Edgar Filing: WESTERN ASSET MANAGED MUNICIPALS FUND INC.

Western Asset Managed Municipals Funds Inc. (MMU)

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 811-06629

Western Asset Managed Municipals Fund Inc.

(Exact name of registrant as specified in charter)

620 Eighth Avenue, 49^th Floor, New York, NY 10018

(Address of principal executive offices) (Zip code)

Robert I. Frenkel, Esq.

Legg Mason & Co., LLC

100 First Stamford Place

Stamford, CT 06902

(Name and address of agent for service)

Registrant’s telephone number, including area code: (888) 777-0102

Date of fiscal year end: May 31

Date of reporting period: May 31, 2016

ITEM 1. REPORT TO STOCKHOLDERS.

The Annual Report to Stockholders is filed herewith.

LOGO


Annual Report		May 31, 2016

WESTERN ASSET

MANAGED MUNICIPALS FUND INC. (MMU)

LOGO

INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE


What’s inside
Letter from the chairman			II
Investment commentary			III
Fund overview			1
Fund at a glance			5
Spread duration			6
Effective duration			7
Schedule of investments			8
Statement of assets and liabilities			18
Statement of operations			19
Statements of changes in net assets			20
Statement of cash flows			21
Financial highlights			22
Notes to financial statements			24
Report of independent registered public accounting firm			35
Additional information			36
Annual chief executive officer and principal financial officer certifications			42
Other shareholder communications regarding accounting matters			43
Dividend reinvestment plan			44
Important tax information			46

Fund objective

The Fund seeks to maximize current income exempt from federal income tax* as is consistent with preservation of principal.

The Fund seeks to achieve its objective by investing primarily in long-term investment grade municipal debt securities issued by state and local governments, political subdivisions, agencies and public authorities (municipal obligations). Under normal market conditions, the Fund will invest at least 80% of its total assets in municipal obligations rated investment grade at the time of investment.

Letter from the chairman

LOGO

Dear Shareholder,

We are pleased to provide the annual report of Western Asset Managed Municipals Fund Inc. for the twelve-month reporting period ended May 31, 2016. Please read on for a detailed look at prevailing economic and market conditions during the Fund’s reporting period and to learn how those conditions have affected Fund performance.

As always, we remain committed to providing you with excellent service and a full spectrum of investment choices. We also remain committed to supplementing the support you receive from your financial advisor. One way we accomplish this is through our website, www.lmcef.com. Here you can gain immediate access to market and investment information, including:

•

Fund prices and performance,

•

Market insights and commentaries from our portfolio managers, and

•

A host of educational resources.

We look forward to helping you meet your financial goals.

Sincerely,

LOGO

Jane Trust, CFA

Chairman, President and Chief Executive Officer

June 30, 2016

*	Certain investors may be subject to the federal alternative minimum tax (“AMT”), and state and local taxes will apply. Capital gains, if any, are fully taxable. Please consult your personal tax or legal adviser.


II		Western Asset Managed Municipals Fund Inc.

Investment commentary

Economic review

The pace of U.S. economic activity moderated during the twelve months ended May 31, 2016 (the “reporting period”). Looking back, the U.S. Department of Commerce reported that second quarter 2015 U.S. gross domestic product (“GDP”)ⁱ growth was 3.9%. Third quarter 2015 GDP growth then moderated to 2.0%. Decelerating growth was primarily due to a downturn in private inventory investment and decelerations in exports, personal consumption expenditures (“PCE”), nonresidential fixed investment, state and local government spending, and residential fixed investment. The U.S. Department of Commerce then reported that fourth quarter 2015 GDP growth was 1.4%. Slower growth was attributed to downturns in nonresidential fixed investment and state and local government spending, along with a deceleration in PCE and less export activity. The U.S. Department of Commerce’s final reading for first quarter 2016 GDP growth — released after the reporting period ended — was 1.1%. This further slowdown was attributed to a number of factors, including a deceleration in PCE, a larger decrease in nonresidential fixed investment and a downturn in federal government spending.

Job growth in the U.S. was generally solid and was a tailwind for the economy during the reporting period. When the period began, unemployment was 5.3%, as reported by the U.S. Department of Labor. By May 2016, unemployment was 4.7%, its lowest level since December 2007.

After an extended period of maintaining the federal funds rateⁱⁱ at a historically low range between zero and 0.25%, the Federal Reserve Board (“Fed”)ⁱⁱⁱ increased the rate at its meeting on December 16, 2015. This marked the first rate hike since 2006. In particular, the U.S. central bank raised the federal funds rate to a range between 0.25% and 0.50%. In its official statement after the December 2015 meeting, the Fed said, “The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation….The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.” At its meetings that concluded on January 27, 2016, March 16, 2016, April 27, 2016, and June 15, 2016 (after the reporting period ended), the Fed kept rates on hold.

As always, thank you for your confidence in our stewardship of your assets.

Sincerely,

LOGO

Jane Trust, CFA

Chairman, President and Chief Executive Officer

June 30, 2016

All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results.


Western Asset Managed Municipals Fund Inc.		III

Investment commentary (cont’d)

ⁱ	Gross domestic product (“GDP”) is the market value of all final goods and services produced within a country in a given period of time.

ⁱⁱ	The federal funds rate is the rate charged by one depository institution on an overnight sale of immediately available funds (balances at the Federal Reserve) to another depository institution; the rate may vary from depository institution to depository institution and from day to day.

