Putnam
Managed
Municipal
Income Trust
Item 1. Report to Stockholders:
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The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
4-30-03
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FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III]
Dear Fellow Shareholder:
We are pleased to bring you news of positive performance by Putnam Managed
Municipal Income Trust for the semiannual period ended April 30, 2003. Your
fund outperformed its benchmark index and came in well ahead of its peers as
measured by its Lipper category average. You will find details on page 7.
As you will see in the following report from your fund's management team,
these results were achieved in large measure by the fund's duration strategy
and a generally favorable interest-rate environment during the period.
Duration is a measure of a fund's sensitivity to changes in interest rates.
The fund's weighting in high-quality bonds also enhanced results as the
demand for these securities by risk-averse investors helped elevate their
prices. The management team also offers its views on prospects for the fund
in the fiscal year's second half.
As we look back on one of the most challenging periods in recent investment
history, we would like you to know how much we appreciate your continued
confidence in Putnam. We believe that those who ride out the current
turbulence will be rewarded for their patience over the long term.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
June 18, 2003
REPORT FROM FUND MANAGEMENT
FUND HIGHLIGHTS
* For the first six months of its fiscal year, Putnam Managed Municipal
Income Trust had a total return at net asset value of 5.44%. The fund's
return at market price was 5.95%.
* The fund's longer duration helped it to outperform its benchmark, the
Lehman Municipal Bond Index, which returned 3.59% for the six-month period.
* The fund's duration and portfolio mix of high- and lower-quality bonds
helped it outperform the average return for its Lipper category, High Yield
Municipal Debt Funds, which was 3.14%.
* Index and Lipper results should be compared to fund performance at net
asset value. See the Performance Summary on page 7 for complete fund
performance, comparative index performance, and Lipper data.
PERFORMANCE COMMENTARY
The fund's solid returns were due in large part to a duration strategy that
made it more responsive to changes in interest rates relative to its
benchmark and many of its peers. (Duration is a measure of interest-rate
sensitivity; the longer its duration, the more responsive the portfolio will
be to rate changes.) Our high-quality bond position also proved to be an
asset, as investors continued to prefer relatively secure investments amidst
the uncertainty at home and abroad. Consequently, lower-rated bonds, which
contribute considerably to the portfolio's monthly income, underperformed
their higher-quality counterparts. This disparity in the performance of
higher- and lower-rated municipal securities is exhibited by the fact that
credit spreads -- the difference in bond yields at either end of the credit
quality spectrum -- widened for much of the six-month period.
The fund's results should also be considered in the context of a generally
favorable interest-rate environment. However, after a three-year rally in
fixed-income investments, the markets are beginning to ponder the return of
higher interest rates. We've been gradually positioning the fund for this
possibility to limit the price depreciation that typically accompanies a
rising-rate market.
FUND PROFILE
Putnam Managed Municipal Income Trust seeks to provide as high a level of
current income free from federal income tax as is consistent with
preservation of capital through investments in investment-grade and
higher-yielding, lower-rated municipal bonds. The fund is designed for
investors seeking tax-exempt income and willing to accept the risks
associated with below-investment-grade bonds.
MARKET OVERVIEW
In what was a challenging semiannual period, municipal-bond yields fell
slightly, resulting in modest returns overall. Municipal bonds slightly
outperformed Treasuries for the period. Several factors contributed to the
difficult environment. The sluggish economy caused many state and local
municipalities to experience significant declines in tax revenues and
subsequent downgrades in credit quality. Difficulties in two sectors --
airlines and utilities -- dampened the performance of industrial development
bonds (IDBs), which are issued by municipalities but backed by the credit of
companies. Airline-backed IDBs suffered as United Airlines followed US
Airways into bankruptcy. In late April, American Airlines narrowly avoided a
similar fate. The electric power sector came under pressure, affecting
performance of utility IDBs as well.
Lastly, the supply of municipal bonds grew throughout 2002. In terms of
supply, the California Department of Water Resources' bond issue was the
largest ever brought to market. New tobacco settlement bonds further boosted
supply. All told, over $320 billion in municipal bonds was issued in 2002 --
an all-time record. Supply has continued to swell in 2003, and has had a
dampening effect on municipal-bond prices.
MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 4/30/03
Bonds
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Lehman Municipal Bond Index 3.59%
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Lehman Intermediate Treasury Bond Index 1.91%
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Lehman Aggregate Bond Index (government and corporate bonds) 4.31%
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Citigroup World Government Bond Index 9.73%
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Equities
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S&P 500 Index (broad market) 4.48%
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Russell 1000 Index (large-cap stocks) 4.75%
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Russell 2000 Index (small-cap stocks) 7.55%
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These indexes provide an overview of performance in different market sectors
for the six months ended 4/30/03.
STRATEGY OVERVIEW
The fund maintained its moderate exposure to higher-yielding securities. We
positioned the portfolio defensively in anticipation of the October
sell-off, but later returned to a more neutral stance by extending the
fund's duration. We diversified the fund further, and increased its exposure
to California tax-exempt bonds. We also reduced exposure to tobacco
settlement bonds, discussed further on page 5.
During the period, tax-exempt municipal bonds offered investors almost the
same yield as comparable Treasury bonds. This was an unusual situation, and
we expect the yield ratios will return to normal levels as the supply of
municipal offerings moderates and demand increases. To take advantage of
this opportunity, we established a cross-market arbitrage position, in which
we bought intermediate-term municipal bonds and shorted 10-year Treasury
futures contracts. Our thesis is that if interest rates should rise (causing
bond prices to fall), the fund would have a loss on the municipal bonds, and
yet, potential gains on the Treasury futures contracts may more than
compensate for the loss. On the other hand, if rates should fall (causing
bond prices to rise), a loss on the Treasury futures contracts may be
mitigated by a gain on the municipal bonds.
[GRAPHIC OMITTED: horizontal bar chart THE FUND'S TOP SECTOR WEIGHTINGS
COMPARED]
THE FUND'S TOP SECTOR WEIGHTINGS COMPARED
as of as of
4/30/03 10/31/03
Health care 26.7% 28.9%
Transportation 19.5% 25.0%
Utilities 16.0% 6.4%
Forest and paper products 4.0% 3.4%
Housing 3.2% 4.7%
Footnote reads:
This chart shows how the fund's sector weightings have changed over the past
six months. Weightings are shown as a percentage of portfolio market value.
Holdings will vary over time.
HOW KEY HOLDINGS AND ALLOCATIONS AFFECTED THE FUND'S PERFORMANCE
While the fund holds over 75% of its assets in high-quality investment-grade
bonds, it does selectively downgrade when the right market conditions and
investment opportunities present themselves. We think the fund's position in
lower-rated municipal bonds, which have been out of favor for some time, is
advantageous at this point and we believe these bonds can perform well in
the coming months, especially as the economy recovers.
We've seen a large supply of uninsured investment-grade hospital bonds come
to market in recent months, improving the number and quality of prospects
for your portfolio. In addition to refinancing older, more expensive debt at
today's historically low interest rates, hospitals in high-growth locations
are requiring more resources to finance their expansion in order to meet
increasing patient demand. Furthermore, hospitals are becoming more
specialized and moving beyond their core medical services. This trend has
meant that hospitals are developing a niche in such fields as cardiology or
oncology.
Several issues in the A to BBB credit-quality range were attractive to us.
Recent purchases include Mother Frances Hospital bonds, which were issued by
Tyler Health Facilities Corp. in Texas. These bonds are helping to finance a
new facility that will serve a growing population and a large cardiac
business, which we expect to improve operating revenues. The fund also holds
the A-rated Cleveland Clinic Health System bonds, issued by Cuyahoga County.
The Cleveland Clinic, which serves northeast Ohio and southwest Florida, has
a medical and educational reputation on par with Johns Hopkins and the Mayo
Clinic. While the Cleveland Clinic previously incurred investment losses, we
believe the steady, high-quality delivery of its core health services in its
target markets should eventually restore much of its diminished cash flow.
[GRAPHIC OMITTED pie chart PORTFOLIO CREDIT QUALITY 4/30/03]
PORTFOLIO CREDIT QUALITY 4/30/03
Aaa/AAA (39.1%)
Aa/AA (1.7%)
A (14.9%)
Baa/BBB (26.0%)
Ba/BB (8.3%)
B (6.0%)
CCC/Ca (1.7%)
D (0.9%)
Other (VMIG1) (1.4%)
Footnote reads:
As percentages of market value. A bond rated Baa or higher is considered
investment grade. The chart reflects Moody's and Standard & Poor's ratings;
percentages may include unrated bonds considered by Putnam Management to be
of comparable quality. Ratings will vary over time.
