/25 2,666,250
1,025,000 AAA Series C, MBIA-Insured, 5.250% due 12/1/20 973,750
- ----------------------------------------------------------------------------------------
14,437,825
- ----------------------------------------------------------------------------------------
</TABLE>
See Notes to
8 Financial statements
<PAGE>
Schedule of Investments
August 31, 1999 (unaudited)(continued)
<TABLE>
<CAPTION>
Face
Amount Ratings(a) Security Value
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Michigan -- 6.3%
$ 8,000,000 NR Michigan State Strategic Fund Resources
Recovery, Limited Obligation Revenue,
Central Wayne Energy Recovery, Series A,
7.000% due 7/1/27(b) $ 7,710,000
16,375,000 NR Midland County, MI Education Development
Corp., PCR, Limited Obligation, Series B,
9.500% due 7/23/09(b)(c) 17,223,388
- ----------------------------------------------------------------------------------------
24,933,388
- ----------------------------------------------------------------------------------------
Minnesota -- 1.3%
2,500,000 A1* Duluth, MN Seaway Port Authority, IDA,
Dock & Wharf Revenue, (Cargill Inc.
Project), 6.800% due 5/1/12 2,665,625
1,000,000 AAA Minneapolis & St. Paul, MN Community
Airport Revenue, Series A, FGIC-Insured,
5.125% due 1/1/25 930,000
525,000 A2* Minnesota State Higher Education Facilities
Authority Revenue, University St. Thomas
Education, Series 3, 5.375% due 4/1/18 504,656
1,225,000 AA+ Minnesota State Housing Financing Agency,
Single-Family Mortgage, Series I,
5.500% due 1/1/17 1,202,031
- ----------------------------------------------------------------------------------------
5,302,312
- ----------------------------------------------------------------------------------------
Missouri -- 0.4%
1,000,000 AAA Fenton, MO COP, (Capital Improvement
Projects), MBIA-Insured, 5.125% due 9/1/17 945,000
750,000 A+ Missouri Health & Educational Facilities
Authority Revenue, Children's Mercy Hospital,
5.250% due 5/15/18 695,625
- ----------------------------------------------------------------------------------------
1,640,625
- ----------------------------------------------------------------------------------------
Montana -- 2.0%
8,000,000 NR Montana State Board Investment Resource
Recovery, (Yellowstone Energy Project),
7.000% due 12/31/19(b) 7,960,000
- ----------------------------------------------------------------------------------------
New Jersey -- 1.8%
5,200,000 A+ Hudson County, NJ Improvement Authority,
6.625% due 8/1/25 5,512,000
1,500,000 AA- New Jersey State Transportation Authority,
Transportation System, Series A,
5.750% due 6/15/16 1,543,125
- ----------------------------------------------------------------------------------------
7,055,125
- ----------------------------------------------------------------------------------------
</TABLE>
See Notes to
9 Financial statements.
<PAGE>
Schedule of Investments
August 31, 1999 (unaudited)(continued)
<TABLE>
<CAPTION>
Face
Amount Ratings(a) Security Value
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
New Mexico -- 0.5%
$ 2,000,000 AAA New Mexico Mortgage Finance Authority,
Single-Family Mortgage, Series D-3,
5.625% due 9/1/28 $ 1,962,500
- ----------------------------------------------------------------------------------------
New York -- 8.8%
2,600,000 A- Long Island Power Authority, Electric
System Revenue, Series A,
5.500% due 12/1/29 2,489,500
100,000 A-1+ New York City, NY GO, Series A-4,
LOC-Chase Manhattan Bank,
3.15% due 8/1/22 (f) 100,000
New York City, NY Transitional Finance
Authority Revenue, Future Tax Secured:
Series B:
1,000,000 AA 4.750% due 11/1/17 891,250
4,250,000 AA 4.750% due 11/1/19 3,702,813
Series C:
2,000,000 AAA FGIC-Insured, 5.000% due 5/1/17 1,857,500
5,000,000 AA 5.000% due 5/1/29 4,431,250
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 1,088,638
New York State Dormitory Authority Revenue:
1,000,000 AAA City University Systems, Series A,
FGIC-Insured, 5.000% due 7/1/16 938,750
4,000,000 AAA Mental Health Services Facilities
Improvement, Series D, FSA-Insured,
5.125% due 8/15/17 3,755,000
6,000,000 AAA Montefiore Medical Center,
AMBAC-Insured, 5.250% due 2/1/15 5,865,000
1,000,000 AAA New York State Medcare Mental Health
Services, FGIC-Insured,
5.250% due 2/15/19 955,000
5,000,000 AAA New York State Thruway Authority,
Highway & Bridge Fund, Series B,
FGIC-Insured, 5.000% due 4/1/17 4,631,250
5,000,000 Aa3* Triborough Bridge & Tunnel Authority of NY,
General Purpose, Series A,
5.000% due 1/1/24 4,493,750
- ----------------------------------------------------------------------------------------
35,199,701
- ----------------------------------------------------------------------------------------
