UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-6629
Managed Municipals Portfolio Inc.
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Smith Barney Fund Management LLC
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 451-2010
Date of fiscal year end: May 30
Date of reporting period: November 30, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
The Semi-Annual Report to Stockholders is filed herewith.
Managed Municipals
Portfolio Inc.
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SEMI-ANNUAL REPORT
November 30, 2003
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Managed Municipals
Portfolio Inc.
WHAT'S INSIDE
Letter from the Chairman......................................... 1
Schedule of Investments.......................................... 5
Statement of Assets and Liabilities.............................. 23
Statement of Operations.......................................... 24
Statements of Changes in Net Assets.............................. 25
Notes to Financial Statements.................................... 26
Financial Highlights............................................. 31
Financial Data................................................... 33
Additional Shareholder Information............................... 34
Dividend Reinvestment Plan....................................... 35
Share Repurchase Notice.......................................... 36
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Managed Municipals
Portfolio Inc.
LETTER FROM THE CHAIRMAN
[PHOTO]
R. Jay Gerken
R. JAY GERKEN, CFA
Chairman, President and Chief Executive Officer
Dear Shareholder,
I am pleased to report that your fund, the Managed Municipals Portfolio Inc.,
generated favorable relative returns both on a net asset value ("NAV")/i/ and
market price basis for the six months ended November 30, 2003. The fund's total
return based on its market price during this period was 6.32%, while its NAV
return was 5.84%. The fund outperformed the Lehman Brothers Municipal Bond
Index,/ii/ which returned 0.19% as well as its Lipper general municipal debt
(leveraged) closed-end funds category average, which returned 1.21% for the
same period./iii/ Certain investors may be subject to the federal Alternative
Minimum Tax, and state and local taxes will apply. Capital gains, if any, are
fully taxable. Please consult your personal tax adviser.
This positive performance occurred within a sea change for bonds. After a
formidable run, bonds lost some of the gains they had generated earlier in the
year as signs of a sharp pick-up in the pace of economic growth and rising
long-term Treasury bond yields dealt a blow to the market. Furthermore, many
municipalities continued to grapple with serious budgetary pressures brought on
by the weak economy among other fiscal factors. As a result, your fund manager
took a cautious stance, maintaining a focus on revenue bonds, which are backed
by the generally stable revenue streams of specific public works (such as
bridge tolls) and de-emphasizing state general obligation (GO) bonds, which
have become relatively less favorable given the uncertain budget scenarios.
During the six months, the fund distributed dividends to shareholders totaling
$0.35 per share. The table shows the annualized distribution yields and six-
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1
month total return based on the fund's November 30, 2003 NAV per share and its
New York Stock Exchange ("NYSE") closing price. Past performance is not
indicative of future results.
FUND PERFORMANCE AS OF NOVEMBER 30, 2003
Annualized Six-Month
Price Per Share Distribution Yield Total Return
$12.12 (NAV) 5.74% 5.84%
$11.32 (NYSE) 6.15% 6.32%
Total returns are based on changes in NAV or market price, respectively.
Total return assumes the reinvestment of all dividends and/or capital gains
distributions in additional shares. Annualized distribution yield is the
fund's current monthly income dividend rate, annualized and then divided by
the NAV or the market price noted in this report. The annualized
distribution yield assumes a current monthly income dividend rate of $0.058
for 12 months. This rate is as of November 30, 2003 and is subject to change.
In this environment of bond volatility marred by budget deficits, it is
critical to perform a thorough analysis before carefully choosing municipal
bonds. In our opinion, this is all the more reason why investing in municipal
bonds with a professional fund manager is a more prudent strategy than buying
these bonds directly. Fund managers can provide the diversification and
thorough credit analysis that is so important in managing risk.
Special Shareholder Notice
It is with great sadness that we bring to your attention the passing of Alfred
J. Bianchetti, Director Emeritus, and James J. Crisona, Director Emeritus, of
the fund. Messrs. Bianchetti and Crisona, who both passed away on September
4th, lived accomplished lives to the ages of 80 and 97, respectively. We will
sorely miss their presence and will remember the dedicated service they
provided to the fund's shareholders through their outstanding contributions as
long-term members of the Board.
Looking for Additional Information?
The fund is traded under the symbol "MMU" and its closing market price is
available in most newspapers under the New York Stock Exchange listings. The
daily NAV is available online under symbol XMMUX. Barron's and The Wall Street
Journal's Monday editions carry closed-end fund tables that will provide
additional information. In addition, the fund issues a quarterly allocation
press release that can be found on most major financial web sites.
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2
In a continuing effort to provide information concerning the fund, shareholders
may call 1-888-735-6507, Monday through Friday from 8:00 a.m. to 6:00 p.m.
Eastern Time, for the fund's current net asset value, market price and other
information regarding the fund's portfolio holdings and allocations.
Information About Your Fund
In recent months several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The fund's Adviser and some of its
affiliates have received requests for information from various government
regulators regarding market timing, late trading, fees and other mutual fund
issues in connection with various investigations. The fund has been informed
that the Adviser and its affiliates are responding to those information
requests, but are not in a position to predict the outcome of these requests
and investigations.
As always, thank you for your continued confidence in our stewardship of your
assets.
Sincerely,
/s/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman, President and Chief
Executive Officer
December 15, 2003
The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
Portfolio holdings and breakdowns are as of November 30, 2003 and are subject
to change. Please refer to pages 5 through 19 for a list and percentage
breakdown of the fund's holdings.
All index performance reflects no deduction for fees, expenses or taxes.
/i/ NAV is a price that reflects the value of the fund's underlying portfolio
plus other assets, less the fund's liabilities. However, the price at
which an investor may buy or sell shares of the fund is at the fund's
market price as determined by supply of and demand for the fund's common
shares which may be more or less than the fund's NAV.
/ii/ The Lehman Brothers Municipal Bond Index is a broad measure of the
municipal bond market with maturities of at least one year. Please note
that an investor cannot invest directly in an index.
/iii/ Lipper Inc. is a major independent mutual-fund tracking organization.
Returns are based on the six-month period ended November 30, 2003,
calculated among 64 funds in the fund's Lipper category including the
reinvestment of dividends and capital gains, if any.
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3
Take Advantage of the Fund's Dividend Reinvestment Plan!
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 shares of common stock 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 98% of 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 98% of the NAV at the time of valuation (the
close of business on the determination date), PFPC Inc. ("Plan Agent"), will
buy common stock for your account in the open market.
If the Plan Agent begins to purchase additional shares in the open market and
the market price of the shares subsequently rises above the previously
determined NAV before the purchases are completed, the Plan Agent will attempt
to terminate purchases and have the Fund issue the remaining dividend or
distribution in shares at the greater of the previously determined NAV or 95%
of the market price. In that case, the number of Fund shares you receive will
be based on the weighted average of prices paid for shares purchased in the
open market and the price at which the Fund issues the remaining shares.
A more complete description of the current Plan appears in this report
beginning on page 35.
To find more detailed information about the Plan and about how you can
participate, please call the Plan Agent at 1 (800) 331-1710.
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4
SCHEDULE OF INVESTMENTS
November 30, 2003 (unaudited)
Face
Amount Rating(a) Security Value
---------------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES -- 100.0%
Alabama -- 3.8%
$24,510,000 AAA Jefferson County, AL Sewer Revenue,
Capital Improvement Warrants,
(Pre-Refunded -- Escrowed with state
and local government securities to 2/1/09
Call @ 101), Series A, FGIC-Insured,
5.375% due 2/1/36 (b) $ 28,027,185
------------------------------------------------------------------------------
Alaska -- 0.2%
Valdez, AK Marine Terminal Revenue
Refunding:
BP Pipelines Inc. Project:
600,000 A-1+ 1.100% due 7/1/37 (c) 600,000
1,000,000 A-1+ Series B, 1.100% due 7/1/37 (c) 1,000,000
50,000 A-1+ Exxon Pipeline Co. Project,
1.080% due 10/1/25 (c) 50,000
------------------------------------------------------------------------------
1,650,000
------------------------------------------------------------------------------
Arizona -- 2.3%
2,000,000 AA Arizona Agricultural Improvement &
Power District Electrical Systems
Revenue, (Salt River Project), Series B,
5.000% due 1/1/31 2,037,920
Arizona State University, COP,
MBIA-Insured:
1,500,000 AAA 5.100% due 7/1/24 1,548,315
1,000,000 AAA 5.125% due 7/1/26 1,028,970
4,000,000 AAA Mesa, AZ IDA, Discovery Health Systems,
Series A, MBIA-Insured,
5.625% due 1/1/29 4,282,760
3,000,000 AAA Phoenix, AZ Civic Improvement Corp.