ⁱⁱⁱ	The Federal Reserve Board (“Fed”) is responsible for the formulation of U.S. policies designed to promote economic growth, full employment, stable prices and a sustainable pattern of international trade and payments.


IV		Western Asset Managed Municipals Fund Inc.

Fund overview

Q. What is the Fund’s investment strategy?

A. The Fund seeks to maximize current income exempt from federal income tax as is consistent with preservation of principal. We select securities primarily by identifying undervalued sectors and individual securities, while also selecting securities that we believe will benefit from changes in market conditions.

Under normal market conditions, the Fund invests primarily in investment grade municipal bonds, but it can also invest up to 20% of its total assets in municipal bonds rated below investment grade by a nationally recognized statistical rating organization or, if unrated, determined to be of equivalent quality. The Fund may also use a variety of derivative instruments for investment purposes, as well as for hedging or risk-management purposes.

At Western Asset Management Company (“Western Asset”), the Fund’s subadviser, we utilize a fixed-income team approach, with decisions derived from interaction among various investment management sector specialists. The sector teams are comprised of Western Asset’s senior portfolio management personnel, research analysts and an in-house economist. Under this team approach, management of client fixed-income portfolios will reflect a consensus of interdisciplinary views within the Western Asset organization.

The individuals responsible for development of investment strategy, day-to-day portfolio management, oversight and coordination of the Fund are S. Kenneth Leech, Robert E. Amodeo, David T. Fare and Dennis J. McNamara. It is anticipated that Mr. McNamara will step down as a member of the Fund’s portfolio management team on or about August 1, 2016.

Q. What were the overall market conditions during the Fund’s reporting period?

A. Most spread sectors (non-Treasuries) posted positive returns, but generated mixed results versus equal-durationⁱ Treasuries over the twelve months ended May 31, 2016. The fixed income market was volatile at times given signs of moderating economic growth, uncertainties regarding future Federal Reserve Board (“Fed”)ⁱⁱ monetary policy and a number of geopolitical issues.

Short-term Treasury yields moved higher, whereas long-term Treasury yields declined during the twelve months ended May 31, 2016. Two-year Treasury yields rose from 0.61% at the beginning of the period to 0.87% at the end of the period. Their peak of 1.09% occurred on December 29, 2015 and they were as low as 0.55% on July 8, 2015. Ten-year Treasury yields were 2.12% at the beginning of the period and ended the period at 1.84%. Their peak of 2.50% occurred on June 10, 2015 and their low of 1.63% was on February 11, 2016.

The municipal bond market outperformed its taxable bond counterpart during the twelve-month reporting period. Over that time, the Barclays Municipal Bond Indexⁱⁱⁱ and the Barclays U.S. Aggregate Index^iv returned 5.87% and 2.99%, respectively. The overall creditworthiness of the municipal bond market has improved as the U.S. economy continues to expand, resulting in a better labor market and higher confidence levels. The municipal bond market was also supported by generally solid investor demand.


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		1

Fund overview (cont’d)

Q. How did we respond to these changing market conditions?

A. During the reporting period we eliminated the Fund’s exposure to Puerto Rico. The Fund employed the use of short U.S. Treasury futures during the reporting period to manage duration. This strategy modestly detracted from performance.

During the reporting period, we utilized leverage in the Fund. We generally maintained leverage as a percentage of gross assets of approximately 28% during the period. The use of leverage was additive for results given the positive performance of the municipal bond market over the twelve months ended May 31, 2016.

Performance review

For the twelve months ended May 31, 2016, Western Asset Managed Municipals Fund Inc. returned 7.05% based on its net asset value (“NAV”)^v and 12.19% based on its New York Stock Exchange (“NYSE”) market price per share. The Fund’s unmanaged benchmark, the Barclays Municipal Bond Index, returned 5.87% for the same period. The Lipper General & Insured Municipal Debt (Leveraged) Closed-End Funds Category Average^vi returned 10.20% over the same time frame. Please note that Lipper performance returns are based on each fund’s NAV.

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 or legal adviser.

During the twelve-month period, the Fund made distributions to shareholders totaling $0.78 per share.* The performance table shows the Fund’s twelve-month total return based on its NAV and market price as of May 31, 2016. Past performance is no guarantee of future results.


Performance Snapshot as of May 31, 2016
Price Per Share	12-Month Total Return**
$14.60 (NAV)		7.05	%†
$14.82 (Market Price)		12.19	%‡

All figures represent past performance and are not a guarantee of future results.

** Total returns are based on changes in NAV or market price, respectively. Returns reflect the deduction of all Fund expenses, including management fees, operating expenses, and other Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors may pay on distributions or the sale of shares.

† Total return assumes the reinvestment of all distributions at NAV.

‡ Total return assumes the reinvestment of all distributions in additional shares in accordance with the Fund’s Dividend Reinvestment Plan.

Q. What were the leading contributors to performance?

A. The largest contributor to the Fund’s relative performance during the reporting period was its yield curve^vii positioning. In particular, having an overweight to the long end of the curve (20+ years) was beneficial as the yield curve flattened, with long-term rates declining, whereas short-term rates moved higher in anticipation of Fed rate hikes. We tactically adjusted the Fund’s duration during the period. Overall, our duration positioning was modestly additive to performance.

Our positioning in a number of sectors contributed to performance. More specifically,

*	For the tax character of distributions paid during the fiscal year ended May 31, 2016, please refer to page 34 of this report.


2		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

an overweight to the Industrial Revenue sector, along with security selection in the Water & Sewer and Power sectors were beneficial for results.