The electric power sector is another industry undergoing great change,
providing unique investment opportunities as it transforms itself. In the
aftermath of the power crisis in 2002, utility companies that strayed into
non-utility-related activities such as telecommunications are in the process
of refocusing on their core business of power generation and distribution.
Overall, we think this trend is a positive one that will contribute to
improvements in credit-quality ratings throughout the sector. The fund's
A2-rated Georgia Power Company bonds, issued by Burke County, exemplify this
trend. This electric utility owns its own generation resources, receives 88%
of its revenues from cost-based regulated rates, and has a history of
regulatory support.
Tobacco settlement bonds, which are issued by municipalities and secured by
cash payments made in satisfaction of legal judgments against the tobacco
industry, are a relatively new class of municipal securities, which we
always approach with caution. These bonds tend to be higher-quality debt,
but because they are subject to special risks, they generally offer higher
yields than other bonds of comparable quality. During the reporting period,
we reduced the fund's exposure to tobacco settlement bonds, due to concerns
about the market becoming overwhelmed by the growing supply of new issuance.
Please note that all holdings discussed in this report are subject to review
in accordance with the fund's investment strategy and may vary in the
future.
THE FUND'S MANAGEMENT TEAM
The fund is managed by the Putnam Tax Exempt Fixed-Income Team. The members
of the team are Richard Wyke (Portfolio Leader), Paul Drury (Portfolio
Member), David Hamlin (Portfolio Member), Susan McCormack (Portfolio
Member), Joyce Dragone, and Jerome Jacobs.
THE OUTLOOK FOR YOUR FUND
The following commentary reflects anticipated developments that could affect
your fund over the next six months, as well as the fund's management team's
plans for responding to them.
Our current outlook for the municipal-bond market is cautiously optimistic.
Fear of war has subsided. The focus is now on rebuilding Iraq and addressing
economic concerns on the home front. While much remains to be answered, the
level of uncertainty in the world seems to have eased a bit. We expect
business activity will accelerate slowly.
Although the tax-free marketplace is certainly not immune to the forces that
buffet other markets, it has historically been less volatile. We believe
municipal bonds should perform well relative to other fixed-income sectors
as some measure of calm returns to financial markets. We believe that
municipal budgets will continue to face significant pressures in the months
ahead. And we believe that governments will need to determine how to
implement costly home-front protection measures while at the same time
pushing tax cuts to stimulate economic growth. Historically, improvement in
the credit quality of state and local governments has lagged a general
economic recovery by six to nine months, so we expect municipal credit
quality to remain fragile for some time to come.
Currently, municipal-bond yields remain unusually high relative to yields on
taxable issues. In time, we expect that relationship will revert to a normal
range. In our opinion, the market continues to offer attractive value and
compelling risk/reward characteristics. We believe that we have positioned
your fund to take advantage of this potential.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. Mutual funds that
invest in government securities are not guaranteed. Mortgage-backed
securities are subject to prepayment risk.
A NOTE ABOUT DUPLICATE MAILINGS
In response to investors' requests, the SEC has modified mailing regulations
for proxy statements, semiannual and annual reports, and prospectuses.
Putnam is now able to send a single copy of these materials to customers who
share the same address. This change will automatically apply to all
shareholders except those who notify us. If you would prefer to receive your
own copy, please call Putnam at 1-800-225-1581.
PERFORMANCE SUMMARY
This section provides information about your fund's performance during its
semiannual period, which ended April 30, 2003. In accordance with regulatory
requirements, we also include performance for the most current calendar
quarter-end. Performance should always be considered in light of a fund's
investment strategy. Past performance does not indicate future results. More
recent returns may be less or more than those shown. Investment return, net
asset value, and market price will fluctuate and you may have a gain or a
loss when you sell your shares. Performance does not reflect taxes on
reinvested distributions. A profile of your fund's strategy appears on the
first page of this report. See page 8 for definitions of some terms used in
this section.
TOTAL RETURN FOR PERIODS ENDED 4/30/03
Lehman Lipper High Yield
Municipal Municipal Debt
Bond Funds category
NAV Market price Index average*
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6 months 5.44% 5.95% 3.59% 3.14%
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1 year 4.57 4.16 8.50 3.76
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5 years 17.12 -0.33 35.78 18.80
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Annual average 3.21 -0.07 6.31 3.45
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10 years 62.84 47.30 86.12 69.70
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Annual average 5.00 3.95 6.41 5.39
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Life of fund
(since 2/24/89)
Annual average 6.79 5.88 7.55 5.81
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* Over the 6-month and 1-, 5-, and 10-year periods ended 4/30/03, there were
12, 12, 12, and 11 funds, respectively, in this Lipper category.
TOTAL RETURN FOR PERIODS ENDED 3/31/03 (most recent calendar quarter)
NAV Market price
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6 months -0.20% -3.74%
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1 year 4.26 3.88
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5 years 14.44 2.70
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Annual average 2.73 0.53
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10 years 60.90 47.49
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Annual average 4.87 3.96
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Life of fund
(since 2/24/89)
Annual average 6.68 5.88
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PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 4/30/03
Putnam Managed Municipal Income Trust
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Distributions from common shares
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Number 6
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Income 1 $0.285
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Capital gains 1 --
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Total $0.285
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Preferred shares Series A Series B Series C
(550 shares) (550 shares) (650 shares)
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Income 1 $613.53 $597.85 $598.08
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Share value: NAV Market price
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10/31/02 $7.84 $7.43
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4/30/03 7.96 7.58
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Current return (end of period)
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Current dividend rate 2 7.16% 7.52%
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Taxable equivalent 3 11.66 12.25
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1 Capital gains, if any, are taxable for federal and, in most cases, state
purposes. For some investors, investment income may be subject to the
federal alternative minimum tax. Income from federally exempt funds may be
subject to state and local taxes.
2 Most recent distribution, excluding capital gains, annualized and divided
by NAV or market price at end of period.
3 Assumes maximum 38.6% of federal tax rate for 2003. Results for investors
subject to lower tax rates would not be as advantageous.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities and the net assets allocated to remarketed preferred shares,
divided by the number of outstanding common shares.
Market price is the current trading price of one share of the fund. Market
prices are set by transactions between buyers and sellers on the New York
Stock Exchange.
COMPARATIVE INDEXES
Citigroup (formerly Salomon Smith Barney) World Government Bond Index is an
unmanaged index of government bonds from 14 countries.
Lehman Aggregate Bond Index is an unmanaged index of U.S. fixed-income
securities.
Lehman Intermediate Treasury Bond Index is an unmanaged index of Treasury
bonds with maturities between 1 and 10 years.
Lehman Municipal Bond Index is an unmanaged index of long-term fixed-rate
investment-grade tax-exempt bonds.
Russell 1000 Index is an unmanaged index of the largest 1,000 companies in
the Russell 3000 Index.
Russell 2000 Index is an unmanaged index of common stocks that generally
measure performance of small to midsize companies within the Russell 3000
Index.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for
fees. Securities and performance of a fund and an index will differ. You
cannot invest directly in an index.
Lipper Inc. is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or objectives
as determined by Lipper. Lipper category averages reflect performance trends
for funds within a category and are based on results at net asset value.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report, as well as the accompanying Notes, constitute
the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values as of
the last day of the reporting period. Holdings are organized by asset type
and industry sector, country, or state to show areas of concentration and
diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to determine
the net asset value per share, which is calculated separately for each class
of shares. (For funds with preferred shares, the amount subtracted from
total assets includes the net assets allocated to remarketed preferred
shares.)
Statement of operations shows the fund's net investment gain or loss. This
is done by first adding up all the fund's earnings -- from dividends and
interest income -- and subtracting its operating expenses to determine net
investment income (or loss). Then, any net gain or loss the fund realized
on the sales of its holdings -- as well as any unrealized gains or losses
over the period -- is added to or subtracted from the net investment result
to determine the fund's net gain or loss for the fiscal period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net investment
income or realized capital gains) over the current reporting period and the
most recent fiscal year-end. The distributions listed here may not match the
sources listed in the Statement of operations because the distributions are
determined on a tax basis and may be paid in a different period from the one
in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios, and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also includes
the current reporting period. For open-end funds, a separate table is
provided for each share class.