Airport Revenue, Sr. Lien, Series B,
FGIC-Insured, 5.250% due 7/1/22 (d) 3,147,660
1,000,000 AA+ Phoenix, AZ GO, Series B,
5.000% due 7/1/27 1,019,530
1,300,000 A-1+ Tempe, AZ Excise Tax Revenue, (Tempe
Center for the Arts Project),
1.100% due 7/1/20 (c) 1,300,000
2,565,000 AAA University of Arizona, COP, (The
University of Arizona Project), Series B,
AMBAC-Insured, 5.000% due 6/1/31 2,607,656
------------------------------------------------------------------------------
16,972,811
------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
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5
SCHEDULE OF INVESTMENTS
November 30, 2003 (unaudited) (continued)
Face
Amount Rating(a) Security Value
----------------------------------------------------------------------------------
California -- 9.2%
$ 7,040,000 Ba1* California Educational Facilities Authority
Revenue, (Pooled College & University
Projects), Series A, (Call 7/1/08 @ 101),
5.625% due 7/1/23 (e) $ 6,130,995
6,000,000 A3* California Health Facilities Authority
Revenue, (Cedars-Sinai Medical Center),
Series A, 6.250% due 12/1/34 6,374,520
1,000,000 A+ California Health Facilities Financing
Authority Revenue, Sutter Health,
Series A, 6.250% due 8/15/35 1,104,550
2,300,000 A-1 California Housing Financing Agency
Revenue, AMBAC-Insured,
1.080% due 2/1/33 (c)(d) 2,300,000
5,000,000 AAA California Infrastructure and Economic
Development Bank Revenue, Bay Area
Toll Bridges, First Lien, Series A,
FSA-Insured, 5.000% due 7/1/25 5,129,950
5,000,000 AAA California State Department of Veterans
Affairs, Home Purchase Revenue,
Series A, AMBAC-Insured,
5.350% due 12/1/27 5,189,950
California State Office of the State
Treasurer, GO:
200,000 A-1+ 1.050% due 5/1/33 (c) 200,000
3,000,000 A-1+ FGIC-Insured, 1.130% due 9/1/28 (c) 3,000,000
7,375,000 AAA Garden Grove, CA Agency for Community
Development, Tax Allocation, AMBAC-
Insured, 5.000% due 10/1/29 (b) 7,506,349
10,000,000 BBB Golden State Tobacco Securitization Corp.,
CA Tobacco Settlement Revenue,
Series 2003-A-1, 6.750% due 6/1/39 (b) 9,712,000
300,000 A-1+ Irvine, CA Improvement Bond Act 1915,
Assessment District No. 87-8
1.070% due 9/2/24 (c) 300,000
7,000,000 AAA Los Angeles County, CA COP, Antelope
Valley Courthouse, Series A,
AMBAC-Insured, 5.250% due 11/1/33 7,245,490
3,340,000 AAA Rancho Cucamonga, CA Redevelopment
Agency Tax Allocation, (Rancho
Redevelopment Project), MBIA-Insured,
5.125% due 9/1/30 3,435,390
SEE NOTES TO FINANCIAL STATEMENTS.
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6
SCHEDULE OF INVESTMENTS
November 30, 2003 (unaudited) (continued)
Face
Amount Rating(a) Security Value
---------------------------------------------------------------------------------
California -- 9.2% (continued)
$ 2,750,000 AAA Sacramento County, CA COP, (Public
Facilities Project), MBIA-Insured,
5.375% due 2/1/19 $ 2,959,935
5,000,000 AAA San Diego, CA Unified School District,
Series E, FSA-Insured,
5.000% due 7/1/28 5,119,500
2,500,000 AAA Santa Clara, CA Redevelopment Agency,
Tax Allocation, (Bayshore North
Project), MBIA-Insured,
5.000% due 6/1/23 2,582,050
------------------------------------------------------------------------------
68,290,679
------------------------------------------------------------------------------
Colorado -- 7.7%
4,000,000 AAA Arapahoe County, CO Capital
Improvement Trust Fund, E-470 Public
Highway Authority Revenue,
(Call 8/31/05 @ 103),
7.000% due 8/31/26 (e)(f) 4,510,720
1,000,000 A Aspen, CO Sales Tax Revenue,
5.400% due 11/1/19 1,070,300
4,000,000 AAA Colorado Educational & Cultural Facilities
Revenue Refunding, (University of
Denver Project), AMBAC-Insured,
5.375% due 3/1/23 4,234,320
4,000,000 A Colorado Health Facilities Authority
Revenue, Series B, Remarketed 7/8/98,
5.350% due 8/1/15 4,141,560
Denver, CO City & County Airport
Revenue, Series C:
13,630,000 A 6.125% due 11/15/25 (b)(d)(g) 14,033,039
10,945,000 A 6.125% due 11/15/25 (b)(d) 12,985,148
2,000,000 AAA Denver, CO City & County COP, Series B,
AMBAC-Insured, 5.500% due 12/1/25 2,339,260
El Paso County, CO COP, (Detention
Facility Project), Series B,
AMBAC-Insured:
1,700,000 AAA 5.000% due 12/1/23 1,747,107
1,500,000 AAA 5.000% due 12/1/27 1,527,180
Garfield County, CO School District No. 2,
GO, FSA-Insured:
2,300,000 Aaa* 5.000% due 12/1/23 2,363,733
1,000,000 Aaa* 5.000% due 12/1/25 1,021,060
SEE NOTES TO FINANCIAL STATEMENTS.
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7
SCHEDULE OF INVESTMENTS
November 30, 2003 (unaudited) (continued)
Face
Amount Rating(a) Security Value
----------------------------------------------------------------------------------
Colorado -- 7.7% (continued)
$ 7,320,000 AAA University of Colorado, COP, Master Lease
Purchase Agreement, Series A,
AMBAC-Insured, 5.000% due 6/1/28 $ 7,458,494
-------------------------------------------------------------------------------
57,431,921
-------------------------------------------------------------------------------
Connecticut -- 1.0%
Connecticut State, GO, Series B:
4,490,000 AA 5.500% due 6/15/21 4,918,391
1,600,000 AA 5.000% due 6/15/22 1,658,432
1,000,000 AAA Connecticut State Health & Education,
(Child Care Facilities Project), Series C,
AMBAC-Insured, 5.625% due 7/1/29 1,082,390
-------------------------------------------------------------------------------
7,659,213
-------------------------------------------------------------------------------
Delaware -- 1.4%
10,000,000 AAA Delaware State EDA Revenue, (Pollution
Control-Delmarva Project-B), AMBAC-
Insured, 5.200% due 2/1/19 (b) 10,592,200
-------------------------------------------------------------------------------
Florida -- 3.4%
5,000,000 AAA Florida State Board & Educational Capital
Outlay GO, FSA-Insured,
5.000% due 6/1/24 5,132,250
3,000,000 AA+ Florida State Board of Education GO,
Series A, 5.125% due 6/1/21 3,141,480
3,145,000 AAA Florida State Department of
Transportation GO, FGIC-Insured,
5.000% due 7/1/25 3,229,192
1,100,000 A-1+ Jacksonville, FL Electric Authority
Revenue, Series B,
1.100% due 10/1/30 (c) 1,100,000
6,500,000 BBB- Martin County, FL IDA, (Indiantown
Cogeneration Project), Series A,
7.875% due 12/15/25 (d) 6,724,575
1,290,000 AAA Miami Beach, FL Stormwater Revenue,
FGIC-Insured, 5.375% due 9/1/30 1,357,003
2,000,000 Aaa* Orange County, FL School Board COP,
Series A, MBIA-Insured,
5.250% due 8/1/23 2,091,240
2,500,000 Aaa* South Brevard, FL Recreational Facilities
Improvement, Special District,
AMBAC-Insured, 5.000% due 7/1/20 2,600,700
-------------------------------------------------------------------------------
25,376,440
-------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
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8
SCHEDULE OF INVESTMENTS
November 30, 2003 (unaudited) (continued)
Face
Amount Rating(a) Security Value
------------------------------------------------------------------------------
Georgia -- 1.8%
$ 6,000,000 AAA Augusta, GA Water & Sewer Revenue,
FSA-Insured, 5.250% due 10/1/26 $ 6,229,560
Private Colleges & Universities Authority
Revenue, (Mercer University Project):
2,180,000 Baa1* 5.750% due 10/1/21 2,319,498
Series A:
2,000,000 Baa1* 5.250% due 10/1/25 1,979,340
1,000,000 Baa1* 5.375% due 10/1/29 997,840
2,000,000 BBB- Savannah, GA EDA Revenue, (College
of Arts & Design Inc. Project),
6.900% due 10/1/29 2,173,220
------------------------------------------------------------------------------
13,699,458
------------------------------------------------------------------------------
Hawaii -- 0.6%
4,000,000 A Hawaii State Department of Budget &
Finance, Special Purpose Revenue,
Kaiser Permanente, Series A,
5.100% due 3/1/14 4,136,720
------------------------------------------------------------------------------
Idaho -- 0.2%
1,200,000 VMIG 1* Idaho Health Facilities Authority Revenue,
(St. Lukes Regional Medical Center
Project), 1.100% due 5/1/22 (c) 1,200,000
------------------------------------------------------------------------------
Illinois -- 3.9%
4,095,000 AAA Chicago, IL GO, Series D, FGIC-Insured,
5.500% due 1/1/35 4,338,161
7,400,000 AAA Chicago, IL Skyway Toll Bridge
Revenue, AMBAC-Insured,
5.500% due 1/1/31 (b) 7,906,604
Illinois Health Facilities
Authority Revenue:
2,400,000 A-1+ Bromenn Healthcare Inc. Project,
1.100% due 8/15/32 (c) 2,400,000
8,000,000 A OSF Healthcare System,
6.250% due 11/15/29 (b) 8,400,080
5,000,000 AAA Illinois State GO, First Series,
MBIA-Insured, (Call 6/1/10 @ 100),
5.625% due 6/1/25 (e) 5,807,700
------------------------------------------------------------------------------
28,852,545
------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
[GRAPHIC]
9
SCHEDULE OF INVESTMENTS
November 30, 2003 (unaudited) (continued)
Face
Amount Rating(a) Security Value
-------------------------------------------------------------------------------
Indiana -- 1.1%
$ 5,000,000 A1* Indiana Port Commission Revenue
Refunding, (Cargill Inc. Project),
6.875% due 5/1/12 $ 5,069,250
3,000,000 BBB+ Indiana State Development Financing
Authority Revenue, (USX Corp. Project),
5.250% due 12/1/22 3,293,790
-------------------------------------------------------------------------------
8,363,040
-------------------------------------------------------------------------------
Kansas -- 0.2%
1,250,000 AAA Scott County, KS GO, Unified School
District No. 446, FGIC-Insured,
5.000% due 9/1/22 1,287,388
-------------------------------------------------------------------------------
Louisiana -- 0.8%
5,500,000 A1* St. Martin Parish, LA Industrial Revenue,
(Cargill Inc. Project), 6.625% due 10/1/12 5,637,280
-------------------------------------------------------------------------------
Maine -- 0.3%
2,085,000 AA+ Maine State Housing Authority Mortgage
Revenue, Series C, 5.300% due 11/15/23 2,143,463
-------------------------------------------------------------------------------
Maryland -- 1.2%
Baltimore, MD Wastewater Project
Revenue, Series A, FGIC-Insured:
2,500,000 AAA 5.125% due 7/1/32 2,567,100
3,385,000 AAA 5.200% due 7/1/32 3,505,641
3,075,000 AA- Maryland State Health & Higher
Educational Facilities Authority
Revenue, (John Hopkins Hospital Issue),
5.000% due 11/15/26 3,101,322
-------------------------------------------------------------------------------
9,174,063
-------------------------------------------------------------------------------
Massachusetts -- 4.2%
2,000,000 Baa3* Boston, MA Industrial Development
Financing Authority, Sr. Revenue Bonds,
(Crosstown Center Project), Series 2002,
6.500% due 9/1/35 (d) 2,019,760
3,000,000 AAA Massachusetts Bay Transportation
Authority, Sales Tax Revenue, Series A,
5.500% due 7/1/30 3,190,110
1,125,000 Aaa* Massachusetts Development Finance
Agency, (Merrimack College Issue)
MBIA-Insured, 5.200% due 7/1/32 1,155,499
SEE NOTES TO FINANCIAL STATEMENTS.