</TABLE>
See Notes to
10 Financial statements.
<PAGE>
Schedule of Investments
August 31, 1999 (unaudited)(continued)
<TABLE>
<CAPTION>
Face
Amount Ratings(a) Security Value
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Ohio -- 7.0%
$ 2,000,000 AAA Akron, OH Economic Development,
MBIA-Insured, 5.000% due 12/1/18 $ 1,845,000
1,000,000 AAA Cleveland-Cuyahoga County, OH Port
Authority Revenue, Rock & Roll
Hall of Fame, AMBAC-Insured,
5.400% due 12/1/15 1,000,000
Cuyahoga County, OH Hospital
Revenue Refunding:
6,360,000 AAA Metrohealth Systems, Series A,
MBIA-Insured, 5.125% due 2/15/14 6,153,300
2,000,000 AAA University Hospital Health Systems Inc.,
AMBAC-Insured, 5.500% due 1/15/30 1,927,500
2,000,000 AAA Evergreen, OH Local School District,
FGIC-Insured, 5.625% due 12/1/24 1,972,500
1,000,000 AAA Lorain County, OH Health Facilities,
Catholic Healthcare Partners, Series A,
5.500% due 9/1/29 968,750
4,000,000 AAA Lucas County, OH Hospital Revenue
Promedia Healthcare Obligation Group,
AMBAC-Insured, 5.375% due 11/15/29 3,800,000
2,000,000 AAA Ohio State Higher Educational Facilities
Community Revenue, (Union Dayton
Project), AMBAC-Insured,
5.350% due 12/1/17 1,987,500
1,645,000 AAA Ohio State Water Development Authority
Revenue, Fresh Water, Series A,
FSA-Insured, 5.000% due 6/1/16 1,554,525
5,320,000 AAA Portage County, OH GO, MBIA-Insured,
5.250% due 12/1/17 5,093,900
1,500,000 AAA University Akron, OH General Receipts,
FGIC-Insured, 5.500% due 1/1/17 1,483,125
- ----------------------------------------------------------------------------------------
27,786,100
- ----------------------------------------------------------------------------------------
Pennsylvania -- 1.4%
3,500,000 AAA Montgomery County, PA Higher Education &
Health Authority Revenue, Holy Redeemer
Health, Series A, AMBAC-Insured,
5.250% due 10/1/17 3,346,875
2,500,000 AA Saint Mary Hospital Authority, Bucks
County Catholic Health Initiatives,
Series A, 5.000% due 12/1/18 2,231,250
- ----------------------------------------------------------------------------------------
5,578,125
- ----------------------------------------------------------------------------------------
</TABLE>
See Notes to
11 Financial statements
<PAGE>
Schedule of Investments
August 31, 1999 (unaudited)(continued)
<TABLE>
<CAPTION>
Face
Amount Ratings(a) Security Value
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
South Carolina -- 3.0%
$ 4,000,000 AAA Lexington County, SC Health Services
District Inc., Hospital Revenue Refunding
& Improvement, FSA-Insured,
5.250% due 11/1/17 $ 3,830,000
2,000,000 A3* Myrtle Beach, SC COP, Myrtle Beach
Convention Center, (Pre-Refunded --
Escrowed with U.S. government securities
to 7/1/02 Call @ 102), 6.875% due 7/1/07(d) 2,170,000
1,140,000 AAA Piedmont, SC Municipal Power Agency,
Electric Revenue Refunding, Series A,
MBIA-Insured, 4.875% due 1/1/16 1,034,550
5,000,000 Aaa* South Carolina Transportation Infrastructure
Revenue, AMBAC-Insured, Series A,
5.250% due 10/1/21 4,737,500
- ----------------------------------------------------------------------------------------
11,772,050