The Fund’s quality biases also contributed to performance. In particular, having an overweight to municipal securities rated A and BBB, combined with underweights to securities rated AAA and AA, benefited results as lower rated municipal bonds outperformed their higher rated counterparts over the twelve-month period.

Q. What were the leading detractors from performance?

A. The Fund outperformed the benchmark during the reporting period. The largest detractor from our relative performance was security selection in the Special Tax Obligation and Education sectors. Elsewhere, while an overweight to Industrial Revenue was positive for results, security selection within the sector was a drag on performance.

Looking for additional information?

The Fund is traded under the symbol “MMU” and its closing market price is available in most newspapers under the NYSE listings. The daily NAV is available on-line under the symbol “XMMUX” on most financial websites. Barron’s and the Wall Street Journal’s Monday edition both carry closed-end fund tables that provide additional information. In addition, the Fund issues a quarterly press release that can be found on most major financial websites as well as www.lmcef.com (click on the name of the Fund).

In a continuing effort to provide information concerning the Fund, shareholders may call 1-888-777-0102 (toll free), Monday through Friday from 8:00 a.m. to 5:30 p.m. Eastern Time, for the Fund’s current NAV, market price and other information.

Thank you for your investment in Western Asset Managed Municipals Fund Inc. As always, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the Fund’s investment goals.

Sincerely,

Western Asset Management Company

June 20, 2016

RISKS: The Fund’s investments are subject to a number of risks such as liquidity risk, interest rate risk, credit risk, leveraging risk and management risk. As interest rates rise, the price of fixed-income investments declines. Lower rated, higher-yielding bonds, known as “high yield” or “junk” bonds, are subject to greater credit risk than higher-rated investment grade securities. Municipal securities purchased by the Fund may be adversely affected by changes in the financial condition of municipal issuers and insurers, regulatory and political developments, uncertainties and public perceptions, and other factors. The Fund may make significant investments in derivative instruments. Derivative instruments can be illiquid, may disproportionately increase losses and could have a potentially large impact on Fund performance. Leverage may result in greater volatility of NAV and market price of common shares and may increase a shareholder’s risk of loss.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		3

Fund overview (cont’d)

subject to change at any time and may not be representative of the portfolio managers’ current or future investments. The Fund’s portfolio composition is subject to change at any time.

All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results. All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

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.

ⁱ	Duration is the measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows.

ⁱⁱ	The Federal Reserve Board (“Fed”) is responsible for the formulation of policies designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱⁱ	The Barclays Municipal Bond Index is a market value weighted index of investment grade municipal bonds with maturities of one year or more.

^iv	The Barclays U.S. Aggregate Index is a broad-based bond index comprised of government, corporate, mortgage- and asset-backed issues, rated investment grade or higher, and having at least one year to maturity.

Net asset value (“NAV”) is calculated by subtracting total liabilities, including liabilities associated with financial leverage (if any), from the closing value of all securities held by the Fund (plus all other assets) and dividing the result (total net assets) by the total number of the common shares outstanding. The NAV fluctuates with changes in the market prices of securities in which the Fund has invested. However, the price at which an investor may buy or sell shares of the Fund is the Fund’s market price as determined by supply of and demand for the Fund’s shares.

^vi

Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. Returns are based on the twelve-month period ended May 31, 2016, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 69 funds in the Fund’s Lipper category.

^vii	The yield curve is the graphical depiction of the relationship between the yield on bonds of the same credit quality but different maturities.


4		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

Fund at a glance^† (unaudited)

Investment breakdown (%) as a percent of total investments

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†	The bar graph above represents the composition of the Fund’s investments as of May 31, 2016 and May 31, 2015 and does not include derivatives such as futures contracts. The Fund is actively managed. As a result, the composition of the Fund’s investments is subject to change at any time.


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		5

Spread duration (unaudited)

Economic exposure — May 31, 2016

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Total Spread Duration
MMU		— 5.91
Benchmark		— 5.68

Spread duration measures the sensitivity to changes in spreads. The spread over Treasuries is the annual risk-premium demanded by investors to hold non-Treasury securities. Spread duration is quantified as the % change in price resulting from a 100 basis points change in spreads. For a security with positive spread duration, an increase in spreads would result in a price decline and a decline in spreads would result in a price increase. This chart highlights the market sector exposure of the Fund’s portfolio and the exposure relative to the selected benchmark as of the end of the reporting period.


Benchmark		— Barclays Municipal Bond Index
MMU		— Western Asset Managed Municipals Fund Inc.


6		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

Effective duration (unaudited)

Interest rate exposure — May 31, 2016

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Total Effective Duration
MMU		— 5.67 years
Benchmark		— 5.81 years

Effective duration measures the sensitivity to changes in relevant interest rates. Effective duration is quantified as the % change in price resulting from a 100 basis points change in interest rates. For a security with positive effective duration, an increase in interest rates would result in a price decline and a decline in interest rates would result in a price increase. This chart highlights the interest rate exposure of the Fund’s sectors relative to the selected benchmark sectors as of the end of the reporting period.


Benchmark		— Barclays Municipal Bond Index
MMU		— Western Asset Managed Municipals Fund Inc.