[GRAPHIC]
10
SCHEDULE OF INVESTMENTS
November 30, 2003 (unaudited) (continued)
Face
Amount Rating(a) Security Value
---------------------------------------------------------------------------------
Massachusetts -- 4.2% (continued)
$ 1,850,000 AAA Massachusetts Health & Educational
Facilities Authority, (University of
Massachusetts Issue), Series C,
FGIC-Insured, 5.125% due 10/1/27 $ 1,898,082
17,000,000 Aa2* Massachusetts State GO, Consolidated
Loan of 2002, Series C,
5.250% due 11/1/30 (b) 17,711,280
5,000,000 AAA Massachusetts State Special Obligation
Revenue, Series A, FGIC-Insured,
5.000% due 6/1/21 5,207,100
---------------------------------------------------------------------------------
31,181,831
---------------------------------------------------------------------------------
Michigan -- 2.3%
5,000,000 AAA East Lansing, MI School District GO,
Q-SBLF-Insured, 5.625% due 5/1/30 5,332,950
Michigan State COP, AMBAC-Insured:
2,345,000 AAA 5.500% due 6/1/19 (f) 2,575,349
6,000,000 AAA 5.500% due 6/1/27 6,421,740
2,500,000 AA- Michigan State Hospital Finance Authority
Revenue Refunding, (Trinity Health
Credit), Series C, 5.375% due 12/1/23 2,578,200
12,000,000 NR Michigan State Strategic Fund Resources
Recovery, Limited Obligation Revenue,
(Central Wayne Energy Recovery L.P.
Project), Series A, 7.000% due 7/1/27 (d)(g) 600,000
---------------------------------------------------------------------------------
17,508,239
---------------------------------------------------------------------------------
Minnesota -- 2.5%
1,500,000 AAA Dakota County, MN Community
Development Agency, MFH Revenue,
FNMA-Collateralized,
5.625% due 2/1/26 1,555,275
2,500,000 A1* Duluth, MN IDA, Seaway Port Authority
Dock & Wharf Revenue, (Cargill Inc.
Project), 6.800% due 5/1/12 2,534,550
7,000,000 A3* Minneapolis, MN Healthcare System
Revenue, (Allina Health System), Series A,
6.000% due 11/15/23 7,386,190
SEE NOTES TO FINANCIAL STATEMENTS.
[GRAPHIC]
11
SCHEDULE OF INVESTMENTS
November 30, 2003 (unaudited) (continued)
Face
Amount Rating(a) Security Value
-----------------------------------------------------------------------------
Minnesota -- 2.5% (continued)
Minneapolis & St. Paul, MN Community
Airport Revenue, FGIC-Insured:
$ 2,000,000 AAA Series A, 5.125% due 1/1/25 $ 2,053,020
4,000,000 AAA Sub-Series C, 5.250% due 1/1/26 4,150,520
1,000,000 AA+ Minnesota State Housing Financing
Agency, Single-Family Mortgage,
Series I, 5.500% due 1/1/17 1,040,740
-----------------------------------------------------------------------------
18,720,295
-----------------------------------------------------------------------------
Mississippi -- 0.1%
700,000 VMIG 1* Jackson County, MS PCR, (Chevron USA
Inc. Project), 1.080% due 12/1/16 (c) 700,000
-----------------------------------------------------------------------------
Missouri -- 0.8%
1,500,000 AAA Greene County, MO Reorganized School
District No. R-8 GO, FSA-Insured,
5.100% due 3/1/22 1,570,785
2,000,000 AAA St. Louis, MO Airport Revenue, (Airport
Development Program), Series A,
MBIA-Insured, 5.125% due 7/1/22 2,083,340
2,515,000 A-1+ University of Missouri Revenue, Series A,
1.100% due 11/1/31 (c) 2,515,000
-----------------------------------------------------------------------------
6,169,125
-----------------------------------------------------------------------------
Montana -- 1.0%
10,080,000 NR Montana State Board Investment
Resource Recovery Revenue,
(Yellowstone Energy L.P. Project),
7.000% due 12/31/19 (d) 7,381,282
-----------------------------------------------------------------------------
New Jersey -- 7.0%
5,200,000 A+ Hudson County, NJ Improvement
Authority, 6.624% due 8/1/25 5,272,540
1,000,000 BBB Middlesex County, NJ Pollution Control
Authority Revenue Refunding,
Pollution Control Financing,
(Amerada Hess Corp. Project),
5.750% due 9/15/32 1,012,270
New Jersey EDA:
3,125,000 Baa1* PCR Refunding, (PSEG Power LLC
Project), 5.000% due 3/1/12 3,173,281
1,000,000 AA- Revenue, (School Facilities-
Construction), Series F,
5.000% due 6/15/28 1,017,440
SEE NOTES TO FINANCIAL STATEMENTS.
[GRAPHIC]
12
SCHEDULE OF INVESTMENTS
November 30, 2003 (unaudited) (continued)
Face
Amount Rating(a) Security Value
-----------------------------------------------------------------------------------
New Jersey -- 7.0% (continued)
New Jersey Health Care Facilities
Financing Authority Revenue:
$ 3,875,000 AAA Engelwood Hospital, FHA/MBIA-
Insured, 5.000% due 8/1/23 $ 3,981,679
8,000,000 A+ Robert Wood Johnson University
Hospital, 5.700% due 7/1/20 (b) 8,475,680
2,395,000 AAA New Jersey State Highway Authority,
Garden State Parkway General Revenue,
(Call 1/1/10 @ 101), 5.625% due 1/1/30 (e) 2,779,230
1,350,000 A South Jersey Port Corp., NJ Revenue
Refunding, 5.000% due 1/1/26 1,353,861
Tobacco Settlement Financing Corp.,
NJ Asset-Backed Bonds:
10,000,000 BBB 5.750% due 6/1/32 (b) 9,056,500
15,000,000 BBB 6.000% due 6/1/37 (b) 13,122,750
3,390,000 BBB 6.125% due 6/1/42 2,992,183
--------------------------------------------------------------------------------
52,237,414
--------------------------------------------------------------------------------
New Mexico -- 0.2%
1,770,000 AAA New Mexico Mortgage Financing
Authority, Single-Family Mortgages
Revenue, Series D-3,
5.625% due 9/1/28 (f) 1,823,613
--------------------------------------------------------------------------------
New York -- 4.1%
Nassau Health Care Corp., NY Health
Systems Revenue, FSA-Insured:
2,000,000 AAA 5.500% due 8/1/19 2,194,260
3,000,000 AAA 5.750% due 8/1/29 3,280,950
400,000 A-1+ New York City, Industrial Development
Agency Civic Facilities Revenue, (Lycee
Francais De New York Project),
1.080% due 6/1/32 (c) 400,000
6,000,000 AA New York City, NY Municipal Water
Financing Authority, Water & Sewer
System Revenue, Series D,
5.250% due 6/15/25 6,268,260
3,500,000 A-1+ New York City, NY Transitional Finance
Authority Revenue, (New York City
Recovery Project), Series 1, Sub-Series 1D,
1.080% due 11/1/22 (c) 3,500,000
SEE NOTES TO FINANCIAL STATEMENTS.