THE FUND'S PORTFOLIO
April 30, 2003 (Unaudited)
Key to Abbreviations
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AMBAC AMBAC Indemnity Corporation
COP Certificate of Participation
FGIC Financial Guaranty Insurance Company
FNMA Coll. Federal National Mortgage Association Collateralized
FSA Financial Security Assurance
GNMA Coll. Government National Mortgage Association Collateralized
G.O. Bonds General Obligation Bonds
IFB Inverse Floating Rate Bonds
IF COP Inverse Floating Rate Certificate of Participation
MBIA MBIA Insurance Company
PSFG Permanent School Fund Guaranteed
VRDN Variable Rate Demand Notes
Municipal bonds and notes (98.8%)(a)
Principal amount Rating(RAT) Value
Alaska (0.4%)
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$2,000,000 Valdez Marine Term Rev. Bonds
(Sohio Pipeline),
7 1/8s, 12/1/25 AA+ $2,048,440
Arizona (2.1%)
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3,000,000 Apache Cnty., Indl. Dev. Auth.
Poll. Control Rev.
Bonds (Tucson Elec. Pwr. Co.),
Ser. B, 5 7/8s, 3/1/33 Ba3 2,711,250
1,000,000 AZ Hlth. Fac. Auth. Hosp. Syst.
Rev. Bonds (John C. Lincoln Hlth.
Network), 6 3/8s, 12/1/37 BBB 1,031,250
2,500,000 Casa Grande, Indl. Dev. Auth.
Rev. Bonds (Casa Grande Regl. Med.
Ctr.), Ser. A, 7 5/8s, 12/1/29 B-/P 2,581,250
4,000,000 Coconino Cnty., Poll. Control
Rev. Bonds (Tuscon/Nava Ba3 4,130,000
1,000,000 Scottsdale, Indl. Dev. Hosp. Auth.
Rev. Bonds (Scottsdale Healthcare),
5.8s, 12/1/31 A3 1,026,250
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11,480,000
Arkansas (2.2%)
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4,600,000 AR State Hosp. Dev. Fin. Auth.
Rev. Bonds (WA Regl. Med. Ctr.),
7 3/8s, 2/1/29 Baa3 4,968,000
6,000,000 Northwest Regl. Arpt. Auth.
Rev. Bonds, 7 5/8s, 2/1/27 BB/P 6,607,500
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11,575,500
California (12.1%)
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7,000,000 CA Hlth. Fac. Auth. IFB (Catholic
Hlth. Care West),
AMBAC, 9.306s, 7/1/17 Aaa 7,498,750
CA State Dept. of Wtr. Resources
Rev. Bonds, Ser. A
1,000,000 6s, 5/1/15 A3 1,136,250
20,000,000 AMBAC, 5 1/2s, 5/1/13 Aaa 22,800,000
3,000,000 5 1/2s, 5/1/11 A3 3,333,750
3,000,000 CA Statewide Cmnty. Dev. Auth. COP
(The Internext Group), 5 3/8s,
4/1/30 BBB 2,883,750
Corona, COP
2,775,000 (Vista Hosp. Syst.), Ser. B,
9 1/2s, 7/1/20 (In default) (NON) D/P 1,026,750
5,000,000 (Hosp. Syst. Inc.), Ser. C, 8 3/8s,
7/1/11 (In default) (NON) D/P 1,850,000
1,970,000 Gilroy, Rev. Bonds (Bonfante
Gardens Park), 8s, 11/1/25 B/P 1,790,238
2,900,000 Orange Cnty., VRDN, 1.35s, 8/1/16 VMIG1 2,900,000
3,500,000 San Bernardino Cnty., IF COP, MBIA,
11.58s, 8/1/28 (acquired 6/27/95,
cost $3,777,340) (RES) AAA/P 4,453,750
3,000,000 San Luis Obispo, COP (Vista Hosp.
Syst., Inc.), 8 3/8s, 7/1/29 (In
default) (NON) D/P 1,110,000
8,750,000 Santa Clara Cnty., Fin. Auth. Lease
Rev. Bonds (VMC Fac. Replacement
Project), Ser. A, AMBAC, 6 3/4s,
11/15/20 Aaa 9,668,750
6,150,000 Valley Hlth. Syst. Hosp. Rev. Bonds
(Refunding & Impt.), Ser. A,
6 1/2s, 5/15/25 B+ 3,989,813
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64,441,801
Colorado (2.2%)
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3,015,000 CO Hlth. Fac. Auth. Rev. Bonds
(Evangelical Lutheran),
3.05s, 10/1/05 A3 3,082,838
CO Hwy. Auth. Rev. Bonds (E-470
Pub. Hwy.), Ser. B
15,500,000 zero %, 9/1/35 Baa3 1,414,375
16,500,000 zero %, 9/1/34 Baa3 1,629,375
3,415,493 CO State Edl. Fac. Auth. Rev. Bonds
(Ocean Journey, Inc.), 8.3s,
12/1/17 (In default) (NON) D/P 136,620
Denver, City & Cnty. Arpt.
Rev. Bonds
1,050,000 Ser. D, AMBAC, 7 3/4s, 11/15/13 AAA 1,300,688
2,500,000 MBIA, 5 1/2s, 11/15/25 Aaa 2,634,375
1,400,000 Northwest Parkway Pub. Hwy. Auth.
Rev. Bonds, Ser. D, 7 1/8s, 6/15/41 Ba1 1,445,500
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11,643,771
District of Columbia (0.6%)
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4,000,000 DC Tobacco Settlement Fin. Corp.
Rev. Bonds, 6 1/2s, 5/15/33 A3 3,485,000
Florida (3.6%)
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2,000,000 Capital Trust Agcy. Rev. Bonds
(Seminole Tribe
Convention), Ser. A, 10s, 10/1/33 B/P 2,067,500
3,210,000 Escambia Cnty., Poll. Control
Rev. Bonds (Champion Intl. Corp.),
6.9s, 8/1/22 Baa2 3,330,375
500,000 Heritage Harbor South Cmnty. Dev.
Distr. Rev. Bonds (Cap. Impt.),
Ser. A, 6 1/2s, 5/1/34 BB-/P 498,750
5,000,000 Hernando Cnty., Indl. Dev.
Rev. Bonds (FL Crushed Stone Co.),
8 1/2s, 12/1/14 A-/P 5,211,000
1,000,000 Lee Cnty., Indl. Dev. Auth.
Rev. Bonds (Alliance Cmnty.
Project), Ser. C, 5 1/2s, 11/15/29 BBB- 907,500
1,335,000 Miami Beach, Hlth. Fac. Auth. Hosp.
Rev. Bonds (Mount Sinai Med. Ctr.),
Ser. A, 6.7s, 11/15/19 Ba3 1,211,513
2,500,000 Miami-Dade Cnty., Rev. Bonds,
Ser. A, FSA, 5 1/8s, 10/1/35 Aaa 2,509,375
1,500,000 South Miami, Hlth. Fac. Auth.
Rev. Bonds (Baptist Hlth.), 5 1/4s,
11/15/33 Aa3 1,507,500
2,000,000 St. Johns Cnty., Hlth. Care Indl.
Dev. Auth. Rev. Bonds (Glenmoor St.
Johns Project), Ser. A, 8s, 1/1/30 B/P 2,005,000
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19,248,513
Georgia (1.9%)
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5,000,000 Atlanta, Waste Wtr. Rev. Bonds,
Ser. A, MBIA, 5s, 11/1/39 Aaa 5,112,500
4,000,000 Burke Cnty., Poll. Control Dev.
Auth. Mandatory Put (GA Power Co.),
4.45s, 1/1/32 A2 4,220,000
700,000 GA Med. Ctr. Hosp. Auth. IFB, MBIA,
11.385s, 8/1/10 Aaa 732,319
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10,064,819
Hawaii (1.1%)
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935,000 HI Dept. of Trans. Special Fac.