- ----------------------------------------------------------------------------------------
Tennessee -- 1.3%
1,150,000 NR Hardeman County, TN Correctional Facilities
Corp., 7.750% due 8/1/17 1,240,563
4,100,000 AA+ Shelby County, TN GO, Refunding, Series A,
5.000% due 3/1/20 3,761,750
- ----------------------------------------------------------------------------------------
5,002,313
- ----------------------------------------------------------------------------------------
Texas -- 15.1%
500,000 Aaa* Arlington, TX ISD, GO, PSFG,
5.000% due 2/15/24 448,750
3,990,000 Aaa* Azle, TX ISD, GO, PSFG, Series C,
5.000% due 2/15/22 3,600,975
2,000,000 AAA Bexar County, TX Health Facilities
Development Corp. Revenue, Baptist
Health Systems, Series A, MBIA-Insured,
5.250% due 11/15/27 1,852,500
Brazos River Authority:
7,500,000 AAA Houston Industrial Income Project, Series A,
5.125% due 5/1/19 6,956,250
4,000,000 Baa1* PCR, Utilities Electric Co., Series C,
5.550% due 6/1/30(b) 3,555,000
2,000,000 AAA Brownsville, TX Utility Systems Revenue,
AMBAC-Insured, 5.250% due 9/1/20 1,897,500
</TABLE>
See Notes to
12 Financial statements
<PAGE>
Schedule of Investments
August 31, 1999 (unaudited)(continued)
<TABLE>
<CAPTION>
Face
Amount Ratings(a) Security Value
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Texas -- 15.1% (continued)
Burleson, TX ISD, GO, PSFG:
$ 2,840,000 NR Pre-Refunded--Escrowed with
U.S. government securities to 8/1/06
Call @ 100, 6.750% due 8/1/24(d) $ 3,180,800
1,160,000 Aaa* 6.750% due 8/1/24 1,255,700
2,960,000 AA- Fort Worth, TX Higher Education Financing
Corp. Revenue, (Texas Christian University
Project), 5.000% due 3/15/14 2,812,000
2,480,000 Aaa* Frisco, TX ISD, GO, PSFG, 5.375% due 8/15/18 2,411,800
Harris County, TX Health Facilities,
Development Corp. Revenue:
1,000,000 AA School Health Care Systems, Series B,
5.750% due 7/1/27 1,010,000
3,000,000 AA Childrens Hospital Project, Series A,
5.250% due 10/1/19 2,786,250
Harris County, TX Toll Road, GO:
3,900,000 AAA Sr. Lien, FGIC-Insured, 5.375% due 8/15/20 3,758,625
5,185,000 AA Sub. Lien, 5.125% due 8/15/16 4,958,155
1,000,000 AAA Houston, TX ISD, GO, Series A, PSFG,
4.750% due 2/15/22 861,250
2,670,000 AAA Manor, TX ISD, GO, Refunding, PSFG,
5.000% due 8/1/17 2,473,088
2,000,000 AAA Nueces River Authority, Texas Water Supply
Facilities, FSA-Insured, 5.500% due 3/1/27 1,937,500
Texas Water Development Board Revenue,
State Revolving Fund, Sr. Lien, Series B:
3,000,000 AAA 5.000% due 7/15/14 2,865,000
1,000,000 AAA 5.000% due 7/15/15 947,500
5,000,000 AAA 5.000% due 7/15/16 4,700,000
5,000,000 AAA 5.000% due 7/15/19 4,593,750
1,520,000 AAA West Texas Municipal Power Agency
Revenue, MBIA-Insured,
5.000% due 2/15/15 1,430,700
- ----------------------------------------------------------------------------------------
60,293,093
- ----------------------------------------------------------------------------------------
Utah -- 0.9%
4,000,000 A+ Intermountain Power Agency, Utah Power
Supply Revenue Refunding, Series D,
5.000% due 7/1/21 3,635,000
- ----------------------------------------------------------------------------------------