[GRAPHIC]
13
SCHEDULE OF INVESTMENTS
November 30, 2003 (unaudited) (continued)
Face
Amount Rating(a) Security Value
----------------------------------------------------------------------------------
New York -- 4.1% (continued)
New York State Dormitory Authority
Revenue:
$ 5,000,000 AAA Series B, FSA-Insured, (Call 5/15/10
@ 101), 5.500% due 5/15/30 (e) $ 5,823,650
1,000,000 AAA Willow Towers Inc. Project, GNMA-
Collateralized, 5.250% due 2/1/22 1,040,530
3,000,000 AAA New York State Thruway Authority
Highway & Bridge Revenue, Series B-1,
FGIC-Insured, 5.400% due 4/1/17 3,264,720
5,000,000 AAA Warren & Washington Counties, NY
Industrial Development Agency, Civic
Facilities Revenue, (Glen Falls Hospital
Project), Series A, FSA-Insured,
5.000% due 12/1/35 5,047,000
-----------------------------------------------------------------------------
30,819,370
-----------------------------------------------------------------------------
North Carolina -- 1.0%
Charlotte, NC COP, (Governmental
Facilities Projects), Series G:
1,750,000 AA+ 5.000% due 6/1/28 1,773,765
3,500,000 AA+ 5.000% due 6/1/33 3,550,190
North Carolina Capital Facilities Finance
Agency, Educational Facilities Revenue,
(Elizabeth City State University Housing
Foundation LLC Project), Series A,
AMBAC-Insured:
1,000,000 AAA 5.000% due 6/1/23 1,032,820
1,250,000 AAA 5.000% due 6/1/33 1,276,538
-----------------------------------------------------------------------------
7,633,313
-----------------------------------------------------------------------------
Ohio -- 9.0%
4,500,000 Aa2* Bexley, OH City School District GO,
5.125% due 12/1/27 4,594,050
2,000,000 AAA Canton, OH City School District GO,
Series A, MBIA-Insured,
5.500% due 12/1/20 2,199,380
1,300,000 AA+ Cincinnati, OH Water System Revenue,
5.125% due 12/1/21 1,368,939
3,000,000 AAA Cuyahoga County, OH Hospital Revenue
Refunding, (University Hospitals Health
System Inc.), AMBAC-Insured,
5.500% due 1/15/30 3,172,170
SEE NOTES TO FINANCIAL STATEMENTS.
[GRAPHIC]
14
SCHEDULE OF INVESTMENTS
November 30, 2003 (unaudited) (continued)
Face
Amount Rating(a) Security Value
-------------------------------------------------------------------------------
Ohio -- 9.0% (continued)
$25,000,000 Aaa* Hamilton County, OH Sales Tax Revenue,
AMBAC-Insured,
5.250% due 12/1/32 (b) $ 25,947,250
7,500,000 AA- Lorain County, OH Hospital Revenue,
Catholic Healthcare Partners,
5.375% due 10/1/30 (b) 7,594,575
5,990,000 AAA Lucas County, OH Hospital Revenue,
Promedic Healthcare Obligation Group,
AMBAC-Insured, 5.375% due 11/15/29 6,281,174
3,025,000 Aaa* Muskingum County, OH GO, Refunding,
County Facilities Improvement,
MBIA-Insured, 5.125% due 12/1/19 3,211,249
1,375,000 AAA Ohio State Higher Educational Facility
Commission Revenue, (University of
Dayton Project), AMBAC-Insured,
5.500% due 12/1/25 1,481,384
2,500,000 AAA Portage County, OH GO, MBIA-Insured,
5.250% due 12/1/17 2,717,050
1,500,000 A3* Steubenville, OH Hospital Revenue,
6.375% due 10/1/20 1,592,115
Summit County, OH GO, FGIC-Insured:
1,000,000 AAA 5.000% due 12/1/21 1,048,920
500,000 AAA 5.000% due 12/1/22 521,580
1,500,000 Aaa* Trumbull County, OH GO, MBIA-Insured,
5.200% due 12/1/20 1,609,995
2,000,000 AAA University of Cincinnati, OH General
Receipts Revenue, Series A,
FGIC-Insured, 5.250% due 6/1/24 2,113,600
1,500,000 AAA Warrensville Heights, OH GO, City School
District, School Improvements,
FGIC-Insured, 5.625% due 12/1/20 (f) 1,677,300
----------------------------------------------------------------------------
67,130,731
----------------------------------------------------------------------------
Oregon -- 2.3%
3,210,000 AA Clackamas County, OR Hospital Facilities
Authority Revenue, Legacy Health
System, 5.750% due 5/1/16 3,502,527
4,895,000 AA+ Oregon State Department of
Transportation, Highway User Tax
Revenue Series A, 5.125% due 11/15/23 5,129,275
SEE NOTES TO FINANCIAL STATEMENTS.
[GRAPHIC]
15
SCHEDULE OF INVESTMENTS
November 30, 2003 (unaudited) (continued)
Face
Amount Rating(a) Security Value
------------------------------------------------------------------------------
Oregon -- 2.3% (continued)
$ 8,410,000 AA Oregon State Veterans Welfare GO,
Series 82, 5.500% due 12/1/42 (b) $ 8,802,747
----------------------------------------------------------------------------
17,434,549
----------------------------------------------------------------------------
Pennsylvania -- 3.8%
3,000,000 BBB+ Pennsylvania State Higher Educational
Facilities Authority Revenue,
5.000% due 7/15/20 3,006,660
200,000 A-1+ Philadelphia Hospitals & Higher
Education Facilities Authority Revenue,
1.100% due 7/1/25 (c) 200,000
State Public School Building Authority,
School Revenue, (Philadelphia School
District Project), FSA-Insured:
18,745,000 AAA 5.250% due 6/1/26 (b) 19,673,815
5,540,000 AAA 5.250% due 6/1/27 5,805,809
----------------------------------------------------------------------------
28,686,284
----------------------------------------------------------------------------
South Carolina -- 4.4%
10,000,000 A3* Berkeley County, SC PCR,
4.875% due 10/1/14 (b) 10,466,500
15,000,000 AA- Greenville County, SC School District
Installment Purchase Revenue,
5.500% due 12/1/28 (b) 15,745,350
South Carolina Transportation
Infrastructure Bank Revenue, Series A:
2,505,000 Aaa* Pre-Refunded -- Escrowed with state
and local government securities to
10/1/11 Call @ 100,
AMBAC-Insured,
5.125% due 10/1/31 2,834,608
3,000,000 AAA Pre-Refunded -- Escrowed with state
and local government securities to
10/1/09 Call @ 101,
MBIA-Insured,
5.500% due 10/1/30 3,489,810
----------------------------------------------------------------------------
32,536,268
----------------------------------------------------------------------------
Tennessee -- 4.2%
3,000,000 VMIG 1* Blount County, TN Public Building
Authority Revenue, Local Governments
Public Improvement A-1-G,
1.090% due 6/1/17 (c) 3,000,000
1,150,000 NR Hardeman County, TN Correctional
Facilities Revenue, Correctional
Facilities Corp., 7.750% due 8/1/17 1,201,566
SEE NOTES TO FINANCIAL STATEMENTS.
[GRAPHIC]
16
SCHEDULE OF INVESTMENTS
November 30, 2003 (unaudited) (continued)
Face
Amount Rating(a) Security Value
--------------------------------------------------------------------------------
Tennessee -- 4.2% (continued)
$ 6,420,000 AAA Memphis-Shelby County, TN Sports
Authority Income Revenue, (Memphis
Arena Project), Series A, AMBAC-
Insured, 5.125% due 11/1/21 $ 6,759,811
Sevier County, TN Public Building
Authority, Local Government Public
Imports:
AMBAC-Insured:
900,000 VMIG 1* 1.090% due 6/1/24 (c) 900,000
3,300,000 VMIG 1* 1.090% due 6/1/25 (c) 3,300,000
400,000 VMIG 1* FSA-Insured 1.090% due 6/1/25 (c) 400,000
12,000,000 AA Tennessee Housing Development Agency
Mortgage Finance, Series A,
5.300% due 7/1/29 (b) 12,170,520
3,000,000 AA Tennessee State, GO Series A,
5.250% due 3/1/17 3,242,550
-----------------------------------------------------------------------------
30,974,447
-----------------------------------------------------------------------------
Texas -- 6.9%
1,595,000 AAA Burleson, TX ISD, GO, PSFG,
6.750% due 8/1/24 1,777,580
Fort Worth, TX International Airport
Facility Improvement Corp. Revenue,
(American Airlines Inc. Project):
12,000,000 CCC 6.375% due 5/1/35 (b)(d) 7,605,120
3,000,000 CCC Series B, 6.050% due 5/1/29 (d) 2,617,020
7,100,000 A-1+ Guadalupe-Blanco River Authority, TX
PCR, (Central Power & Light Co.