Rev. Bonds (Continental Airlines,
Inc.), 7s, 6/1/20 B 558,663
4,500,000 HI State G.O. Bonds, Ser. CY, FSA,
5 1/2s, 2/1/12 Aaa 5,175,000
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5,733,663
Illinois (5.9%)
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Chicago, G.O. Bonds
4,850,000 Ser. A, AMBAC, 5 5/8s, 1/1/39 Aaa 5,250,125
3,500,000 Ser. C, FGIC, 5 1/2s, 1/1/40 Aaa 3,710,000
2,500,000 (Neighborhoods Alive 21 Project),
FGIC, 5s, 1/1/41 Aaa 2,528,125
2,500,000 Chicago, O'Hare Intl. Arpt. Special
Fac. Rev. Bonds (United Airlines,
Inc.), Ser. C, 6.3s, 5/1/16
(In default) (NON) D/P 250,000
3,000,000 Chicago, O'Hare Intl. Arpt. Special
Fac. Rev. Bonds (American Airlines,
Inc.), 8.2s, 12/1/24 Caa2 990,000
3,250,000 IL Dev. Fin. Auth. Hosp. Rev. Bonds
(Adventist Hlth. Syst./Sunbelt
Obligation), 5.65s, 11/15/24 A3 3,306,875
6,000,000 IL State G.O. Bonds, FGIC, 6s,
11/1/26 Aaa 7,290,000
3,570,000 IL U. Rev. Bonds (Auxiliary Fas),
Ser. A, AMBAC, 5 1/2s, 4/1/20 Aaa 4,074,263
3,500,000 Regl. Trans. Auth. Rev. Bonds,
Ser. B, MBIA, 5 3/4s, 6/1/33 Aaa 4,125,625
------------
31,525,013
Indiana (3.0%)
------------------------------------------------------------------------------
2,500,000 IN State Dev. Fin. Auth. Env. Impt.
Rev. Bonds (USX Corp.), 5.6s,
12/1/32 Baa1 2,475,000
6,500,000 IN Trans. Fin. Auth. Arpt. Facs.
Lease Rev. Bonds, Ser. A, AMBAC,
5s, 11/1/16 Aaa 6,800,625
6,300,000 Indianapolis, Arpt. Auth. Special
Fac. Rev. Bonds (Federal Express
Corp.), 7.1s, 1/15/17 Baa2 6,685,875
------------
15,961,500
Iowa (1.0%)
------------------------------------------------------------------------------
IA Fin. Auth. Hlth. Care Fac.
Rev. Bonds (Care Initiatives)
3,000,000 9 1/4s, 7/1/25 BBB-/P 3,581,250
1,745,000 9.15s, 7/1/09 BBB-/P 2,037,288
------------
5,618,538
Kansas (1.6%)
------------------------------------------------------------------------------
8,400,000 Witchita, Hosp. IFB, Ser. 111-A,
MBIA, 11.48s, 10/20/17 Aaa 8,799,000
Kentucky (0.4%)
------------------------------------------------------------------------------
2,035,000 Kenton Cnty., Arpt. Board
Rev. Bonds (Special Fac. -
Delta Airlines, Inc.), Ser. A,
7 1/2s, 2/1/20 BB- 1,505,900
1,000,000 Scott Cnty., Indl. Dev. Rev. Bonds
(Hoover Group, Inc.), 8 1/2s,
11/1/14 Ba3 660,000
------------
2,165,900
Louisiana (3.3%)
------------------------------------------------------------------------------
2,000,000 LA Pub. Fac. Auth. Hosp. Rev. Bonds
(Lake Charles Memorial Hosp.
Project), 8 5/8s, 12/1/30 CCC/P 1,827,500
12,500,000 Lake Charles, Harbor & Term Dist.
Port Fac. Rev. Bonds (Trunkline
Co.), 7 3/4s, 8/15/22 Baa2 12,977,000
2,750,000 W. Feliciana Parish, Poll. Control
Rev. Bonds (Gulf States Util.
Co.), Ser. C, 7s, 11/1/15 Ba1 2,839,375
------------
17,643,875
Maine (0.4%)
------------------------------------------------------------------------------
2,000,000 Rumford Solid Waste Disp.
Rev. Bonds (Boise Cascade Corp.),
6 7/8s, 10/1/26 Baa3 2,002,500
Massachusetts (4.3%)
------------------------------------------------------------------------------
MA State Hlth. & Edl. Fac. Auth.
Rev. Bonds
2,000,000 (Civic Investments), Ser. A, 9s,
12/15/15 B+/P 2,182,500
3,300,000 (Rehab. Hosp. Cape & Islands),
Ser. A, 7 7/8s, 8/15/24 AAA/P 3,613,500
1,185,000 (Norwood Hosp.), Ser. C, 7s, 7/1/14 Ba2 1,515,319
2,500,000 (UMass Memorial), Ser. C, 6 5/8s,
7/1/32 Baa2 2,593,750
1,875,000 (UMass Memorial), Ser. C, 6 1/2s,
7/1/21 Baa2 1,950,000
7,645,000 MA State Hsg. Fin. Agcy. IFB,
AMBAC, 9.698s, 7/1/40 (acquired
6/3/98, cost $7,739,951) (RES) AAA 8,094,144
2,000,000 MA State Hsg. Fin. Agcy. Rev. Bonds
(Rental Mtge.), Ser. C, AMBAC,
5 5/8s, 7/1/40 Aaa 2,052,500
1,000,000 MA State Indl. Fin. Agcy.
Rev. Bonds (1st. Mtge. Brookhaven),
Ser. A, 7s, 1/1/15 BBB/P 1,033,750
------------
23,035,463
Michigan (2.5%)
------------------------------------------------------------------------------
1,500,000 MI State Hosp. Fin. Auth.
Rev. Bonds (Oakwood Hosp.),
Ser. A, 6s, 4/1/22 A2 1,580,625
2,000,000 MI State Strategic Fund Resource
Recvy. Rev. Bonds (Central Wayne
Energy Res.), Ser. A, 6.9s, 7/1/19
(In default) (NON) D/P 500,000
2,700,000 Pontiac, Hosp. Fin. Auth.
Rev. Bonds (NOMC Obligation Group),
Ser. B, 6s, 8/1/18 Ba1 2,207,250
2,975,000 Warren Cons. School Dist. G.O.
Bonds, FSA, 5 3/8s, 5/1/18 Aaa 3,250,188
6,780,000 Waterford, Econ. Dev. Corp.
Rev. Bonds (Canterbury Hlth.), 6s,
1/1/39 B-/P 4,779,900
2,000,000 Wayne Charter Cnty., Special Arpt.
Fac. Rev. Bonds (Northwest
Airlines, Inc.), 6s, 12/1/29 B-/P 1,095,000
------------
13,412,963
Minnesota (2.1%)
------------------------------------------------------------------------------
1,780,000 Chaska, Indl. Dev. Rev. Bonds
(Lifecore Biomedical, Inc.),
10 1/4s, 9/1/20 BB/P 1,863,660
5,000,000 Cohasset, VRDN (MN Pwr. & Light Co.
Project), 1.35s, 6/1/20 A-1+ 5,000,000
5,130,000 St. Paul, Hsg. & Hosp. Redev. Auth.
Rev. Bonds (Healtheast), Ser. B,
6 5/8s, 11/1/17 Ba2 4,578,525
------------
11,442,185
Mississippi (0.4%)
------------------------------------------------------------------------------
2,250,000 Mississippi Bus. Fin. Corp. Poll.
Control Rev. Bonds (Syst. Energy
Resources, Inc.), 5.9s, 5/1/22 BBB- 2,221,875
Missouri (1.1%)
------------------------------------------------------------------------------
1,500,000 Cape Girardeau Cnty. Indl. Dev.
Auth. Hlth. Care Fac.
Rev. Bonds (St. Francis Med. Ctr.),
Ser. A, 5 1/2s, 6/1/32 A 1,522,500
4,110,000 MO State Hlth. & Edl. Fac. Auth.
VRDN (St. Francis Med. Ctr.),
Ser. A, 1.35s, 6/1/26 A-1+ 4,110,000
------------
5,632,500
Nebraska (0.3%)
------------------------------------------------------------------------------
2,000,000 Gage Cnty., Indl. Dev. Rev. Bonds
(Hoover Group, Inc.), 8 1/2s,
12/1/07 Baa3 1,380,000
2,410,239 Kearney, Indl. Dev. Rev. Bonds
(Great Platte River Road), 6 3/4s,
1/1/28 (In default) (NON) D/P 12,051
150,000 NE Investment Fin. Auth. Single
Fam. Mtge. IFB, Ser. C, GNMA/FNMA
Coll., 10.504s, 3/1/20 Aaa 153,000
------------
1,545,051
Nevada (1.8%)
------------------------------------------------------------------------------
5,000,000 Clark Cnty., Indl. Dev. Rev. Bonds
(Southwest Gas Corp.), Ser. C,
AMBAC, 5.95s, 12/1/38 Aaa 5,500,000
4,000,000 Las Vegas, Monorail Rev. Bonds (2nd
Tier), 7 3/8s, 1/1/40 B-/P 4,040,000
------------
9,540,000
New Hampshire (0.5%)
------------------------------------------------------------------------------
2,565,000 NH State Bus. Fin. Auth. Rev. Bonds
(Alice Peck Day Hlth. Syst.),
Ser. A, 7s, 10/1/29 BB+/P 2,603,475
New Jersey (2.7%)
------------------------------------------------------------------------------
1,250,000 NJ Econ. Dev. Auth. Rev. Bonds
(Cedar Crest Vlg. Inc. Fac.),
Ser. A, 7 1/4s, 11/15/31 BB-/P 1,257,813
NJ Hlth. Care Fac. Fin. Auth.