</TABLE>
See Notes to
13 Financial statements.
<PAGE>
Schedule of Investments
August 31, 1999 (unaudited)(continued)
<TABLE>
<CAPTION>
Face
Amount Ratings(a) Security Value
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Virgin Islands -- 0.2%
$ 1,000,000 BBB- Virgin Islands, PFA Revenue, Sr. Lien,
Series A, 5.500% due 10/1/22 $ 950,000
- ----------------------------------------------------------------------------------------
Virginia -- 2.8%
4,700,000 A2* Harrisonburg, VA Redevelopment &
Housing Authority, (Jail & Courthouse
Project), Public Facilities Lease Revenue,
6.500% due 9/1/14 4,905,625
2,590,000 AA Virginia College Building Authority,
Virginia Educational Facilities Revenue,
21st Century College Program,
5.250% due 8/1/13 2,573,813
Virginia State HDA, Multi-Family Housing:
1,655,000 AA+ Series D, 6.250% due 1/1/15 1,698,444
1,235,000 AAA Series H, AMBAC-Insured,
6.300% due 11/1/15 1,285,944
600,000 AA+ Series K, 5.800% due 11/1/10 622,500
- ----------------------------------------------------------------------------------------
11,086,326
- ----------------------------------------------------------------------------------------
Washington -- 6.8%
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 5,869,368
22,685,000 AAA Zero coupon due 6/1/22 6,068,237
4,750,000 AA Series B, Remarketed 7/1/92,
Mandatory put 7/1/19,
6.750% due 7/1/62(b)(c) 4,874,687
10,060,000 AA- Washington State Health Care Facilities
Authority Revenue, Sisters of Providence
Hospital, (Pre-Refunded-- Escrowed with
U.S. government securities to 10/1/99
Call @ 102), 7.875% due 10/1/10(c)(d) 10,293,090
- ----------------------------------------------------------------------------------------
27,105,382
- ----------------------------------------------------------------------------------------
Wisconsin -- 2.3%
4,070,000 AA Wisconsin State GO, Series B,
6.600% due 1/1/22(b) 4,227,713
Wisconsin State Health & Educational
Facilities Authority Revenue, MBIA-Insured:
3,000,000 AAA Aurora Health Care Inc.,
5.250% due 8/15/17 2,861,250
</TABLE>
See Notes to
14 Financial statements
<PAGE>
Schedule of Investments
August 31, 1999 (unaudited)(continued)
<TABLE>
<CAPTION>
Face
Amount Ratings(a) Security Value
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Wisconsin -- 2.3% (continued)
$ 1,100,000 A Kenosha Hospital & Medical Center
Project, 5.700% due 5/15/20 $ 1,029,875
1,000,000 AAA The Medical College of Wisconsin Inc.
Project, 5.400% due 12/1/16 977,500
- ----------------------------------------------------------------------------------------
9,096,338
- ----------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(COST-- $406,440,735**) $ 398,236,797
- ----------------------------------------------------------------------------------------
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service with the exception of
those identified by an asterisk (*), which are rated by Moody's Investor's
Service Inc.
(b) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Security is segregated by Custodian for open purchase commitments.
(d) Pre-Refunded bonds escrowed by U.S. government securities and bonds
escrowed to maturity by U.S. government securities are considered by
manager to be triple-A rated even if issuer has not applied for new
ratings.
(e) Security is in default.
(f) Variable rate obligation payable at par on demand at anytime on no more
than seven days notice.
** Aggregate cost for Federal income tax purposes is substantially the same.
Summary of Investments by Combined Ratings
August 31, 1999 (unaudited)
Percentage of
Moody's and/or Standard & Poor's Total Investments
- --------------------------------------------------------------------------------
Aaa AAA 51.1%
Aa AA 17.4
A A 10.6
Baa BBB 9.7
NR NR 11.2
-----
100.0%
=====
See Notes to
Financial statements.
15
<PAGE>
Bond Ratings
(unaudited)
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard and Poor's") -- Ratings from "AA"
to "BBB" may be modified by the addition of a plus (+) or minus (-) sign to show
relative standings within the major rating categories.
AAA -- Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA -- Bonds rated "AA" have a very strong capacity to pay interest and
repay principal and differs from the highest rated issue only in a
small degree.
A -- Bonds rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for bonds in this category than in
higher rated categories.
Moody's Investors Service, Inc. ("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 rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in "Aaa" securities.
A -- Bonds rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa -- Bonds rated "Baa" are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
16
<PAGE>
Short-Term Security Ratings
(unaudited)
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate demand
obligation (VRDO) rating indicating that the degree of safety
regarding timely payment is either overwhelming or very strong;
those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG 1 rating.