Project), 1.100% due 11/1/15 (c) 7,100,000
Harris County, TX Health Facilities
Development Corp., Hospital Revenue:
11,500,000 A-1+ Methodist Hospital,
1.100% due 12/1/32 (c) 11,500,000
1,000,000 AAA School Health Care Systems, Series B,
5.750% due 7/2/27 (g) 1,148,640
13,600,000 A-1+ St. Lukes Episcopal Hospital,
Series B, 1.100% due 2/15/31 (c) 13,600,000
100,000 A-1+ Texas Medical Center Project, MBIA-
Insured, 1.100% due 2/15/22 (c) 100,000
5,700,000 VMIG 1* YMCA-Greater Houston Area,
1.100% due 7/1/37 (c) 5,700,000
-----------------------------------------------------------------------------
51,148,360
-----------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
[GRAPHIC]
17
SCHEDULE OF INVESTMENTS
November 30, 2003 (unaudited) (continued)
Face
Amount Rating(a) Security Value
---------------------------------------------------------------------------
Virginia -- 3.6%
$ 3,000,000 A3* Chesapeake, VA IDA Revenue,
Remarketed 11/8/02, 5.250% due 2/1/08 $ 3,171,000
3,000,000 A3* Chesterfield County, VA IDA PCR,
(VA Electric & Power Co.), Remarketed
11/8/02, Series A, 5.875% due 6/1/17 3,207,420
10,000,000 AAA Virginia State HDA Commonwealth
Mortgage Revenue, Series H,
Sub-Series H-1, MBIA-Insured,
5.350% due 7/1/31 (b) 10,211,800
Virginia State HDA MFH Revenue:
1,235,000 AAA Series H, AMBAC-Insured,
6.300% due 11/1/15 (f) 1,288,550
Series K:
600,000 AA+ 5.800% due 11/1/10 634,782
925,000 AA+ 5.900% due 11/1/11 976,254
7,000,000 A3* York County, VA IDA PCR, (VA Electrical
& Power Co.), Remarketed 11/8/02,
5.000% due 7/1/09 (b) 7,463,890
---------------------------------------------------------------------------
26,953,696
---------------------------------------------------------------------------
Washington -- 1.8%
Chelan County, WA GO, Public Utilities,
District No. 1, Columbus River Rock:
22,685,000 AAA Series A, MBIA-Insured,
zero coupon due 6/1/22 (b) 8,621,434
4,750,000 AA Series B, Remarketed 7/1/92,
Mandatory put 7/1/19,
6.750% due 7/1/62 (d) 4,879,438
---------------------------------------------------------------------------
13,500,872
---------------------------------------------------------------------------
West Virginia -- 1.2%
West Virginia State Housing Development
Fund, Housing Finance Revenue:
3,845,000 AAA Series B, 5.300% due 5/1/24 3,956,274
5,000,000 AAA Series C, 5.350% due 11/1/27 5,150,700
---------------------------------------------------------------------------
9,106,974
---------------------------------------------------------------------------
Wisconsin -- 0.5%
Wisconsin Housing & Economic
Development Authority, Home Ownership
Revenue, Series A:
170,000 AA 6.450% due 3/1/17 173,934
1,290,000 AA 5.650% due 11/1/23 1,301,687
SEE NOTES TO FINANCIAL STATEMENTS.
[GRAPHIC]
18
SCHEDULE OF INVESTMENTS
November 30, 2003 (unaudited) (continued)
Face
Amount Rating(a) Security Value
-----------------------------------------------------------------------------------
Wisconsin -- 0.5% (continued)
Wisconsin State Health & Educational
Facilities Authority Revenue:
$ 1,100,000 A Kenosha Hospital & Medical Center
Project, 5.700% due 5/15/20 $ 1,121,934
1,250,000 AAA The Medical College of Wisconsin Inc.
Project, MBIA-Insured,
5.400% due 12/1/16 1,345,812
-----------------------------------------------------------------------------
3,943,367
-----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(Cost -- $726,681,479**) $ 746,084,436
-----------------------------------------------------------------------------
(a)All ratings are by Standard & Poor's Ratings Service, except for those which
are identified by an asterisk (*), are rated by Moody's Investor's Service.
(b)All or a portion of this security is segregated for open futures contracts
commitments.
(c)Variable rate obligation payable at par on demand at any time on no more
than seven days notice.
(d)Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(e)Pre-Refunded bonds are escrowed with U.S. government securities and are
considered by the Manager to be triple-A rated even if the issuer had not
applied for new ratings.
(f)All or a portion of this security is held as collateral for open futures
contracts commitments.
(g)Bonds are escrowed to maturity with U.S. government securities and are
considered by the Manager to be triple-A rated even if the issuer had not
applied for new ratings.
(h)Security is currently in default.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 21 and 22 for definitions of ratings and certain abbreviations.
SEE NOTES TO FINANCIAL STATEMENTS.
[GRAPHIC]
19
SUMMARY OF INVESTMENTS BY INDUSTRY*
November 30, 2003 (unaudited)
Hospitals 15.3%
Education 13.9
General Obligation 13.2
Transportation 12.2
Utilities 6.9
Water and Sewer 6.6
Tobacco 4.7
Single-Family Housing 4.0
Multi-Family Housing 2.7
Other 20.5
-----
100.0%
=====
*As a percentage of total investments. Please note that Fund holdings are as of
November 30, 2003 and are subject to change.
[GRAPHIC]
20
BOND RATINGS
(unaudited)
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("Standard & Poor's") -- Ratings from "AA" to
"CCC" 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 differ from the highest rated issue only in a
small degree.
A --Bonds rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions
than debt in higher rated categories.
BBB --Bonds rated "BBB" are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than in higher rated categories.
BB, B, --Bonds rated "BB", "B", "CCC" and "CC" are regarded, on balance, as
CCC predominantly speculative with respect to capacity to pay interest
and CC and repay principal in accordance with the terms of the obligation.
"BB" represents a lower degree of speculation than "B", and "CC"
the highest degree of speculation. While such bonds will likely
have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to
adverse conditions.
Moody's Investors Service ("Moody's") -- Numerical modifiers 1, 2 and 3 may
be applied to eachgeneric rating from "Aa" to "Ba," where 1 is the highest
and 3 the lowest ranking within itsgeneric category.
Aaa --Bonds rated "Aaa" are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by
an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa --Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large in "Aaa"
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in "Aaa" securities.
A --Bonds rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to
impairment some time in the future.
Baa --Bonds rated "Baa" are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba --Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
NR --Indicates that the bond is not rated by Standard & Poor's or
Moody's.
[GRAPHIC]
21
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.
ABBREVIATIONS*
(unaudited)
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- American Municipal Bond Assurance 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
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FLAIRS -- Floating Adjustable Interest Rate Securities
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Financial Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage Association
GO -- General Obligation
HDA -- Housing Development Authority
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
INFLOS -- Inverse Floaters
ISD -- Independent School District
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MFH -- Multi-Family Housing
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCR -- Pollution Control Revenue
PFA -- Public Finance Authority
PSFG -- Permanent School Fund Guaranty
Q-SBLF -- Qualified School Bond Loan Fund
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt Securities
SYCC -- Structured Yield Curve Certificate
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation Notes
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
-----
*Abbreviations may or may not appear on the schedule of investments.
[GRAPHIC]
22
STATEMENT OF ASSETS AND LIABILITIES
(unaudited)
November 30, 2003
----------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost -- $726,681,479) $746,084,436
Interest receivable 11,309,722
Receivable from broker -- variation margin 2,296,875
Receivable for securities sold 492,821
---------------------------------------------------------------------------------
Total Assets 760,183,854
---------------------------------------------------------------------------------
LIABILITIES:
Bank overdraft 1,703,178
Dividends payable to Common Stock Shareholders 722,219
Investment advisory fee payable 357,252
Administration fee payable 125,079
Dividends payable to Auction Rate Cumulative
Preferred Stockholders 29,364
Accrued expenses 145,290
---------------------------------------------------------------------------------
Total Liabilities 3,082,382
---------------------------------------------------------------------------------
Series M, T, W, Th and F Auction Rate Cumulative Preferred Stock
(2,000 shares authorized and issued at $25,000 per share for each
Series) (Note 6) 250,000,000
---------------------------------------------------------------------------------
Total Net Assets $507,101,472
---------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $ 41,856
Capital paid in excess of par value 509,076,800
Undistributed net investment income 1,118,543
Accumulated net realized loss from investment transactions
and futures contracts (13,382,434)
Net unrealized appreciation of investments and futures contracts 10,246,707
---------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $12.12 a share on 41,855,576 common shares of
$0.001 par value outstanding; 500,000,000 common shares
authorized) $507,101,472
---------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
[GRAPHIC]
23
STATEMENT OF OPERATIONS
(unaudited)
Six Months Ended
November 30, 2003
--------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 19,138,573
--------------------------------------------------------------------------
EXPENSES:
Investment advisory fee (Note 3) 2,116,104
Administration fee (Note 3) 747,121
Auction participation fees (Note 6) 313,580
Shareholder communications 95,848
Shareholder servicing fees 68,823
Audit and legal 42,406
Custody 33,701
Directors' fees 29,437
Stock exchange listing fees 17,475
Rating agency fees 8,885
Other 35,937
--------------------------------------------------------------------------
Total Expenses 3,509,317
--------------------------------------------------------------------------
Net Investment Income 15,629,256
--------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 4 AND 5):
Realized Gain From:
Investments transactions 3,505,396
Futures contracts 19,827,857
--------------------------------------------------------------------------
Net Realized Gain 23,333,253
--------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments
and Future Contracts:
Beginning of period 21,229,478
End of period 10,246,707
--------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (10,982,771)
--------------------------------------------------------------------------
Net Gain on Investments and Futures Contracts 12,350,482
--------------------------------------------------------------------------
Distributions Paid to Auction Rate Cumulative Preferred
Stockholders From Net Investment Income (1,089,406)
--------------------------------------------------------------------------
Increase in Net Assets From Operations $ 26,890,332
--------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
[GRAPHIC]
24
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year Ended
November 30, 2003 May 31,
(unaudited) 2003
-------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 15,629,256 $ 31,961,114
Net realized gain (loss) 23,333,253 (6,095,076)
Increase (decrease) in net unrealized
appreciation (10,982,771) 10,448,849
Dividends paid to Auction Rate
Cumulative Preferred Stockholders
from net investment income (1,089,406) (3,092,691)
---------------------------------------------------------------------------
Increase in Net Assets From Operations 26,890,332 33,222,196
---------------------------------------------------------------------------
DISTRIBUTIONS PAID TO COMMON STOCK
SHAREHOLDERS FROM (NOTE 2):
Net investment income (14,565,823) (27,708,391)
---------------------------------------------------------------------------
Decrease in Net Assets From Distributions
Paid to Common Stock Shareholders (14,565,823) (27,708,391)
---------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 6):
Underwriting commissions and offering
expenses for the issuance of Auction
Rate Cumulative Preferred Stock -- (71,209)
---------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions -- (71,209)
---------------------------------------------------------------------------
Increase in Net Assets 12,324,509 5,442,596
NET ASSETS:
Beginning of period 494,776,963 489,334,367
---------------------------------------------------------------------------
End of period* $507,101,472 $494,776,963
---------------------------------------------------------------------------
* Includes undistributed net investment
income of: $1,118,543 $1,144,516
---------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
[GRAPHIC]
25
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 asked 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 for
which market quotations are not available will be valued in good faith at fair
value by or under the direction of the Board of Directors; (d) securities
maturing within 60 days or less are valued at cost plus accreted discount, or
minus amortized premium, which approximates value; (e) gains or losses on sale
of securities are calculated by using the specific identification method; (f)
interest income, adjusted for amortization of premium and accretion of
discount, is recorded on an accrual basis; (g) dividends and distributions to
shareholders are recorded monthly by the Fund on the ex-dividend date for the
shareholders of Common Stock. The holders of the Auction Rate Cumulative
Preferred Stock shall be entitled to receive dividends in accordance with an
auction that will normally be held weekly and out of funds legally available to
shareholders; (h) the net asset value of the Fund's Common Stock is determined
no less frequently than the close of business on the Fund's last business day
of each week (generally Friday). It is determined by dividing the value of the
net assets available to Common Stock by the total number of shares of Common
Stock outstanding. For the purpose of determining the net asset value per share
of the Common Stock, the value of the Fund's net assets shall be deemed to
equal the value of the Fund's assets less (1) the Fund's liabilities, (2) the
aggregate liquidation value (i.e., $25,000 per outstanding share) of the
Auction Rate Cumulative Preferred Stock and (3) accumulated and unpaid
dividends on the outstanding Auction Rate Cumulative Preferred Stock issue; (i)
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; (j) the character of income
and gains to be distributed is determined in accordance with income tax
regulations which may differ from accounting principles generally accepted in
the United States of America; and (k) estimates and assumptions are required to
be made regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared.