Rev. Bonds
3,000,000 (Trinitas Hosp. Oblig. Group),
7 1/2s, 7/1/30 Baa3 3,296,250
1,250,000 (Atlantic City Med. Ctr.), 5 3/4s,
7/1/25 A3 1,304,720
1,000,000 (Somerset Med. Ctr.), 5 1/2s,
7/1/33 Baa2 961,560
6,500,000 NJ State Trans. Trust Fund Auth.
Rev. Bonds (Trans. Syst.), Ser. A,
FSA, 5 1/2s, 6/15/12 Aaa 7,475,000
------------
14,295,343
New York (9.2%)
------------------------------------------------------------------------------
10,000,000 NY City G.O. Bonds, Ser. B, 5 1/4s,
12/1/09 A2 10,962,500
9,625,000 NY City, Indl. Dev. Agcy. Special
Fac. Rev. Bonds (British Airways),
5 1/4s, 12/1/32 BBB- 5,967,500
1,500,000 NY City, Indl. Dev. Agency
Rev. Bonds (Staten Island U. Hosp.
Project), 6.45s, 7/1/32 Baa3 1,560,000
5,000,000 NY City, Muni. Wtr. & Swr. Fin.
Auth. IFB, MBIA, 9.688s, 6/15/17
(acquired 5/21/98, cost $5,296,700)
(RES) AAA 5,837,500
5,000,000 NY City, Muni. Wtr. & Swr. Fin.
Auth. Rev. Bonds, Ser. G, FSA, 5s,
6/15/34 Aaa 5,112,500
NY City, Muni. Wtr. & Swr. Fin.
Auth. VRDN
2,000,000 Ser. A, FGIC, 1.4s, 6/15/25 VMIG1 2,000,000
2,700,000 Ser. G, FGIC, 1.4s, 6/15/24 VMIG1 2,700,000
900,000 NY State Dorm. Auth. Rev. Bonds
(Winthrop-U. Hosp. Assn.), Ser. A,
5 1/2s, 7/1/32 Baa1 892,125
2,000,000 Onondaga Cnty., Indl. Dev. Agcy.
Rev. Bonds (Solvay Paperboard,
LLC), 7s, 11/1/30 BB-/P 2,082,500
5,000,000 Port Auth. NY & NJ Rev. Bonds, Ser.
96, FGIC, 6.6s, 10/1/23 Aaa 5,331,250
5,000,000 Port Auth. NY & NJ Special
Obligation IFB, MBIA, Ser. N18,
8.64s, 12/1/17 (acquired 7/19/00,
cost $5,234,450) (RES) Aaa 6,812,500
------------
49,258,375
North Carolina (1.2%)
------------------------------------------------------------------------------
100,000 Charlotte, Special Fac. Rev. Bonds
(Douglas Intl. Arpt.- US Airways),
7 3/4s, 2/1/28 (In default) (NON) CCC/P 68,500
NC Eastern Muni. Pwr. Agcy. Syst.
Rev. Bonds
1,500,000 Ser. D, 6 3/4s, 1/1/26 Baa3 1,648,125
3,000,000 Ser. A, 5 3/4s, 1/1/26 Baa3 3,037,500
1,300,000 NC State Muni. Pwr. Agcy.
Rev. Bonds, Ser. A, 5 1/2s, 1/1/13 Baa1 1,428,375
------------
6,182,500
Ohio (2.6%)
------------------------------------------------------------------------------
Cuyahoga Cnty., Rev. Bonds, Ser. A
1,280,000 6s, 1/1/16 A1 1,422,400
2,000,000 6s, 1/1/15 A 2,240,000
1,000,000 Dayton, Fac. Rev. Bonds (Emery Air
Freight), Ser. A, 5 5/8s, 2/1/18 BB+ 770,000
3,000,000 OH State Air Quality Dev. Auth.
Rev. Bonds (Toledo Poll. Control),
Ser. A, 6.1s, 8/1/27 Baa2 3,052,500
2,100,000 OH State Solid Waste Rev. Bonds
(General Motors Corp. Project),
6.3s, 12/1/32 A3 2,210,250
4,000,000 Rickenbacker Port Auth. Rev. Bonds
(OASBO Expanded Asset Pooled),
Ser. A, 5 3/8s, 1/1/32 A2 4,270,000
------------
13,965,150
Oklahoma (2.7%)
------------------------------------------------------------------------------
3,150,000 OK City Arpt. Trust Rev. Bonds (Jr.
Lien 27th Ser.), Ser. A, FSA, 5s,
7/1/18 AAA 3,256,313
4,900,000 OK Dev. Fin. Auth. Rev. Bonds
(Hillcrest Hlth. Care), Ser. A,
5 5/8s, 8/15/29 B1 3,589,250
7,000,000 OK State Indl. Dev. Auth.
Rev. Bonds (Hlth. Syst.-
Oblig. Group), Ser. A, MBIA,
5 3/4s, 8/15/29 Aaa 7,673,750
------------
14,519,313
Pennsylvania (5.8%)
------------------------------------------------------------------------------
2,165,000 Carbon Cnty., Indl. Dev. Auth.
Rev. Bonds (Panther Creek
Partners), 6.65s, 5/1/10 BBB- 2,248,894
3,500,000 Dauphin Cnty., Gen. Auth.
Rev. Bonds (Office & Pkg.), Ser. A,
6s, 1/15/25 CCC/P 1,750,000
350,000 Lebanon Cnty. Hlth. Fac. Auth.
Rev. Bonds (Good Samaritan Hosp.
Project), 6s, 11/15/35 Baa1 354,813
7,250,000 PA Convention Ctr. Auth.
Rev. Bonds, MBIA, 6.7s, 9/1/14 Aaa 7,875,313
PA Econ. Dev. Fin. Auth. Rev. Bonds
7,750,000 (MacMillan Ltd. Partnership), 7.6s,
12/1/20 Baa2 9,067,500
1,000,000 (Amtrak Project), Ser. A, 6 3/8s,
11/1/41 A3 881,250
PA State Econ. Dev. Fin. Auth.
Resource Recvy. Rev. Bonds
1,000,000 (Clover), Ser. D, 7 1/8s, 12/1/15 BBB- 1,038,750
4,200,000 (Northampton Generating), Ser. A,
6.6s, 1/1/19 BBB- 4,242,000
2,764,894 Philadelphia, Hosp. & Higher Ed.
Fac. Auth. Rev. Bonds (Graduate
Hlth. Syst.), 7 1/4s, 7/1/10 (In
default) (NON) D/P 3,456
2,000,000 Philadelphia, Indl. Dev. Auth.
Arpt. Rev. Bonds (Aero
Philadelphia, LLC), 5 1/2s, 1/1/24 BB/P 1,575,000
2,957,177 Philadelphia, Indl. Dev. Auth.
Special Fac. Rev. Bonds (U.S.
Airways, Inc.), 8 1/8s, 5/1/30 (In
default) (NON) D/P 88,715
1,800,000 Sayre Healthcare Fac. Auth.
Rev. Bonds (Guthrie Hlth.), Ser. A,
5 7/8s, 12/1/31 A- 1,851,750
------------
30,977,441
South Carolina (2.6%)
------------------------------------------------------------------------------
4,750,000 Connector 2000 Assn., Inc. SC Toll
Road Rev. Bonds (SR-Southern
Connector), Ser. A, 5 3/8s, 1/1/38 B- 1,989,063
775,000 Lexington Cnty. Rev. Bonds, 5 1/2s,
11/1/32 A2 789,531
5,000,000 Richland Cnty. Rev. Bonds (Intl.
Paper Co. Project), Ser. A, 4 1/4s,
10/1/07 Baa2 5,106,250
1,250,000 SC Hosp. Auth. Rev. Bonds (Med.
U.), Ser. A, 6 1/2s, 8/15/32 Baa2 1,300,000
1,000,000 SC Jobs Econ. Dev. Auth. Hosp. Fac.
Rev. Bonds (Palmetto Hlth.