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		7

Schedule of investments

May 31, 2016

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
Municipal Bonds — 138.3%
Alabama — 6.4%
Jefferson County, AL, Sewer Revenue:
AGM		5.500	%		10/1/53	$	1,400,000	$	1,609,104
Convertible CAB, Subordinated Lien		0.000	%		10/1/50		11,580,000		8,750,427	^(a)
Subordinated Lien Warrants		6.000	%		10/1/42		9,230,000		11,027,173
Subordinated Lien Warrants		6.500	%		10/1/53		6,900,000		8,489,760
Lower Alabama Gas District, Gas Project Revenue		5.000	%		9/1/46		8,000,000		10,534,000
Total Alabama									40,410,464
Arizona — 4.9%
Greater Arizona Development Authority, Development Authority Infrastructure Revenue, Pinal County Road Project, NATL		5.000	%		8/1/19		2,205,000		2,220,898	^(b)
Navajo Nation, AZ, Revenue		5.500	%		12/1/30		950,000		1,073,671	^(c)
Phoenix, AZ, Civic Improvement Corp. Airport Revenue		5.000	%		7/1/40		5,000,000		5,586,600
Salt Verde, AZ, Financial Corp. Senior Gas Revenue		5.250	%		12/1/28		2,000,000		2,496,820
Salt Verde, AZ, Financial Corp. Senior Gas Revenue		5.000	%		12/1/32		10,000,000		12,351,100
Salt Verde, AZ, Financial Corp. Senior Gas Revenue		5.000	%		12/1/37		5,500,000		6,872,855
Total Arizona									30,601,944
California — 20.2%
Anaheim, CA, Public Financing Authority Lease Revenue		5.000	%		5/1/46		2,000,000		2,367,860
Bay Area Toll Authority, CA, Toll Bridge Revenue:
San Francisco Bay Area		1.500	%		4/1/24		5,500,000		5,468,320	^(a)(d)
San Francisco Bay Area		5.125	%		4/1/39		21,700,000		24,234,560	^(b)
California Health Facilities Financing Authority Revenue, Stanford Hospital & Clinics		5.150	%		11/15/40		2,000,000		2,310,300
California Housing Finance Agency Revenue, Home Mortgage		4.700	%		8/1/24		2,110,000		2,161,716	^(e)
California State PCFA, Water Furnishing Revenue		5.000	%		11/21/45		12,500,000		13,755,250	^(c)(e)
California State PCFA, Water Furnishing Revenue		5.000	%		11/21/45		5,000,000		5,175,950	^(c)
California State, GO		1.005	%		12/1/17		4,000,000		4,001,440	^(a)(d)
California Statewide CDA Revenue, Methodist Hospital Project, FHA		6.625	%		8/1/29		5,235,000		6,156,098	^(b)
California Statewide CDA, Student Housing Revenue, Provident Group-Pomona Properties LLC		5.750	%		1/15/45		1,770,000		1,962,523
Imperial Irrigation District, CA, Electric Revenue		5.500	%		11/1/41		2,750,000		3,184,637
Inland Valley, CA, Development Agency, Successor Agency Tax Allocation Revenue		5.000	%		9/1/44		2,405,000		2,694,490
Los Angeles County, CA, Public Works Financing Authority, Lease Revenue:
Multiple Capital Project II		5.000	%		8/1/32		3,000,000		3,553,560

See Notes to Financial Statements.


8		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
California — continued
Multiple Capital Project II		5.000	%		8/1/37	$	1,000,000	$	1,171,160
Los Angeles, CA, Convention & Exhibition Center Authority, Lease Revenue		5.125	%		8/15/22		8,000,000		8,758,480	^(b)
M-S-R Energy Authority, CA, Gas Revenue		7.000	%		11/1/34		3,430,000		5,109,328
M-S-R Energy Authority, CA, Gas Revenue		6.500	%		11/1/39		8,000,000		11,665,200
Modesto, CA, Irrigation District, COP, Capital Improvements		6.000	%		10/1/39		6,500,000		7,281,690
River Islands, CA, Public Financing Authority Special Tax, Community Facilities District No. 2003-1		5.500	%		9/1/45		2,000,000		2,201,860
Riverside County, CA, Transportation Commission Sales Tax Revenue, Limited Tax		5.250	%		6/1/39		900,000		1,066,797
Riverside County, CA, Transportation Commission Toll Revenue:
Senior Lien		5.750	%		6/1/44		200,000		230,652
Senior Lien		5.750	%		6/1/48		600,000		689,934
San Bernardino County, CA, COP, Arrowhead Project		5.125	%		8/1/24		5,185,000		5,786,927
Shafter Wasco Irrigation District Revenue, CA, COP		5.000	%		11/1/40		5,000,000		5,598,800
Total California									126,587,532
Colorado — 10.3%
Colorado State Health Facilities Authority Revenue:
Catholic Health Initiatives		5.000	%		9/1/41		4,000,000		4,035,800
Sisters Leavenworth		5.000	%		1/1/35		6,000,000		6,631,560
Denver, CO, City & County Airport Revenue		6.125	%		11/15/25		10,945,000		14,387,860	^(e)(f)
Denver, CO, City & County Airport Revenue		6.125	%		11/15/25		13,630,000		13,690,517	^(e)
Public Authority for Colorado Energy, Natural Gas Purchase Revenue		6.500	%		11/15/38		18,000,000		25,814,700
Total Colorado									64,560,437
District of Columbia — 2.4%
District of Columbia, Hospital Revenue, Children’s Hospital Obligation, AGM		5.450	%		7/15/35		13,760,000		15,051,651	^(b)
Florida — 10.4%
Florida State Development Finance Corp., Educational Facilities Revenue, Renaissance Charter School Inc. Project		6.125	%		6/15/46		560,000		577,405	^(c)
Florida State Development Finance Corp., Senior Living Revenue:
Tuscan Isle Champions Gate Project		6.375	%		6/1/46		750,000		760,223	^(c)
Tuscan Isle Obligated Group		7.000	%		6/1/45		300,000		318,693	^(c)
Florida State Mid-Bay Bridge Authority Revenue		5.000	%		10/1/30		2,410,000		2,786,803
Miami-Dade County, FL, Aviation Revenue		5.000	%		10/1/30		6,000,000		6,816,240	^(e)
Miami-Dade County, FL, Aviation Revenue		5.500	%		10/1/41		10,000,000		11,227,600

See Notes to Financial Statements.