[GRAPHIC]
26
NOTES TO FINANCIAL STATEMENTS
(unaudited) (continued)
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.
3. INVESTMENT ADVISORY AGREEMENT, ADMINISTRATION AGREEMENT AND OTHER
TRANSACTIONS
Smith Barney Fund Management LLC ("SBFM"), an indirect wholly-owned
subsidiary of Citigroup Inc. ("Citigroup"), acts as the investment adviser and
administrator to the Fund. For investment advisory and administrative services,
the Fund pays SBFM fees calculated at the annual rate of 0.70% and 0.20% of the
average daily total net assets of the Fund, respectively, for an aggregate
investment advisory and administrative fee of 0.90%. Notwithstanding the
foregoing, by agreement between SBFM and the Fund, the Fund pays SBFM an
aggregate investment advisory and administrative fee at an annual rate of 0.65%
on those assets of the Fund equal to the product of the number of preferred
shares outstanding multiplied by the liquidation value of such shares. The
investment advisory fee and the administrative fee are each calculated daily
and paid monthly.
Effective September 1, 2003, the aggregate investment advisory and
administrative fee rate of 0.90% described above was reduced to an aggregate
fee of 0.75%, composed of investment advisory and administrative fees
calculated at the annual rate of 0.55% and 0.20% of the average daily total net
assets of the Fund, respectively. The investment advisory and administrative
fees are otherwise calculated as described in the above paragraph.
All officers and one Director of the Fund are employees of Citigroup or its
affiliates.
[GRAPHIC]
27
NOTES TO FINANCIAL STATEMENTS
(unaudited) (continued)
4. INVESTMENTS
During the six months ended November 30, 2003, the aggregate cost of
purchases and proceeds from sales of investments (including maturities of
long-term investments, but excluding short-term investments) were as follows:
-----------------------------------------------------------------------------
Purchases $171,698,526
-----------------------------------------------------------------------------
Sales 197,486,189
-----------------------------------------------------------------------------
At November 30, 2003, aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
------------------------------------------------------------------------------
Gross unrealized appreciation $ 40,914,047
Gross unrealized depreciation (21,511,090)
------------------------------------------------------------------------------
Net unrealized appreciation $ 19,402,957
------------------------------------------------------------------------------
5. FUTURES CONTRACTS
Securities or cash equal to the initial margin amount are either deposited
with the broker or segregated by the custodian upon entering into the futures
contracts. Additional securities are also segregated up to the current market
value of the futures contracts. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
received or made and recognized as assets due from or liabilities due to
broker, depending upon whether unrealized gains or losses are incurred. When
the contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Fund's basis in the contract. The Fund enters into such contracts typically
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.
At November 30, 2003, the Fund had the following open futures contracts:
Number of Basis Market Unrealized
Contracts Expiration Value Value Loss
------------------------------------------------------------------------------
To Sell:
U.S. Treasury
Bonds 2,450 12/03 $258,582,813 $267,739,063 $(9,156,250)
------------------------------------------------------------------------------
[GRAPHIC]
28
NOTES TO FINANCIAL STATEMENTS
(unaudited) (continued)
6. AUCTION RATE CUMULATIVE PREFERRED STOCK
As of November 30, 2003, the Fund had 2,000 outstanding shares of Series M,
Series T, Series W, Series Th and Series F, respectively, of Auction Rate
Cumulative Preferred Stock ("ARCPS"). Additional offering costs of $71,209 were
incurred and recorded as a reduction of the capital paid in excess of par value
of common stock for the year ended May 31, 2003. The ARCPS' dividends are
cumulative at a rate determined at an auction and the dividend period is
typically 7 days. The dividend rates ranged from 0.60% to 1.15% during the six
months ended November 30, 2003. At November 30, 2003, the current dividend
rates were as follows:
Series M Series T Series W Series Th Series F
----------------------------------------------------------------------
Current Dividend Rates 0.98% 1.00% 1.02% 1.03% 1.03%
----------------------------------------------------------------------
The ARCPS are redeemable under certain conditions by the Fund, or subject to
mandatory redemption (if the Fund is in default of certain coverage
requirements) at a redemption price equal to $25,000 per share plus accumulated
and unpaid dividends. ARCPS have a liquidation preference of $25,000 per share
plus accumulated and unpaid dividends.
The Fund is required to maintain certain asset coverages with respect to the
ARCPS. If the Fund fails to maintain these coverages and does not cure any such
failure within the required time period, the Fund is required to redeem a
requisite number of the ARCPS in order to meet the applicable requirement.
Additionally, failure to meet the foregoing asset requirements would restrict
the Fund's ability to pay dividends to common stock shareholders.
Citigroup Global Markets Inc. ("CGM"), another indirect wholly-owned
subsidiary of Citigroup, currently acts as a broker/dealer in connection with
the auction of ARCPS. After each auction, the auction agent will pay to each
participating broker/dealer, from monies the Fund provides, a participation fee
at the annual rate of 0.25% of the purchase price of the ARCPS that the
broker/dealer places at the auction. For the six months ended November 30,
2003, CGM earned $313,580 as a participating broker/dealer.
[GRAPHIC]
29
NOTES TO FINANCIAL STATEMENTS
(unaudited) (continued)
7. ADDITIONAL INFORMATION
The Fund has received the following information from Citigroup Asset
Management ("CAM"), the Citigroup business unit which includes the Fund's
Investment Manager and other investment advisory companies, all of which are
indirect, wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry,
through an affiliate, into the transfer agent business in the period 1997-1999.
As CAM currently understands the facts, at the time CAM decided to enter the
transfer agent business, CAM sub-contracted for a period of five years certain
of the transfer agency services to a third party and also concluded a revenue
guarantee agreement with this sub-contractor providing that the sub-contractor
would guarantee certain benefits to CAM or its affiliates (the "Revenue
Guarantee Agreement"). In connection with the subsequent purchase of the
sub-contractor's business by an affiliate of the current sub-transfer agent
(PFPC Inc.) used by CAM on many of the funds it manages, this Revenue Guarantee
Agreement was amended eliminating those benefits in exchange for arrangements
that included a one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the
Revenue Guarantee Agreement with the sub-contractor at the time the Boards
considered and approved the transfer agent arrangements. Nor were the Boards
informed of the subsequent amendment to the Revenue Guarantee Agreement when
that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable
funds $16 million (plus interest) that CAM and its affiliates received from the
Revenue Guarantee Agreement and its amendment. CAM also plans an independent
review to verify that the transfer agency fees charged by CAM were fairly
priced as compared to competitive alternatives. CAM is instituting new
procedures and making changes designed to ensure no similar arrangements are
entered into in the future.
CAM has briefed the SEC, the New York State Attorney General and other
regulators with respect to this matter, as well as the U.S. Attorney who is
investigating the matter. CAM is cooperating with governmental authorities on
this matter, the ultimate outcome of which is not yet determinable.
The Fund's transfer agent is PFPC Inc., which is not affiliated with CAM.