Security Descriptions
(unaudited)
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- AMBAC Indemnity Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CDA -- Community Development Administration
CGIC -- Capital Guaranty Insurance Company
CHFCLI -- California Health Facility Construction Loan Insurance
COP -- Certificate of Participation
EDA -- Economic Development Authority
ETM -- Escrowed To Maturity
FAIRS -- Floating Adjustable Interest Rate Securities
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- 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
VAN -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
17
<PAGE>
Statement of Assets and Liabilities
(unaudited)
August 31, 1999
================================================================================
ASSETS:
Investments, at value (Cost -- $406,440,735) $398,236,797
Cash 17,439
Interest receivable 5,205,571
- --------------------------------------------------------------------------------
Total Assets 403,459,807
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 10,878,187
Dividends payable 632,154
Investment advisory fees payable 327,875
Accrued expenses 176,013
- --------------------------------------------------------------------------------
Total Liabilities 12,014,229
- --------------------------------------------------------------------------------
Total Net Assets $391,445,578
================================================================================
NET ASSETS:
Par value of capital shares $ 34,607
Capital paid in excess of par value 413,576,918
Treasury stock, at cost (Note 6) (785,161)
Undistributed net investment income 407,644
Accumulated net realized loss from security transactions (13,584,492)
Net unrealized depreciation of investments (8,203,938)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS
(Equivalent to $11.34 per share on 34,606,944 shares of
$0.001 par value outstanding; 500,000,000 shares authorized) $391,445,578
================================================================================
See Notes to
18 Financial statements.
<PAGE>
Statement of Operations
(unaudited)
Three Months
Ended
8/31/99
================================================================================
INVESTMENT INCOME:
Interest $ 5,956,315
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3) 731,695
Administration fees (Note 3) 209,056
Shareholder communications 66,298
Audit and legal 18,298
Registration fees 14,210
Shareholder and system servicing fees 6,041
Directors' fees 6,034
Pricing services fees 5,497
Custody 4,984
Other 7,254
- --------------------------------------------------------------------------------
Total Expenses 1,069,367
- --------------------------------------------------------------------------------
Net Investment Income 4,886,948
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS (NOTE 4):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 40,174,850
Cost of securities sold 45,621,943
- --------------------------------------------------------------------------------
Net Realized Loss (5,447,093)
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments:
Beginning of period 8,230,011
End of period (8,203,938)
- --------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (16,433,949)
- --------------------------------------------------------------------------------
Net Loss on Investments (21,881,042)
- --------------------------------------------------------------------------------
Decrease in Net Assets From Operations $(16,994,094)
================================================================================
See Notes to
19 Financial Statements.
<PAGE>
Statements of Changes in Net Assets
Three Months Year
Ended 8/31/99 Ended
(unaudited) 5/31/99
================================================================================
OPERATIONS:
Net investment income $ 4,886,948 $ 20,136,169
Net realized loss (5,447,093) (4,886,706)
Increase in net unrealized depreciation (16,433,949) (6,285,612)
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
From Operations (16,994,094) 8,963,851
- --------------------------------------------------------------------------------
DISTRIBUTION TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income (5,188,491) (18,626,947)
Net realized gains -- (4,075,207)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (5,188,491) (22,702,154)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Treasury stock acquired (785,161) --
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (785,161) --
- --------------------------------------------------------------------------------
Decrease in Net Assets (22,967,746) (13,738,303)
NET ASSETS:
Beginning of period 414,413,324 428,151,627
- --------------------------------------------------------------------------------
End of period* $391,445,578 $414,413,324
- --------------------------------------------------------------------------------
* Includes undistributed
net investment income of: $407,644 $709,187
================================================================================
See Notes to
20 Financial Statements.
<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 value; (d) gains or losses on sale of securities are calculated by
using the specific identification method; (e) interest income, adjusted for
amortization of premium and accretion of original issue discount, is recorded on
an 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, 1999, 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 (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.
2. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from
municipal securities, which is exempt from regular Federal income tax and from
designated state income taxes, to retain such tax-exempt status when distributed
to the shareholders of the Fund.
Capital gain distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
21
<PAGE>
Notes to Financial Statements
(unaudited)(continued)
3. Investment Advisory Agreement, Administration Agreement and Other
Transactions
SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund
Management Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"),
acts as investment adviser to the Fund. The Fund pays SSBC 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.