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		9

Schedule of investments (cont’d)

May 31, 2016

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
Florida — continued
Miami-Dade County, FL, Aviation Revenue, Miami International Airport		5.375	%		10/1/35	$	10,705,000	$	12,315,353
Miami-Dade County, FL, Expressway Authority Toll System Revenue		5.000	%		7/1/40		9,000,000		10,078,380
Orange County, FL, Health Facilities Authority Revenue:
Balance Hospital-Orlando Regional Healthcare, AGM		5.000	%		11/1/35		2,670,000		2,877,913
Hospital-Orlando Regional Healthcare, AGM		5.000	%		11/1/35		1,875,000		2,060,775	^(b)
Orange County, FL, IDA Revenue, Vitag Florida LLC Project		8.000	%		7/1/36		840,000		883,688	^(c)(e)
Orange County, FL, School Board, COP, AGC		5.500	%		8/1/34		8,000,000		9,128,080	^(b)
Orlando, FL, State Sales Tax Payments Revenue		5.000	%		8/1/32		5,000,000		5,297,000
Total Florida									65,128,153
Georgia — 4.3%
Atlanta, GA, Water & Wastewater Revenue		6.250	%		11/1/39		13,000,000		15,287,870	^(b)
DeKalb, Newton & Gwinnett Counties, GA, Joint Development Authority Revenue, GGC Foundation LLC Project		6.125	%		7/1/40		6,220,000		7,084,020
Main Street Natural Gas Inc., GA, Gas Project Revenue		5.000	%		3/15/22		4,000,000		4,607,320
Total Georgia									26,979,210
Hawaii — 1.2%
Hawaii State Airports System Revenue		5.000	%		7/1/39		7,000,000		7,835,800
Illinois — 9.5%
Chicago, IL, GO		5.500	%		1/1/32		3,300,000		3,344,880
Chicago, IL, O’Hare International Airport Revenue		5.000	%		1/1/31		1,000,000		1,160,090	^(e)
Chicago, IL, O’Hare International Airport Revenue		5.000	%		1/1/35		7,000,000		8,000,510	^(e)
Chicago, IL, O’Hare International Airport Revenue		5.625	%		1/1/35		6,415,000		7,445,634
Chicago, IL, O’Hare International Airport Revenue		5.750	%		1/1/39		6,000,000		6,982,320
Chicago, IL, Wastewater Transmission Revenue, Second Lien		5.000	%		1/1/44		1,000,000		1,101,860
Illinois State Finance Authority Revenue:
Advocate Health Care & Hospitals Corp. Network		6.250	%		11/1/28		2,445,000		2,760,038	^(b)
Depaul University		6.125	%		10/1/40		5,000,000		5,987,800
Memorial Health System		5.500	%		4/1/39		7,000,000		7,751,660
Illinois State Toll Highway Authority Revenue, Senior		5.000	%		1/1/41		1,400,000		1,658,538	^(g)
Metropolitan Pier & Exposition Authority, IL, Dedicated State Tax Revenue, McCormick Project, State Appropriations		5.250	%		6/15/50		12,000,000		12,755,520
Metropolitan Pier & Exposition Authority, IL, Revenue, CAB-McCormick Place Expansion Project		0.000	%		12/15/52		3,100,000		523,156
Total Illinois									59,472,006
Indiana — 4.0%
Indiana Finance Authority, Wastewater Utility Revenue, CWA Authority		5.000	%		10/1/41		5,000,000		5,643,700

See Notes to Financial Statements.