[GRAPHIC]
30
FINANCIAL HIGHLIGHTS
For a share of capital stock outstanding throughout each year ended May 31,
unless otherwise noted:
2003/(1)/ 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $11.82 $11.69 $11.74 $10.93 $11.97 $12.37
--------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income/(2)(3)/ 0.37 0.76 0.60 0.60 0.58 0.58
Net realized and unrealized
gain (loss)/(3)/ 0.31 0.10 0.02 0.79 (1.14) (0.32)
Dividends paid to Auction
Rate Cumulative Preferred
Stockholders from net
investment income (0.03) (0.07) (0.00)* -- -- --
--------------------------------------------------------------------------------------
Total Income (Loss)
From Operations 0.65 0.79 0.62 1.39 (0.56) 0.26
--------------------------------------------------------------------------------------
Gain From Repurchase of
Treasury Stock -- -- -- 0.02 0.12 --
--------------------------------------------------------------------------------------
Underwriting Commissions and
Offering Expenses for the
Issuance of Auction
Rate Cumulative Preferred
Stock -- (0.00)* (0.07) -- -- --
--------------------------------------------------------------------------------------
Distributions Paid to Common
Stock Shareholders From:
Net investment income (0.35) (0.66) (0.60) (0.60) (0.60) (0.54)
Net realized gains -- -- -- -- -- (0.12)
--------------------------------------------------------------------------------------
Total Distributions (0.35) (0.66) (0.60) (0.60) (0.60) (0.66)
--------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.12 $11.82 $11.69 $11.74 $10.93 $11.97
--------------------------------------------------------------------------------------
Total Return,
Based on Market Value/(4)/ 6.32%++ 10.60% 4.79% 20.69% (3.88)% 0.11%
--------------------------------------------------------------------------------------
Total Return,
Based on Net Asset Value/(4)/ 5.84%++ 7.55% 5.33% 13.90% (2.82)% 2.66%
--------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $507 $495 $489 $374 $352 $414
--------------------------------------------------------------------------------------
Ratios to Average Net Assets
Based on Common Shares
Outstanding/(5)/:
Expenses/(2)/ 1.41%+ 1.51% 0.52% 0.68% 0.89% 0.94%
Net investment income/(3)/ 6.29+ 6.40 4.84 5.15 5.19 4.72
--------------------------------------------------------------------------------------
Portfolio Turnover Rate 25% 28% 39% 58% 35% 23%
--------------------------------------------------------------------------------------
Market Price, End of Period $11.32 $10.99 $10.57 $10.67 $9.375 $10.375
----------------------------------------------------------------------------- -------
[GRAPHIC]
31
FINANCIAL HIGHLIGHTS
(continued)
2003/(1)/ 2003 2002 2001 2000 1999
--------------------------------------------------------------------------------------------------
Auction Rate Cumulative Preferred Stock/(6)/:
Total Amount Outstanding (000s) $250,000 $250,000 $250,000 -- -- --
Asset Coverage Per Share 75,710 74,478 74,000 -- -- --
Involuntary Liquidating Preference Per Share/(7)/ 25,000 25,000 25,000 -- -- --
Average Market Value Per Share/(7)/ 25,000 25,000 25,000 -- -- --
--------------------------------------------------------------------------------------------------
(1) For the six months ended November 30, 2003 (unaudited).
(2) The investment adviser and/or administrator waived a portion of its fees
for the years ended May 31, 2002, 2001, 2000 and 1999. If such fees had not
been waived, the per share decreases to net investment income and actual
expense ratios would have been as follows:
Per share decreases to Expense ratios
net investment income without fee waivers
---------------------- -------------------
2002 $0.05 1.01%
2001 0.04 1.01
2000 0.02 1.04
1999 0.01 1.02
(3) Effective June 1, 2001, the Fund adopted a change in the accounting method
that requires the Fund to amortize premiums and accrete all discounts.
Without the adoption of this change, for the year ended May 31, 2002, the
ratio of net investment income to average net assets would have been 4.81%.
Per share information, ratios and supplemental data for the periods prior
to June 1, 2001 have not been restated to reflect this change in
presentation. In addition, the impact of this change to net investment
income and net realized and unrealized gain was less than $0.01 per share.
(4) The total return calculation assumes that dividends are reinvested in
accordance with the Fund's dividend reinvestment plan. Performance figures
may reflect fee waivers and/or expense reimbursements. Past performance is
no guarantee of future results. In the absence of fee waivers and/or
expense reimbursements, the total return would be reduced.
(5) Calculated on basis of average net assets of common shareholders. Ratios do
not reflect the effect of dividend payments to preferred shareholders.
(6) On May 22, 2002, the Fund issued 2,000 shares of Auction Rate Cumulative
Preferred Stock at $25,000 a share, for Series M, Series T, Series W,
Series Th and Series F, respectively.
(7) Excludes accumulated undeclared dividends.
* Amount represents less than $0.01 per share.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
[GRAPHIC]
32
FINANCIAL DATA
(unaudited)
For a share of common stock outstanding throughout each period:
NYSE Net Dividend
Record Payable Closing Asset Dividend Reinvestment
Date Date Price+ Value+ Paid Price
------------------------------------------------------
6/26/01 6/29/01 $10.40 $11.80 $0.050 $10.61
7/24/01 7/27/01 10.59 11.88 0.050 10.71
8/28/01 8/31/01 10.83 12.09 0.050 11.00
9/25/01 9/28/01 10.33 11.87 0.050 10.65
10/23/01 10/26/01 10.64 11.93 0.050 10.82
11/27/01 11/30/01 10.58 11.83 0.050 10.51
12/24/01 12/28/01 10.31 11.63 0.050 10.43
1/22/02 1/25/02 10.60 11.81 0.050 10.74
2/19/02 2/22/02 10.60 11.77 0.050 10.72
3/25/02 3/28/02 10.25 11.55 0.050 10.43
4/23/02 4/26/02 10.30 11.66 0.050 10.51
5/28/02 5/31/02 10.50 11.65 0.050 10.62
6/25/02 6/28/02 10.49 11.76 0.050 10.67
7/23/02 7/26/02 10.74 12.02 0.050 10.80
8/27/02 8/30/02 10.89 12.02 0.055 11.09
9/24/02 9/27/02 11.10 12.35 0.055 11.15
10/22/02 10/25/02 10.48 11.79 0.055 10.55
11/25/02 11/29/02 10.35 11.93 0.055 10.49
12/23/02 12/27/03 10.39 11.97 0.056 10.51
1/28/03 1/31/03 10.40 11.84 0.056 10.52
2/25/03 2/28/03 10.47 11.75 0.056 10.56
3/25/03 3/28/03 10.30 11.67 0.058 10.48
4/22/03 4/25/03 10.49 11.80 0.058 10.59
5/27/03 5/30/03 10.93 11.86 0.058 11.00
6/24/03 6/27/03 10.93 11.77 0.058 11.08
7/22/03 7/25/03 10.62 11.82 0.058 10.79
8/26/03 8/29/03 10.56 11.68 0.058 10.63
9/23/03 9/26/03 10.61 11.83 0.058 10.76
10/28/03 10/31/03 11.11 11.95 0.058 11.17
11/24/03 11/28/03 11.03 12.05 0.058 11.24
------------------------------------------------------
+ As of record date.
[GRAPHIC]
33
ADDITIONAL SHAREHOLDER INFORMATION
(unaudited)
Result of Annual Meeting of Shareholders
The Annual Meeting of Shareholders of Managed Municipals Portfolio Inc. was
held on September 18, 2003, for the purpose of considering and voting upon the
election of Directors. The following table provides information concerning the
matter voted upon at the Meeting:
1. ELECTION OF DIRECTORS
Common Common Preferred Preferred
Shares Voted Shares Shares Voted Shares
Nominees For Election Withheld For Election Withheld
---------------------------------------------------------------
Allan J. Bloostein 40,081,829 698,772 9,888 0
R. Jay Gerken 40,142,258 638,343 9,888 0
Paolo M. Cucchi N/A N/A 9,888 0
----------------------------------------------------- ---------
[GRAPHIC]
34
DIVIDEND REINVESTMENT PLAN
(unaudited)
Under the Fund's Dividend Reinvestment Plan ("Plan"), a shareholder whose
shares of common stock are registered in his own name will have all
distributions from the Fund reinvested automatically by PFPC Inc. ("PFPC"), as
purchasing agent under the Plan, unless the shareholder elects to receive cash.
Distributions with respect to shares registered in the name of a broker-dealer
or other nominee (that is, in street name) will be reinvested by the broker or
nominee in additional shares under the Plan, unless the service is not provided
by the broker or nominee or the shareholder elects to receive distributions in
cash. Investors who own common stock registered in street name should consult
their broker-dealers for details regarding reinvestment. All distributions to
shareholders who do not participate in the Plan will be paid by check mailed
directly to the record holder by or under the direction of PFPC as dividend
paying agent.
The number of shares of common stock distributed to participants in the Plan
in lieu of a cash dividend is determined in the following manner. When the
market price of the common stock is equal to or exceeds 98% of 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 98% of the net asset
value of the common stock at the time of valuation (which is the close of
business on the determination date), PFPC will buy common stock in the open
market, on the NYSE or elsewhere, for the participants' accounts. If following
the commencement of the purchases and before PFPC has completed its purchases,
the market price exceeds the net asset value of the common stock as of the
valuation time, PFPC will attempt to terminate purchases in the open market and
cause the Fund to issue the remaining portion of the dividend or distribution
in shares at a price equal to the greater of (a) net asset value as of the
valuation time or (b) 95% of the then current market price. In this case, the
number of shares received by a Plan participant will be based on the weighted
average of prices paid for shares purchased in the open market and the price at
which the Fund issues the remaining shares. To the extent PFPC is unable to
stop open market purchases and cause the Fund to issue the remaining shares,
the average per share purchase price paid by PFPC may exceed the net asset
value of the common stock as of the valuation time, resulting in the
acquisition of fewer shares than if the dividend or capital gains distribution
had been paid in common stock issued by the Fund at such net asset value. PFPC
will begin to purchase common stock on the open market as
[GRAPHIC]
35
DIVIDEND REINVESTMENT PLAN
(unaudited) (continued)
soon as practicable after the determination date for the dividend or capital
gains distribution, but in no event shall such purchases continue later than 30
days after the payment date for such dividend or distribution, or the record
date for a succeeding dividend or distribution, except when necessary to comply
with applicable provisions of the federal securities laws.