Alliance), Ser. A, 7 3/8s, 12/15/21 Baa2 1,133,750
SC Tobacco Settlement Rev. Mgt.
Rev. Bonds, Ser. B
1,300,000 6 3/8s, 5/15/30 A3 1,105,000
3,000,000 6 3/8s, 5/15/28 A3 2,606,250
------------
14,029,844
South Dakota (0.3%)
------------------------------------------------------------------------------
2,000,000 SD Edl. Enhancement Funding Corp.
Rev. Bonds, Ser. B, 6 1/2s, 6/1/32 A1 1,732,500
Tennessee (3.3%)
------------------------------------------------------------------------------
6,000,000 Johnson City, Hlth. & Edl. Fac.
Board Hosp. IFB, Ser. A2, MBIA,
10.495s, 7/1/21 (acquired 2/8/00,
cost $5,651,400) (RES) Aaa 7,702,500
4,700,000 Johnson City, Hlth. & Edl. Fac.
Board Hosp. Rev. Bonds (Mountain
States Hlth.), Ser. A, 7 1/2s,
7/1/33 Baa2 5,246,375
2,175,000 Knox Cnty., Hlth. Edl. & Hsg. Fac
Board Rev. Bonds (Ft. Sanders
Alliance), MBIA, 5 1/4s, 1/1/15 Aaa 2,414,250
2,000,000 Shelby Cnty. Hlth. Edl. & Hsg. Fac.
Board Rev. Bonds (Methodist
Healthcare), 6 1/2s, 9/1/26 Baa1 2,145,000
------------
17,508,125
Texas (7.4%)
------------------------------------------------------------------------------
Alliance, Arpt. Auth. Rev. Bonds
1,430,000 (American Airlines, Inc.), 7 1/2s,
12/1/29 Caa2 471,900
8,100,000 (Federal Express Corp.), 6 3/8s,
4/1/21 (SEG) Baa2 8,424,000
9,500,000 Austin, Elec. Util. Syst.
Rev. Bonds, FSA, 5s, 1/15/30 Aaa 9,642,500
4,655,000 Carrollton, Farmers Branch Indpt.
School Dist. G.O. Bonds, PSFG, 5s,
2/15/17 Aaa 4,951,756
1,000,000 Comal Cnty. Hlth. Fac. Dev. Corp.
Rev. Bonds (Hlth. Care System -
McKenna Memorial Project), Ser. A,
6 1/4s, 2/1/32 Baa2 1,007,500
Dallas-Fort Worth, Intl. Arpt. Fac.
Impt. Corp. Rev. Bonds (American
Airlines, Inc.)
3,000,000 7 1/4s, 11/1/30 Caa2 900,000
8,000,000 6 3/8s, 5/1/35 Caa2 2,640,000
3,000,000 Harris Cnty., Hlth. Fac. Rev. Bonds
(Memorial Hermann Hlth. Care),
Ser. A, 6 3/8s, 6/1/29 A3 3,217,500
2,000,000 Lower Neches Valley Indl. Dev. Swr.
Auth. Rev. Bonds (Mobil Oil
Refining Corp.), 6.4s, 3/1/30 Aaa 2,102,500
2,500,000 Sam Rayburn Muni. Pwr. Agcy.
Rev. Bonds, 6s, 10/1/21 Baa2 2,606,250
2,000,000 Tomball, Hosp. Auth. Rev. Bonds
(Tomball Regl. Hosp.),
6s, 7/1/29 Baa2 2,025,000
Tyler, Hlth. Facs. Dev. Corp.
Rev. Bonds (Mother Frances Hosp.)
745,000 5s, 7/1/08 Baa1 791,563
500,000 5s, 7/1/07 Baa1 532,500
------------
39,312,969
Utah (2.5%)
------------------------------------------------------------------------------
5,000,000 Intermountain Power Agency
Rev. Bonds, Ser. A, FSA,
5s, 7/1/11 AAA 5,556,250
8,000,000 Tooele Cnty., Harbor & Term. Dist.
Port Fac. Rev. Bonds (Union
Pacific), Ser. A, 5.7s, 11/1/26 Baa3 8,020,000
------------
13,576,250
Virginia (0.8%)
------------------------------------------------------------------------------
1,500,000 Fredericksburg Indl. Dev. Auth.
Rev. Bonds (Medicorp Hlth. Syst.),
Ser. B, 5 1/8s, 6/15/33 A3 1,501,875
3,900,000 Pocahontas Parkway Assn. Toll Rd.
Rev. Bonds, Ser. A, 5 1/2s, 8/15/28 BB 2,593,500
------------
4,095,375
Washington (1.3%)
------------------------------------------------------------------------------
5,000,000 King Cnty., G.O. Bonds, Ser. C,
6 1/4s, 1/1/32 Aa1 5,631,250
2,200,000 Port of Seattle, Special Fac.
Rev. Bonds (Northwest Airlines,
Inc.), 7 1/4s, 4/1/30 B-/P 1,430,000
------------
7,061,250
West Virginia (0.4%)
------------------------------------------------------------------------------
2,500,000 Princeton, Hosp. Rev. Bonds (Cmnty.
Hosp. Assn., Inc.), 6.1s, 5/1/29 Ba3 1,931,250
Wisconsin (1.2%)
------------------------------------------------------------------------------
3,000,000 Badger Tobacco Settlement Asset
Securitization Corp.
Rev. Bonds, 6 3/8s, 6/1/32 A3 2,527,500
3,900,000 WI State Hlth. & Edl. Fac. Auth.
Rev. Bonds (Wheaton Franciscan),
5 3/4s, 8/15/30 A2 3,997,500
------------
6,525,000
------------
Total Municipal Bonds and Notes
(cost $554,401,356) $527,842,030
Preferred stocks (1.2%) (a)
Number of shares Value
------------------------------------------------------------------------------
2,000,000 Charter Mac. Equity Trust 144A
Ser. A, 6.625% cum. pfd. BBB-/P $2,172,500
4,000,000 MuniMae Tax Exempt Bond Subsidiary,
LLC 144A 6.875% cum. pfd. BB+/P 4,395,000
------------
Total Preferred Stocks
(cost $6,000,000) $6,567,500
------------------------------------------------------------------------------
Total Investments
(cost $560,401,356) $534,409,530
------------------------------------------------------------------------------
(a) Percentages indicated are based on portfolio market value.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to
be the most recent ratings available at April 30, 2003 for the
securities listed. Ratings are generally ascribed to securities at the
time of issuance. While the agencies may from time to time revise such
ratings, they undertake no obligation to do so, and the ratings do not
necessarily represent what the agencies would ascribe to these
securities at April 30, 2003. Securities rated by Putnam are indicated
by "/P" and are not publicly rated.
(NON) Non-income-producing security.
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at April 30, 2003 was
$32,900,394 or 6.2% of portfolio market value.
(SEG) A portion of this security was pledged and segregated with the
custodian to cover margin requirements for futures contracts at April
30, 2003.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
The rates shown on IFB and IF COP, which are securities paying interest
rates that vary inversely to changes in the market interest rates, and
VRDN and mandatory puts are the current interest rates at April 30,
2003.