SSBC 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 Salomon Smith
Barney Inc., another subsidiary of SSBH.
4. Investments
For the three months ended August 31, 1999, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $ 40,046,090
- --------------------------------------------------------------------------------
Sales 40,174,850
================================================================================
At August 31, 1999, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
================================================================================
Gross unrealized appreciation $ 8,797,791
Gross unrealized depreciation (17,001,729)
- --------------------------------------------------------------------------------
Net unrealized depreciation $ (8,203,938)
================================================================================
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
22
<PAGE>
Notes to Financial Statements
(unaudited) (continued)
day's trading. Variation margin payments are received or made and recognized as
assets due from or liabilities due to broker, depending upon whether unrealized
gains or losses are incurred. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the proceeds from (or cost
of) the closing transactions and the Fund's basis in the contract.
The Fund enters into such contracts to hedge a portion of its portfolio.
The Fund bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At August 31, 1999, the Fund had no open futures contracts.
6. Capital Shares
At August 31, 1999, the Fund had 500,000,000 shares of common stock
authorized with a par value of $0.001 per share.
On June 21, 1999, the Fund commenced a share repurchase plan. As of August
31, 1999, repurchased shares totalled 79,400.
7. Securities Traded on a When-Issued Basis
In a when-issued transaction, the Fund commits to purchasing securities for
which specific information is not yet known at the time of the trade. Securities
purchased on a when-issued basis are not settled until they are delivered to the
Fund. Beginning on the date the Fund enters into the when-issued transaction,
the custodian maintains cash, U.S. government securities or other liquid high
grade debt obligations in a segregated account equal in value to the purchase
price of the when-issued security. These transactions are subject to market
fluctuations and their current value is determined in the same manner as for
other securities.
At August 31, 1999, the Fund did not hold any when-issued securities.
8. Capital Loss Carryforward
At May 31, 1999, the Fund had, for Federal income tax purposes,
approximately $2,565,000 of unused capital loss carryforwards available to
offset future capital gains expiring May 31, 2007. To the extent that these
carryforward losses are used to offset capital gains, it is probable that the
gains so offset will not be distributed.
23
<PAGE>
Financial Highlights
For a share of capital stock outstanding throughout each year ended May 31,
except where noted:
<TABLE>
<CAPTION>
1999(1) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 11.97 $ 12.37 $ 11.90 $ 12.11 $ 12.55 $ 12.26
- ---------------------------------------------------------------------------------------------------------
Income (Loss) From
Operations:
Net investment income(2) 0.14 0.58 0.54 0.67 0.67 0.72
Net realized and
unrealized gain (loss) (0.62) (0.32) 0.83 0.08 (0.35) 0.49
- ---------------------------------------------------------------------------------------------------------
Total Income (Loss)
From Operations (0.48) 0.26 1.37 0.75 0.32 1.21
- ---------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.15) (0.54) (0.61) (0.66) (0.75) (0.67)
Net realized gains -- (0.12) (0.29) (0.30) (0.01) (0.25)
- ---------------------------------------------------------------------------------------------------------
Total Distributions (0.15) (0.66) (0.90) (0.96) (0.76) (0.92)
- ---------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 11.34 $ 11.97 $ 12.37 $ 11.90 $ 12.11 $ 12.55
- ---------------------------------------------------------------------------------------------------------
Total Return, Based on
Market Value(3) (2.24)%++ 0.11% 2.08% 7.89% 8.26% 8.40%
- ---------------------------------------------------------------------------------------------------------
Total Return, Based on
Net Asset Value(3) (3.86)%++ 2.66% 12.14% 6.59% 2.79% 10.96%
- ---------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $ 391 $ 414 $ 428 $ 411 $ 418 $ 433
- ---------------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses(2) 1.06%+ 0.94% 0.99% 1.00% 1.00% 1.02%
Net investment income 4.85+ 4.72 4.35 5.56 5.35 5.97
- ---------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 10% 23% 87% 113% 45% 93%
- ---------------------------------------------------------------------------------------------------------
Market Value,
End of Period $ 10.000 $ 10.375 $ 11.000 $ 11.625 $ 11.690 $ 11.500
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the three months ended August 31, 1999 (unaudited).
(2) The investment advisor and administrator waived a portion of their fees for
the year ended May 31, 1999. If such fees were not waived, the per share
decrease in net investment income would have been $0.01. In addition, the
ratio of expenses to average net assets would have been 1.02%.