PFPC maintains all shareholder accounts in the Plan and furnishes written
confirmations of all transactions in each account, including information needed
by a shareholder for personal and tax records. The automatic reinvestment of
dividends and capital gains distributions will not relieve Plan participants of
any income tax that may be payable on the dividends or capital gains
distributions. Common stock in the account of each Plan participant will be
held by PFPC in uncertificated form in the name of the Plan participant.
Plan participants are subject to no charge for reinvesting dividends and
capital gains distributions under the Plan. PFPC's fees for handling the
reinvestment of dividends and capital gains distributions will be paid by the
Fund. No brokerage charges apply with respect to shares of common stock issued
directly by the Fund under the Plan. Each Plan participant will, however, bear
a proportionate share of any brokerage commissions actually incurred with
respect to any open market purchases made under the Plan.
Experience under the Plan may indicate that changes to it are desirable. The
Fund reserves the right to amend or terminate the Plan as applied to any
dividend or capital gains distribution paid subsequent to written notice of the
change sent to participants at least 30 days before the record date for the
dividend or capital gains distribution. The Plan also may be amended or
terminated by PFPC, with the Fund's prior written consent, on at least 30 days'
written notice to Plan participants. All correspondence concerning the plan
should be directed by mail to PFPC Inc., P.O. Box 8030, Boston, Massachusetts
02266-8030 or by telephone at 1 (800) 331-1710.
SHARE REPURCHASE NOTICE
(unaudited)
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase
shares of its common stock in the open market.
[GRAPHIC]
36
Managed Municipals
Portfolio Inc.
DIRECTORS
Allan J. Bloostein
Dwight B. Crane
Paolo M. Cucchi
Robert A. Frankel
R. Jay Gerken, CFA
Chairman
Paul Hardin
William R. Hutchinson
George M. Pavia
OFFICERS
R. Jay Gerken, CFA
President and Chief Executive Officer
Andrew B. Shoup
Senior Vice President and Chief Administrative Officer
Richard L. Peteka
Chief Financial Officer and Treasurer
Joseph P. Deane
Vice President and Investment Officer
David T. Fare
Investment Officer
Kaprel Ozsolak
Controller
Robert I. Frenkel
Secretary and
Chief Legal Officer
INVESTMENT ADVISER AND ADMINISTRATOR
Smith Barney Fund Management LLC
399 Park Avenue
New York, New York 10022
TRANSFER AGENT
PFPC Inc.
P.O. Box 8030
Boston, Massachusetts 02266-8030
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
[GRAPHIC]
THIS REPORT IS ONLY INTENDED FOR SHAREHOLDERS OF THE
MANAGED MUNICIPALS PORTFOLIO INC.
IT IS NOT A PROSPECTUS,
CIRCULAR OR REPRESENTATION INTENDED FOR USE IN THE
PURCHASE OR SALE OF SHARES OF THE FUND OR OF ANY
SECURITIES MENTIONED IN THE REPORT.
A DESCRIPTION OF THE POLICIES AND PROCEDURES THAT THE FUND
USES TO DETERMINE HOW TO VOTE PROXIES RELATING TO
PORTFOLIO SECURITIES IS AVAILABLE WITHOUT CHARGE,
UPON REQUEST, BY TELEPHONING THE FUND (TOLL-FREE)
AT 1-800-451-2010 AND BY VISITING THE SEC'S WEB SITE
AT WWW.SEC.GOV.
FD0837 1/04
03-5879
ITEM 2. CODE OF ETHICS.
Not Applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Board of Directors of the Fund has delegated the authority to
develop policies and procedures relating to proxy voting to the
Manager. The Manager is part of Citigroup Asset Management ("CAM"), a
group of investment adviser affiliates of Citigroup, Inc.
("Citigroup"). Along with the other investment advisers that comprise
CAM, the Manager has adopted a set of proxy voting policies and
procedures (the "Policies") to ensure that the Manager votes proxies
relating to equity securities in the best interest of clients.
In voting proxies, the Manager is guided by general fiduciary
principles and seeks to act prudently and solely in the best interest
of clients. The Manager attempts to consider all factors that could
affect the value of the investment and will vote proxies in the manner
that it believes will be consistent with efforts to maximize
shareholder values. The Manager may utilize an external service
provider to provide it with information and/or a recommendation with
regard to proxy votes. However, such recommendations do not relieve the
Manager of its responsibility for the proxy vote.
In the case of a proxy issue for which there is a stated position in
the Policies, CAM generally votes in accordance with such stated
position. In the case of a proxy issue for which there is a list of
factors set forth in the Policies that CAM considers in voting on such
issue, CAM votes on a case-by-case basis in accordance with the general
principles set forth above and considering such enumerated factors. In
the case of a proxy issue for which there is no stated position or list
of factors that CAM considers in voting on such issue, CAM votes on a
case-by-case basis in accordance with the general principles set forth
above. Issues for which there is a stated position set forth in the
Policies or for which there is a list of factors set forth in the
Policies that CAM considers in voting on such issues fall into a
variety of categories, including election of directors, ratification of
auditors, proxy and tender offer defenses, capital structure issues,
executive and director
compensation, mergers and corporate restructurings, and social and
environmental issues. The stated position on an issue set forth in the
Policies can always be superseded, subject to the duty to act solely in
the best interest of the beneficial owners of accounts, by the
investment management professionals responsible for the account whose
shares are being voted. Issues applicable to a particular industry may
cause CAM to abandon a policy that would have otherwise applied to
issuers generally. As a result of the independent investment advisory
services provided by distinct CAM business units, there may be
occasions when different business units or different portfolio managers
within the same business unit vote differently on the same issue.
In furtherance of the Manager's goal to vote proxies in the best
interest of clients, the Manager follows procedures designed to
identify and address material conflicts that may arise between the
Manager's interests and those of its clients before voting proxies on
behalf of such clients. To seek to identify conflicts of interest, CAM
periodically notifies CAM employees (including employees of the
Manager) in writing that they are under an obligation (i) to be aware
of the potential for conflicts of interest with respect to voting
proxies on behalf of client accounts both as a result of their personal
relationships and due to special circumstances that may arise during
the conduct of CAM's and the Manager's business, and (ii) to bring
conflicts of interest of which they become aware to the attention of
compliance personnel. The Manager also maintains and considers a list
of significant relationships that could present a conflict of interest
for the Manager in voting proxies. The Manager is also sensitive to the
fact that a significant, publicized relationship between an issuer and
a non-CAM affiliate might appear to the public to influence the manner
in which the Manager decides to vote a proxy with respect to such
issuer. Absent special circumstances or a significant, publicized
non-CAM affiliate relationship that CAM or the Manager for prudential
reasons treats as a potential conflict of interest because such
relationship might appear to the public to influence the manner in
which the Manager decides to vote a proxy, the Manager generally takes
the position that non-CAM relationships between Citigroup and an issuer
(e.g. investment banking or banking) do not present a conflict of
interest for the Manager in voting proxies with respect to such issuer.
Such position is based on the fact that the Manager is operated as an
independent business unit from other Citigroup business units as well
as on the existence of information barriers between the Manager and
certain other Citigroup business units.
CAM maintains a Proxy Voting Committee, of which the Manager personnel
are members, to review and address conflicts of interest brought to its
attention by compliance personnel. A proxy issue that will be voted in
accordance with a stated position on an issue or in accordance with the
recommendation of an independent third party is not brought to the
attention of the Proxy Voting Committee for a conflict of interest
review because the Manager's position is that to the extent a conflict
of interest issue exists, it is resolved by voting in accordance with a
pre-determined policy or in accordance with the recommendation of an
independent third party. With respect to a conflict of interest brought
to its attention, the
Proxy Voting Committee first determines whether such conflict of
interest is material. A conflict of interest is considered material to
the extent that it is determined that such conflict is likely to
influence, or appear to influence, the Manager's decision-making in
voting proxies. If it is determined by the Proxy Voting Committee that
a conflict of interest is not material, the Manager may vote proxies
notwithstanding the existence of the conflict.
If it is determined by the Proxy Voting Committee that a conflict of
interest is material, the Proxy Voting Committee is responsible for
determining an appropriate method to resolve such conflict of interest
before the proxy affected by the conflict of interest is voted. Such
determination is based on the particular facts and circumstances,
including the importance of the proxy issue and the nature of the
conflict of interest. Methods of resolving a material conflict of
interest may include, but are not limited to, disclosing the conflict
to clients and obtaining their consent before voting, or suggesting to
clients that they engage another party to vote the proxy on their
behalf.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer have concluded that the registrant's disclosure
controls and procedures (as defined in Rule 30a- 3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act")) are
effective as of a date within 90 days of the filing date of this
report that includes the disclosure required by this paragraph,
based on their evaluation of the disclosure controls and
procedures required by Rule 30a-3(b) under the 1940 Act and
15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940
Act) that occurred during the registrant's last fiscal half-year
(the registrant's second fiscal half-year in the case of an annual
report) that have materially affected, or are likely to materially
affect the registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) Not applicable.
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this Report to be
signed on its behalf by the undersigned, there unto duly authorized.
Managed Municipals Portfolio Inc.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Managed Municipals Portfolio Inc.
Date: January 30, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
(R. Jay Gerken)
Chief Executive Officer of
Managed Municipals Portfolio Inc.
Date: January 30, 2004
By: /s/ Richard L. Peteka
Richard L. Peteka
Chief Financial Officer of
Managed Municipals Portfolio Inc.
Date: January 30, 2004