10		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
Indiana — continued
Indiana State Finance Authority Revenue:
I-69 Development Partners LLC		5.000	%		9/1/46	$	1,750,000	$	1,890,910	^(e)
Private Activity-Ohio River Bridges East End Crossing Project		5.000	%		7/1/44		5,000,000		5,466,450	^(e)
Indianapolis, IN, Thermal Energy System Revenue, AGC		5.000	%		10/1/25		5,000,000		5,432,400
Richmond, IN, Hospital Authority Revenue, Reid Hospital & Health Care Services Inc. Project		6.625	%		1/1/39		5,000,000		5,707,050	^(b)
Valparaiso, IN, Exempt Facilities Revenue, Pratt Paper LLC Project		7.000	%		1/1/44		1,000,000		1,234,910	^(e)
Total Indiana									25,375,420
Kentucky — 1.8%
Louisville & Jefferson County, KY, Metropolitan Government Health System Revenue, Norton Healthcare Inc.		5.250	%		10/1/36		11,000,000		11,151,360
Louisiana — 0.9%
St. Charles Parish, LA, Gulf Zone Opportunity Zone Revenue, Valero Refining-New Orleans LLC		4.000	%		6/1/22		5,000,000		5,447,100	^(a)(d)
Massachusetts — 7.0%
Massachusetts State DFA Revenue:
Boston University		5.000	%		10/1/29		3,000,000		3,346,800
Broad Institute Inc.		5.250	%		4/1/37		8,000,000		9,250,480
Milford Regional Medical Center		5.750	%		7/15/43		500,000		553,705
Partners Healthcare System		5.000	%		7/1/47		5,750,000		6,837,267
Massachusetts State HEFA Revenue, Suffolk University		5.750	%		7/1/39		8,000,000		8,990,480	^(b)
Massachusetts State Housing Finance Agency, Housing Revenue		7.000	%		12/1/38		4,575,000		5,004,730
Massachusetts State School Building Authority, Sales Tax Revenue		5.000	%		5/15/43		3,000,000		3,530,130
Massachusetts State Water Resources Authority Revenue, Green Bond		5.000	%		8/1/40		5,500,000		6,666,385
Total Massachusetts									44,179,977
Michigan — 3.6%
Lansing, MI, Board of Water & Light Utility System Revenue		5.000	%		7/1/37		7,000,000		7,969,150
Michigan State Building Authority Revenue, Facilities Program		5.250	%		10/15/47		650,000		759,564
Michigan State Finance Authority Limited Obligation Revenue, Higher Education, Thomas M Cooley Law School Project		6.750	%		7/1/44		2,120,000		2,275,142	^(c)
Michigan State Finance Authority Revenue:
Local Government Loan Program, Detroit Water & Sewer Department		5.000	%		7/1/33		625,000		726,912

See Notes to Financial Statements.


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		11

Schedule of investments (cont’d)

May 31, 2016

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
Michigan — continued
Local Government Loan Program, Detroit Water & Sewer Department		5.000	%		7/1/34	$	250,000	$	287,540
Local Government Loan Program, Detroit Water & Sewer Department		5.000	%		7/1/35		300,000		345,819
Senior Lien Detroit Water & Sewer		5.000	%		7/1/33		1,270,000		1,465,745
Senior Lien Detroit Water & Sewer		5.000	%		7/1/44		1,320,000		1,451,789
Royal Oak, MI, Hospital Finance Authority Revenue:
William Beaumont Hospital		5.000	%		9/1/39		2,500,000		2,850,550
William Beaumont Hospital		8.250	%		9/1/39		4,000,000		4,658,560	^(b)
Total Michigan									22,790,771
Minnesota — 0.3%
Western Minnesota Municipal Power Agency Revenue		5.000	%		1/1/46		1,530,000		1,765,130
Missouri — 2.7%
Kansas City, MO, IDA, Senior Living Facilities Revenue, Kansas City United Methodist Retirement Home Inc.		6.000	%		11/15/51		900,000		918,171	^(c)
Kansas City, MO, Water Revenue		5.250	%		12/1/32		1,000,000		1,102,620
Missouri State HEFA Revenue:
Children’s Mercy Hospital		5.625	%		5/15/39		6,000,000		6,693,120
Lutheran Senior Services		5.000	%		2/1/44		2,710,000		3,027,287
Platte County, MO, IDA Revenue, Improvement Zona Rosa Retail Project, GTD		5.000	%		12/1/32		5,000,000		5,289,000
Total Missouri									17,030,198
Nebraska — 0.5%
Nebraska Public Power Generation Agency Revenue, Whelan Energy Center Unit 2-A, AMBAC		5.000	%		1/1/25		3,000,000		3,075,480	^(b)
Nevada — 2.2%
Reno, NV, Hospital Revenue, Washoe Medical Centre, AGM		5.500	%		6/1/33		12,750,000		13,745,775
New Jersey — 9.1%
New Jersey Institute of Technology Revenue		5.000	%		7/1/45		750,000		858,788
New Jersey State EDA Revenue		5.000	%		6/15/26		2,500,000		2,782,800
New Jersey State EDA Revenue:
Continental Airlines Inc. Project		4.875	%		9/15/19		1,865,000		1,972,890	^(e)
Continental Airlines Inc. Project		5.125	%		9/15/23		2,000,000		2,208,700	^(e)
Continental Airlines Inc. Project		5.250	%		9/15/29		3,000,000		3,336,270	^(e)
Private Activity-The Goethals Bridge Replacement Project, AGM		5.125	%		7/1/42		2,500,000		2,898,025	^(e)
School Facilities Construction, SIFMA		2.000	%		3/1/28		15,000,000		13,297,800	^(a)
New Jersey State Higher Education Assistance Authority, Student Loan Revenue		5.625	%		6/1/30		12,320,000		13,450,237

See Notes to Financial Statements.