(3) The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
24
<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
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Per Per Per
Quarter Ended Total Share Total Share Total Share Total Share
- ----------------------------------------------------------------------------------------------------------------
August 31,
1997 $5,809,421 $0.17 $4,751,757 $0.14 $11,642,588 $0.34 $16,394,345 $0.48
November 30,
1997 5,571,655 0.16 4,540,883 0.13 9,907,664 0.29 14,448,547 0.42
February 28,
1998 5,677,656 0.16 4,609,822 0.13 7,399,266 0.21 12,009,088 0.34
May 31,
1998 5,679,780 0.16 4,606,509 0.13 (7,936) (0.00) 4,598,573 0.13
August 31,
1998 6,731,153 0.19 5,618,898 0.16 2,807,927 0.09 8,426,825 0.25
November 30,
1998 5,825,421 0.17 4,996,967 0.15 (967,184) (0.04) 4,029,783 0.11
February 28,
1999 5,747,605 0.17 4,793,284 0.14 (3,630,173) (0.10) 1,163,111 0.04
May 31,
1999 5,833,696 0.17 4,727,020 0.13 (9,382,888) (0.27) (4,655,868) (0.14)
August 31,
1999 5,956,315 0.17 4,886,948 0.14 (21,881,042) (0.62) (16,994,094) (0.48)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
25
<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> <C>
- ----------------------------------------------------------------------------------------------------------------
6/24/97 6/27/97 $11.750 $12.06 $0.060 $11.98
7/22/97 7/25/97 12.000 12.43 0.060 12.08
8/26/97 8/29/97 11.750 12.17 0.060 11.83
9/23/97 9/26/97 11.750 12.30 0.056 11.91
10/28/97 10/31/97 11.375 12.33 0.056 11.60
11/24/97 11/28/97 11.563 12.41 0.056 11.64
12/22/97* 12/26/97 11.625 12.39 0.294 12.24
1/27/98 1/30/98 11.938 12.41 0.056 12.04
2/24/98 2/27/98 11.938 12.39 0.056 11.60
3/24/98 3/27/98 11.125 12.36 0.050 11.34
4/21/98 4/24/98 11.1875 12.23 0.050 11.10
5/26/98 5/29/98 10.875 12.34 0.050 11.15
6/23/98 6/26/98 11.000 12.32 0.050 11.10
7/28/98 7/31/98 10.875 12.30 0.048 10.84
8/25/98 8/28/98 10.875 12.41 0.048 11.05
9/22/98 9/25/98 11.375 12.48 0.049 11.57
10/27/98 10/30/98 11.4375 12.44 0.049 11.58
11/23/98 11/27/98 11.750 12.42 0.049 11.59
12/21/98* 12/24/98 11.313 12.32 0.118 11.27
1/26/99 1/29/99 10.938 12.37 0.049 11.04
2/23/99 2/26/99 10.875 12.31 0.049 10.89
3/23/99 3/26/99 10.750 12.22 0.049 10.72
4/27/99 4/30/99 10.500 12.18 0.049 10.46
5/25/99 5/28/99 10.375 12.01 0.049 10.52
6/22/99 6/25/99 10.563 11.67 0.050 10.61
7/27/99 7/30/99 10.063 11.67 0.050 10.03
8/24/99 8/27/99 9.813 11.29 0.050 9.95
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
+ As of record date.
* Capital gain distribution.
26
<PAGE>
Dividend Reinvestment Plan
(unaudited)
Under the Fund's Dividend Reinvestment Plan ("Plan"), a shareholder whose
shares of common stock are registered in his own name will have all
distributions from the Fund reinvested automatically by First Data Investor
Services Group, Inc. ("First Data") as purchasing agent under the Plan, unless
the shareholder elects to receive cash. Distributions with respect to shares
registered in the name of a broker-dealer or other nominee (that is, in street
name) will be reinvested by the broker or nominee in additional shares under the
Plan, unless the service is not provided by the broker or nominee or the
shareholder elects to receive distributions in cash. Investors who own common
stock registered in street name should consult their broker-dealers for details
regarding reinvestment. All distributions to shareholders who do not participate
in the Plan will be paid by check mailed directly to the record holder by or
under the direction of First Data as dividend paying agent.