The fund had the following industry group concentrations greater than
10% at April 30, 2003 (as a percentage of portfolio market value):
Health care 26.7%
Transportation 19.5
Utilities 16.0
The fund had the following insurance concentrations greater than 10% at
April 30, 2003 (as a percentage of portfolio market value):
AMBAC 13.7%
MBIA 12.0
Futures Contracts Outstanding at April 30, 2003
Aggregate Expiration Unrealized
Market Value Face Value Date Depreciation
------------------------------------------------------------------------------
U.S. Treasury
Note 10 yr
(Short) $25,327,500 $25,205,746 Jun-03 $(121,754)
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2003 (Unaudited)
Assets
---------------------------------------------------------------------
Investments in securities, at value
(identified cost $560,401,356) (Note 1) $534,409,530
---------------------------------------------------------------------
Cash 1,246,128
---------------------------------------------------------------------
Interest and other receivables 11,319,791
---------------------------------------------------------------------
Receivable for securities sold 19,132,545
---------------------------------------------------------------------
Total assets 566,107,994
Liabilities
---------------------------------------------------------------------
Payable for variation margin (Note 1) 130,625
---------------------------------------------------------------------
Distributions payable to shareholders 2,290,686
---------------------------------------------------------------------
Payable for securities purchased 11,726,893
---------------------------------------------------------------------
Payable for compensation of
Manager (Note 2) 913,093
---------------------------------------------------------------------
Payable for investor servicing and
custodian fees (Note 2) 34,906
---------------------------------------------------------------------
Payable for compensation of
Trustees (Note 2) 42,833
---------------------------------------------------------------------
Payable for administrative
services (Note 2) 800
---------------------------------------------------------------------
Other accrued expenses 56,297
---------------------------------------------------------------------
Total liabilities 15,196,133
---------------------------------------------------------------------
Series A, B and C remarketed
preferred shares: (8,000 shares
authorized; 1,750 shares issued at
$100,000 per share) (Note 4) 175,000,000
---------------------------------------------------------------------
Net assets $375,911,861
Represented by
---------------------------------------------------------------------
Paid-in capital -- common shares (unlimited
shares authorized) (Note 1) $435,026,079
---------------------------------------------------------------------
Undistributed net investment
income (Note 1) 1,598,284
---------------------------------------------------------------------
Accumulated net realized loss on
investments (Note 1) (34,598,922)
---------------------------------------------------------------------
Net unrealized depreciation of investments (26,113,580)
---------------------------------------------------------------------
Total -- Representing net assets
applicable to common shares outstanding $375,911,861
Computation of net asset value
---------------------------------------------------------------------
Net asset value per common share
($375,911,861 divided by 47,206,343 shares) $7.96
---------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
STATEMENT OF OPERATIONS
Six months ended April 30, 2003 (Unaudited)
Interest income: $17,722,681
---------------------------------------------------------------------
Expenses:
---------------------------------------------------------------------
Compensation of Manager (Note 2) 1,851,982
---------------------------------------------------------------------
Investor servicing and custodian
fees (Note 2) 166,268
---------------------------------------------------------------------
Compensation of Trustees (Note 2) 7,881
---------------------------------------------------------------------
Administrative services (Note 2) 5,439
---------------------------------------------------------------------
Preferred share remarketing
agent fees 204,168
---------------------------------------------------------------------
Other 117,490
---------------------------------------------------------------------
Total expenses 2,353,228
---------------------------------------------------------------------
Expense reduction (Note 2) (10,781)
---------------------------------------------------------------------
Net expenses 2,342,447
---------------------------------------------------------------------
Net investment income 15,380,234
---------------------------------------------------------------------
Net realized loss on investments
(Notes 1 and 3) (8,233,622)
---------------------------------------------------------------------
Net realized loss on futures
contracts (Note 1) (720,450)
---------------------------------------------------------------------
Net unrealized appreciation of
investments and futures contracts
during the period 13,713,756
---------------------------------------------------------------------
Net gain on investments 4,759,684
---------------------------------------------------------------------
Net increase in net assets
resulting from operations $20,139,918
---------------------------------------------------------------------
Distributions to Series A, B,
and C remarketed preferred
shareholders: (Note 1)
---------------------------------------------------------------------
From tax exempt income (1,055,009)
---------------------------------------------------------------------
Net increase in net assets resulting
from operations applicable to
common shareholders $19,084,909
---------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
STATEMENT OF CHANGES IN NET ASSETS
Six months Year
ended ended
April 30 October 31
Increase (decrease) in net assets 2003* 2002
---------------------------------------------------------------------
Operations:
---------------------------------------------------------------------
Net investment income $15,380,234 $32,937,590
---------------------------------------------------------------------
Net realized loss on
investments (8,954,072) (3,409,597)
---------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments 13,713,756 (30,443,946)
---------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 20,139,918 (915,953)
Distributions to Series A, B,
and C remarketed preferred
shareholders: (Note 1)
---------------------------------------------------------------------
From tax exempt income (1,055,009) (2,589,647)
---------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations
applicable to common shareholders 19,084,909 (3,505,600)
---------------------------------------------------------------------
Distributions to common shareholders:
(Note 1)
---------------------------------------------------------------------
From tax exempt income (13,453,839) (26,888,250)
---------------------------------------------------------------------
Increase from issuance of common
shares in connection
with reinvestment of distributions -- 419,191
---------------------------------------------------------------------
Total increase (decrease) in
net assets 5,631,070 (29,974,659)
Net assets
---------------------------------------------------------------------
Beginning of period 370,280,791 400,255,450
---------------------------------------------------------------------
End of period (including undistributed
net investment income of $1,598,284 and
$726,898, respectively) $375,911,861 $370,280,791
---------------------------------------------------------------------
Number of fund shares
---------------------------------------------------------------------
Common shares outstanding at beginning
of period 47,206,343 47,155,237
---------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions -- 51,106
---------------------------------------------------------------------
Common shares outstanding at end
of period 47,206,343 47,206,343
---------------------------------------------------------------------
Remarketed preferred shares outstanding
at beginning and end of period 1,750 1,750
---------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
Six months
ended
April 30
Per-share (Unaudited) Year ended October 31
operating performance 2003 2002 2001 2000 1999 1998
-------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period
(common shares) $7.84 $8.49 $8.44 $8.77 $9.82 $9.92
-------------------------------------------------------------------------------------------------------------
Investment operations:
-------------------------------------------------------------------------------------------------------------
Net investment income (a) .33 .70 .72 .75 .80 .79
-------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .10 (.73) .04 (.16) (.96) .01
-------------------------------------------------------------------------------------------------------------
Total from investment operations .43 (.03) .76 .59 (.16) .80
-------------------------------------------------------------------------------------------------------------
Distributions to preferred shareholders:
-------------------------------------------------------------------------------------------------------------
From net investment income (.02) (.05) (.12) (.16) (.13) (.14)
-------------------------------------------------------------------------------------------------------------
Total from investment
operations: (applicable to
common shareholders) .41 (.08) .64 .43 (.29) .66
-------------------------------------------------------------------------------------------------------------
Distributions to common shareholders:
-------------------------------------------------------------------------------------------------------------
From net investment income: (.29) (.57) (.59) (.76) (.76) (.76)
-------------------------------------------------------------------------------------------------------------
Total distributions (.29) (.57) (.59) (.76) (.76) (.76)
-------------------------------------------------------------------------------------------------------------
Net asset value, end of period
(common shares) $7.96 $7.84 $8.49 $8.44 $8.77 $9.82
-------------------------------------------------------------------------------------------------------------
Market price, end of period
(common shares) $7.58 $7.43 $8.44 $9.63 $9.81 $11.44
-------------------------------------------------------------------------------------------------------------
Total return at market price (%)
(common shares) (b) 5.95* (5.57) (6.21) 6.84 (7.72) 4.52
-------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
-------------------------------------------------------------------------------------------------------------
Net assets, end of period
(common shares) (in thousands) $375,912 $370,281 $400,255 $396,212 $408,419 $453,766
-------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c)(d) .63* 1.25 1.22 1.27 1.23 1.22
-------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(c) 3.84* 7.84 7.01 6.97 7.12 6.57
-------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 14.64* 20.44 17.95 16.72 12.88 19.97
-------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of the
weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment.
(c) Ratios reflect net assets available to common shares only; net
investment income ratio also reflects reduction for dividend payments to
preferred shareholders.
(d) Includes amounts paid through expense offset arrangements (Note 2).
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
April 30, 2003 (Unaudited)
Note 1
Significant accounting policies
Putnam Managed Municipal Income Trust (the "fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The fund's investment objective is to seek a
high level of current income exempt from federal income tax. The fund
intends to achieve its objective by investing in a diversified portfolio of
tax-exempt municipal securities which Putnam Investment Management, LLC
("Putnam Management"), the fund's manager, an indirect wholly-owned
subsidiary of Putnam, LLC, believes does not involve undue risk to income or
principal. Up to 50% of the fund's assets may consist of high-yield
tax-exempt municipal securities that are below investment grade and involve
special risk considerations. The fund also uses leverage by issuing
preferred shares in an effort to increase the income to the common shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with accounting
principles generally accepted in the United States of America and requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities in the financial statements and the
reported amounts of increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those
estimates.
A) Security valuation Tax-exempt bonds and notes are valued on the basis of
valuations provided by an independent pricing service, approved by the
Trustees. Such services use information with respect to transactions in
bonds, quotations from bond dealers, market transactions in comparable
securities and various relationships between securities in determining
value. Restricted securities are valued at fair value following procedures
approved by the Trustees. Such valuations and procedures are reviewed
periodically by the Trustees.
B) Security transactions and related investment income Security transactions
are recorded on the trade date (date the order to buy or sell is executed).
Gains or losses on securities sold are determined on the identified cost
basis.