12		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
New Jersey — continued
New Jersey State Higher Education Assistance Authority, Student Loan Revenue, AGC		6.125	%		6/1/30	$	7,035,000	$	7,487,069	^(e)
New Jersey State Housing & Mortgage Finance Agency Revenue		6.375	%		10/1/28		1,165,000		1,201,499
New Jersey State Turnpike Authority Revenue		0.880	%		1/1/17		5,000,000		4,999,550	^(a)
New Jersey State Turnpike Authority Revenue		1.080	%		1/1/18		2,500,000		2,497,175	^(a)(d)
Total New Jersey									56,990,803
New Mexico — 0.9%
New Mexico State Hospital Equipment Loan Council, Hospital Revenue, Presbyterian Healthcare Services		6.125	%		8/1/28		5,000,000		5,555,550	^(b)
New York — 12.8%
Liberty, NY, Development Corp. Revenue:
Goldman Sachs Headquarters		5.250	%		10/1/35		4,000,000		5,127,880
Goldman Sachs Headquarters		5.500	%		10/1/37		1,485,000		1,960,631
Long Island Power Authority, NY, Electric System Revenue		6.000	%		5/1/33		24,570,000		28,154,517	^(b)
MTA, NY, Revenue		5.250	%		11/15/40		5,000,000		5,787,800
New York City, NY, Municipal Water Finance Authority, Water & Sewer System Revenue, Second General Resolution Fiscal 2013		5.000	%		6/15/47		5,000,000		5,857,850	^(h)
New York City, NY, TFA, Building Aid Revenue		5.000	%		1/15/32		4,000,000		4,395,800
New York State Liberty Development Corp., Liberty Revenue:
3 World Trade Center LLC Project		5.000	%		11/15/44		1,750,000		1,973,300	^(c)
4 World Trade Center LLC Project		5.750	%		11/15/51		5,000,000		5,876,000
Second Priority, Bank of America Tower		5.125	%		1/15/44		1,000,000		1,128,260
New York State Transportation Development Corp., Special Facilities Revenue, Laguardia Airport Terminal B Redevelopment Project		5.000	%		7/1/41		8,000,000		9,011,360	^(e)(g)
Port Authority of New York & New Jersey Revenue		5.000	%		1/15/41		2,750,000		3,160,493
Port Authority of New York & New Jersey Revenue		5.000	%		10/15/41		6,400,000		7,704,832
Total New York									80,138,723
North Carolina — 0.3%
Harnett County, NC, GO, Custody Receipts, AMBAC		5.250	%		6/1/24		110,000		110,365
North Carolina Department of Transportation Private Activity Revenue, I-77 Hot Lanes Project		5.000	%		6/30/54		1,500,000		1,634,625	^(e)
Total North Carolina									1,744,990
Ohio — 1.9%
JobsOhio Beverage System Statewide Liquor Profits Revenue		5.000	%		1/1/38		8,000,000		9,179,840
Ohio State Water Development Authority, Environmental Improvement Revenue, U.S. Steel Corp. Project		6.600	%		5/1/29		3,000,000		2,793,780
Total Ohio									11,973,620

See Notes to Financial Statements.


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		13

Schedule of investments (cont’d)

May 31, 2016

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
Oregon — 0.1%
Umatilla County, OR, Hospital Facility Authority Revenue, Catholic Health Initiatives		5.000	%		5/1/32	$	510,000	$	511,632
Pennsylvania — 3.3%
Cumberland County, PA, Municipal Authority Revenue, Diakon Lutheran Social Ministries Project		5.000	%		1/1/30		2,375,000		2,766,994
East Hempfield Township, PA, IDA Revenue, Student Services Inc.-Student Housing Project-Millersville University		5.000	%		7/1/47		550,000		582,906
Pennsylvania State Public School Building Authority Lease Revenue, Philadelphia School District Project, AGM		5.000	%		6/1/33		7,255,000		7,365,131
Pennsylvania State Turnpike Commission Revenue		5.250	%		12/1/41		6,000,000		6,895,320
Philadelphia, PA, School District, GO		5.000	%		9/1/33		1,755,000		1,906,369
Philadelphia, PA, Water & Wastewater Revenue		5.000	%		7/1/45		1,000,000		1,158,040
Total Pennsylvania									20,674,760
Rhode Island — 0.9%
Rhode Island State Health & Educational Building Corp. Revenue, Hospital Financing		7.000	%		5/15/39		5,000,000		5,623,800
South Carolina — 0.5%
South Carolina State Ports Authority Revenue		5.250	%		7/1/40		2,500,000		2,824,975
Tennessee — 0.0%
Hardeman County, TN, Correctional Facilities Corp., Correctional Facilities Revenue		7.750	%		8/1/17		270,000		270,605
Texas — 14.9%
Alamo, TX, Regional Mobility Authority Revenue, Senior Lien		5.000	%		6/15/46		1,300,000		1,536,353	^(g)
Dallas-Fort Worth, TX, International Airport Revenue, Joint Improvement		5.000	%		11/1/45		8,500,000		9,525,525
Grand Parkway Transportation Corp., TX, System Toll Revenue, Convertible CAB, Step Bond		0.000	%		10/1/36		4,000,000		3,500,120	^(a)
Harris County, TX, Cultural Education Facilities Finance Corp. Revenue, Memorial Herman Health System		1.350	%		6/1/23		4,500,000		4,518,765	^(a)
Harris County, TX, Health Facilities Development Corp. Revenue, School Health Care System Revenue		5.750	%		7/1/27		1,000,000		1,289,940	^(f)
Houston, TX, Airport Systems Revenue, United Airlines Inc.		5.000	%		7/15/30		5,500,000		6,180,075	^(e)
Houston, TX, Utility System Revenue, Combined First Lien		5.000	%		11/15/44		1,000,000		1,178,510
Love Field Airport Modernization Corp., TX, Special Facilities Revenue, Southwest Airlines Co. Project		5.250	%		11/1/40		14,500,000		16,180,985
Mission, TX, Economic Development Corp. Revenue, Senior Lien, Natgasoline Project		5.750	%		10/1/31		540,000		571,558	^(c)(e)
New Hope Cultural Education Facilities Finance Corp., TX, Student Housing Revenue, Collegiate Housing College Station LLC, Texas A&M University Project, AGM		5.000	%		4/1/46		750,000		839,490
North Texas Tollway Authority Revenue		5.750	%		1/1/33		5,000,000		5,382,300	^(b)

See Notes to Financial Statements.