The number of shares of common stock distributed to participants in the
Plan in lieu of a cash dividend is determined in the following manner. When the
market price of the common stock is equal to or exceeds the net asset value per
share of the common stock on the determination date (generally, the record date
for the distribution), Plan participants will be issued shares of common stock
by the Fund at a price equal to the greater of net asset value determined as
described below under "Net Asset Value" or 95% of the market price of the common
stock.
If the market price of the common stock is less than the net asset value of
the common stock at the time of valuation (which is the close of business on the
determination date), or if the Fund declares a dividend or capital gains
distribution payable only in cash, First Data will buy common stock in the open
market, on the NYSE or elsewhere, for the participants' accounts. If following
the commencement of the purchases and before First Data has completed its
purchases, the market price exceeds the net asset value of the common stock as
of the valuation time, First Data will attempt to terminate purchases in the
open market and cause the Fund to issue the remaining portion of the dividend or
distribution in shares at a price equal to the greater of (a) net asset value as
of the valuation time or (b) 95% of the then current market price. In this case,
the number of shares received by a Plan participant will be based on the
weighted average of prices paid for shares purchased in the open market and the
price at which the Fund issues the remaining shares. To the extent First Data is
unable to stop open market purchases and cause the Fund to issue the remaining
shares, the average per share purchase price paid by First Data may exceed the
net asset value of the common stock as of the valuation time, resulting in the
acquisition of fewer shares than if the dividend or capital gains distribution
had been paid in common stock issued by the Fund at such net asset value. First
Data will begin to purchase common stock on the open market as soon as
practicable after the determination date for the dividend or capital gains
distribution, but in no event shall such
27
<PAGE>
Dividend Reinvestment Plan
(unaudited)(continued)
purchases continue later than 30 days after the payment date for such dividend
or distribution, or the record date for a succeeding dividend or distribution,
except when necessary to comply with applicable provisions of the federal
securities laws.
First Data maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in each account, including information
needed by a shareholder for personal and tax records. The automatic reinvestment
of dividends and capital gains distributions will not relieve Plan participants
of any income tax that may be payable on the dividends or capital gains
distributions. Common stock in the account of each Plan participant will be held
by First Data in uncertificated form in the name of the Plan participant.
Plan participants are subject to no charge for reinvesting dividends and
capital gains distributions under the Plan. First Data's fees for handling the
reinvestment of dividends and capital gains distributions will be paid by the
Fund. No brokerage charges apply with respect to shares of common stock issued
directly by the Fund under the Plan. Each Plan participant will, however, bear a
proportionate share of any brokerage commissions actually incurred with respect
to any open market purchases made under the Plan.
Experience under the Plan may indicate that changes to it are desirable.
The Fund reserves the right to amend or terminate the Plan as applied to any
dividend or capital gains distribution paid subsequent to written notice of the
change sent to participants at least 30 days before the record date for the
dividend or capital gains distribution. The Plan also may be amended or
terminated by First Data, with the Fund's prior written consent, on at least 30
days' written notice to Plan participants. All correspondence concerning the
plan should be directed by mail to First Data Investor Services Group, Inc.,
P.O. Box 9699, Providence, Rhode Island 02940-9699 or by telephone at
1-800-451-2010.
- --------------------------------------------------------------------------------
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.
28
<PAGE>
Managed Municipals
Portfolio Inc.
Directors Investment Adviser and
Allan J. Bloostein Administrator
Martin Brody SSB Citi Fund Management LLC
Dwight B. Crane 388 Greenwich Street
Robert A. Frankel New York, New York 10013
William R. Hutchinson
Heath B. McLendon, Chairman Transfer Agent
First Data Investor Services
Charles F. Barber, Emeritus Group, Inc.
P.O. Box 9699
Officers Providence, RI 02940-9699
Heath B. McLendon
President and Custodian
Chief Executive Officer PNC Bank, N.A.
17th & Chestnut Streets
Lewis E. Daidone Philadelphia, Pennsylvania 19103
Senior Vice President
and Treasurer
Joseph P. Deane
Vice President and
Investment Officer
David Fare
Investment Officer
Paul A. Brook
Controller
Christina T. Sydor
Secretary
29
<PAGE>
This report is only intended for shareholders of the
Managed Municipals Portfolio Inc.
It is not a Prospectus,
circular or representation intended for use in the
purchase or sale of shares of the Fund or of any
securities mentioned in the report.
FD0776 10/99