Interest income is recorded on the accrual basis. All premiums/discounts are
amortized/accreted on a yield-to-maturity basis. The premium in excess of
the call price, if any, is amortized to the call date; thereafter, any
remaining premium is amortized to maturity.
C) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund owns
or expects to purchase. The fund may also write options on securities it
owns or in which it may invest to increase its current returns.
The potential risk to the fund is that the change in value of futures and
options contracts may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts, or if the counterparty to the contract is unable to perform. When
the contract is closed, the fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened
and the value at the time it was closed. Realized gains and losses on
purchased options are included in realized gains and losses on investment
securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. The fund and the broker
agree to exchange an amount of cash equal to the daily fluctuation in the
value of the futures contract. Such receipts or payments are known as
"variation margin." Exchange traded options are valued at the last sale
price, or if no sales are reported, the last bid price for purchased options
and the last ask price for written options. Options traded over-the-counter
are valued using prices supplied by dealers. Futures and written option
contracts outstanding at period end are listed after The fund's portfolio.
D) Federal taxes It is the policy of the fund to distribute all of its
income within the prescribed time and otherwise comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies.
It is also the intention of the fund to distribute an amount sufficient to
avoid imposition of any excise tax under Section 4982 of the Internal
Revenue Code of 1986, as amended. Therefore, no provision has been made for
federal taxes on income, capital gains or unrealized appreciation on
securities held nor for excise tax on income and capital gains.
At October 31, 2002, the fund had a capital loss carryover of approximately
$24,642,000 available to the extent allowed by tax law to offset future
capital gains, if any. The amount of the carryover and the expiration dates
are:
Loss Carryover Expiration
------------------------------------
$321,000 October 31, 2003
11,188,000 October 31, 2005
2,895,000 October 31, 2006
3,629,000 October 31, 2007
1,237,000 October 31, 2008
1,642,000 October 31, 2009
3,730,000 October 31, 2010
The aggregate identified cost on a tax basis is $560,196,631, resulting in
gross unrealized appreciation and depreciation of $26,642,818 and
$52,429,919, respectively, or net unrealized depreciation of $25,787,101.
E) Distributions to shareholders Distributions to common and preferred
shareholders from net investment income are recorded by the fund on the
ex-dividend date. Distributions from capital gains, if any, are recorded on
the ex dividend date and paid at least annually. Dividends on re marketed
preferred shares become payable when, as and if declared by the Trustees.
Each dividend period for the remarketed preferred shares is generally a
28-day period for Series A and Series B shares, and a 7-day period for
Series C shares. The applicable dividend rate for the remarketed preferred
shares on April 30, 2003 was 1.08% for Series A, 1.09% for Series B and
1.19% for Series C. The amount and character of income and gains to be
distributed are determined in accordance with income tax regulations, which
may differ from generally accepted accounting principles. Reclassifications
are made to the fund's capital accounts to reflect income and gains
available for distribution (or available capital loss carryovers) under
income tax regulations.
F) Determination of net asset value Net asset value of the common shares is
determined by dividing the value of all assets of the fund, less all
liabilities and the liquidation preference of any outstanding remarketed
preferred shares, by the total number of common shares outstanding as of
period end.
Note 2
Management fee, administrative services and other transactions
Putnam Management is paid for management and investment advisory services
quarterly based on the average net assets of the fund. Such fee is based on
the following annual rates: 0.70% of the first $500 million of the average
weekly net assets, 0.60% of the next $500 million, 0.55% of the next $500
million and 0.50% thereafter.
If dividends payable on remarketed preferred shares during any dividend
payment period plus any expenses attributable to remarketed preferred shares
for that period exceed the fund's gross income attributable to the proceeds
of the remarketed preferred shares during that period, then the fee payable
to Putnam Management for that period will be reduced by the amount of the
excess (but not more than .70% of the liquidation preference of the
remarketed preferred shares outstanding during the period).
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and their
staff who provide administrative services to the fund. The aggregate amount
of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a wholly-owned subsidiary of Putnam, LLC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
The fund has entered into an arrangement with PFTC whereby credits realized
as a result of uninvested cash balances are used to reduce a portion of the
fund's expenses. For the six months ended April 30, 2003, the fund's
expenses were reduced by $10,781 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $737 has been allocated to the fund, and an additional fee for each
Trustees meeting attended. Trustees receive additional fees for attendance
at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which
allows the Trustees to defer the receipt of all or a portion of Trustees
fees payable on or after July 1, 1995. The deferred fees remain invested in
certain Putnam funds until distribution in accordance with the Deferral
Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have served
as a Trustee for at least five years. Benefits under the Pension Plan are
equal to 50% of the Trustee's average total retainer and meeting fees for
the three years preceding retirement. Pension expense for the fund is
included in Compensation of Trustees in the Statement of operations. Accrued
pension liability is included in Payable for compensation of Trustees in the
Statement of assets and liabilities.
Note 3
Purchases and sales of securities
During the six months ended April 30, 2003, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $89,403,022 and $77,040,786, respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Preferred shares
The Series A (550), Series B (550) and Series C (650) shares are redeemable
at the option of the fund on any dividend payment date at a redemption price
of $100,000 per share, plus an amount equal to any dividends accumulated on
a daily basis but unpaid through the redemption date (whether or not such
dividends have been declared) and, in certain circumstances, a call premium.
Under the Investment Company Act of 1940, the fund is required to maintain
asset coverage of at least 200% with respect to the remarketed preferred
shares as of the last business day of each month in which any such shares
are outstanding. Additionally, the fund is required to meet more stringent
asset coverage requirements under terms of the remarketed preferred shares
and the shares' rating agencies. Should these requirements not be met, or
should dividends accrued on the remarketed preferred shares not be paid, the
fund may be restricted in its ability to declare dividends to common
shareholders or may be required to redeem certain of the remarketed
preferred shares. At April 30, 2003, no such restrictions have been placed
on the fund.
FUND INFORMATION
About Putnam Investments
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition and
practice since 1830. Founded over 65 years ago, Putnam Investments was built
around the concept that a balance between risk and reward is the hallmark of
a well-rounded financial program. We presently manage over 100 mutual funds
in growth, value, blend, fixed income, and international.
Investment Manager
Putnam Investment Management, LLC
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary Trust Company
Legal Counsel
Ropes & Gray
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
Officers
George Putnam, III
President
Charles E. Porter
Executive Vice President, Treasurer and Principal Financial Officer
Patricia C. Flaherty
Senior Vice President
Karnig H. Durgarian
Vice President and Principal Executive Officer
Steven D. Krichmar
Vice President and Principal Financial Officer
Michael T. Healy
Assistant Treasurer and Principal Accounting Officer
Brett C. Browchuk
Vice President
Charles E. Haldeman, Jr.
Vice President
Lawrence J. Lasser
Vice President
Beth S. Mazor
Vice President
Richard A. Monaghan
Vice President
Stephen M. Oristaglio
Vice President
Gordon H. Silver
Vice President
Mark C. Trenchard
Vice President
Jerome J. Jacobs
Vice President
Judith Cohen
Clerk and Assistant Treasurer
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time, or visit
our Web site (www.putnaminvestments.com) any time for up-to-date information
about the fund's NAV.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
----------------------
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
----------------------
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88639 052 6/03
Item 2. Code of Ethics:
-----------------------
Not applicable
Item 3. Audit Committee Financial Expert:
-----------------------------------------
Not applicable
Item 4. Principal Accountant Fees and Services:
-----------------------------------------------
Not applicable
Items 5-6. [Reserved]
---------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed End
-------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. [Reserved]
------------------
Item 9. Controls and Procedures:
--------------------------------
The registrant's principal executive officer and principal financial
officers have concluded, based on their evaluation of the effectiveness
of the design and operation of the registrant's disclosure controls and
procedures as of a date within 90 days of the filing date of this report
on Form N-CSR, that the design and operation of such procedures are
effective to provide reasonable assurance that information required to
be disclosed by the investment company in the reports that it files or
submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized, and reported within the time periods specified in
the Commission's rules and forms.
There have been no significant changes in the registrant's internal
controls subsequent to the date of their evaluation.
Item 10. Exhibits:
------------------
(a) Not applicable
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act of 2002
are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: June 24, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
an 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 (Signature and Title): /s/Karnig H. Durgarian
---------------------------
Karnig H. Durgarian
Principal Executive Officer
Date: June 24, 2003
By (Signature and Title): /s/Charles E. Porter
---------------------------
Charles E. Porter
Principal Financial Officer
Date: June 24, 2003
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: June 24, 2003