14		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
Texas — continued
North Texas Tollway Authority Revenue		5.000	%		1/1/39	$	825,000	$	981,115	^(g)
North Texas Tollway Authority Revenue		5.000	%		1/1/40		2,000,000		2,318,600
North Texas Tollway Authority Revenue		5.000	%		1/1/45		2,105,000		2,436,790
North Texas Tollway Authority Revenue:
System-First Tier		5.750	%		1/1/40		7,490,000		8,068,827	^(b)
System-First Tier		5.750	%		1/1/40		7,510,000		8,068,669
Texas State Municipal Gas Acquisition & Supply Corp. I, Gas Supply Revenue		5.625	%		12/15/17		795,000		832,150
Texas State Municipal Gas Acquisition & Supply Corp. III, Gas Supply Revenue		5.000	%		12/15/27		8,550,000		9,830,961
Texas State Private Activity Bond Surface Transportation Corp. Revenue:
LBJ Infrastructure Group LLC		7.000	%		6/30/40		7,000,000		8,366,050
Senior Lien, Blueridge Transportation Group LLC		5.000	%		12/31/45		1,600,000		1,827,408	^(e)
Total Texas									93,434,191
Virginia — 0.9%
Virginia State Small Business Financing Authority Revenue:
Elizabeth River Crossings OpCo LLC Project		5.250	%		1/1/32		3,000,000		3,442,410	^(e)
Elizabeth River Crossings OpCo LLC Project		5.500	%		1/1/42		2,000,000		2,298,620	^(e)
Total Virginia									5,741,030
Washington — 0.1%
Washington State HFC Revenue:
Heron’s Key		6.500	%		7/1/30		350,000		363,332	^(c)
Heron’s Key		6.750	%		7/1/35		370,000		384,722	^(c)
Total Washington									748,054
Total Investments before Short-Term Investments (Cost — $762,810,119)									867,421,141
Short-Term Investments — 1.7%
California — 0.4%
Madera, CA, Public Financing Authority Lease Revenue, Municipal Golf Course Refing Project, LOC-Union Bank N.A.		0.410	%		11/1/23		1,900,000		1,900,000	^(i)(j)
San Diego County, CA, Regional Transportation Commission, Sales Tax Revenue, SPA-JPMorgan Chase		0.380	%		4/1/38		500,000		500,000	^(i)(j)
Total California									2,400,000
Connecticut — 0.2%
Stamford, CT, Housing Authority Revenue, Fairfield Apartments, LOC-FNMA		0.400	%		12/1/28		1,700,000		1,700,000	^(e)(i)(j)
District of Columbia — 0.2%
Metropolitan Washington DC, Airports Authority System Revenue, LOC-Royal Bank of Canada		0.410	%		10/1/39		1,300,000		1,300,000	^(e)(i)(j)

See Notes to Financial Statements.


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		15

Schedule of investments (cont’d)

May 31, 2016

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
Massachusetts — 0.1%
Massachusetts State DFA Revenue, Partners Healthcare Systems Inc., SPA-Wells Fargo Bank N.A.		0.370	%		7/1/46	$	200,000	$	200,000	^(i)(j)
Massachusetts State HEFA Revenue, Partners Healthcare Systems, SPA-JPMorgan Chase		0.370	%		7/1/27		300,000		300,000	^(i)(j)
Total Massachusetts									500,000
New York — 0.8%
Nassau County, NY, Interim Finance Authority Revenue, SPA-Sumitomo Mitsui Banking, Sales Tax Secured		0.400	%		11/15/21		5,000,000		5,000,000	^(i)(j)
Total Short-Term Investments (Cost — $10,900,000)									10,900,000
Total Investments — 140.0% (Cost — $773,710,119#)									878,321,141
Auction Rate Cumulative Preferred Stock, at Liquidation Value — (5.1)%									(32,075,000	)
Variable Rate Demand Preferred Stock, at Liquidation Value — (34.7)%									(217,575,000	)
Other Assets in Excess of Liabilities — (0.2)%									(1,420,403	)
Total Net Assets Applicable to Common Shareholders — 100.0%								$	627,250,738

^(a)	Variable rate security. Interest rate disclosed is as of the most recent information available.

^(b)	Pre-Refunded bonds are escrowed with U.S. government obligations and/or U.S. government agency securities and are considered by the manager to be triple-A rated even if issuer has not applied for new ratings.

^(c)

Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors, unless otherwise noted.

^(d)	Maturity date shown represents the mandatory tender date.

^(e)	Income from this issue is considered a preference item for purposes of calculating the alternative minimum tax (“AMT”).

^(f)	Bonds are escrowed to maturity by government securities and/or U.S. government agency securities and are considered by the manager to be triple-A rated even if issuer has not applied for new ratings.

^(g)	Security is purchased on a when-issued basis.

^(h)	All or a portion of this security is held at the broker as collateral for open futures contracts.

⁽ⁱ⁾	Variable rate demand obligations have a demand feature under which the Fund can tender them back to the issuer or liquidity provider on no more than 7 days notice.

^(j)	Maturity date shown is the final maturity date. The security may be sold back to the issuer before final maturity.

#	Aggregate cost for federal income tax purposes is $772,769,097.


Abbreviations used in this schedule:
AGC		— Assured Guaranty Corporation — Insured Bonds
AGM		— Assured Guaranty Municipal Corporation — Insured Bonds
AMBAC		— American Municipal Bond Assurance Corporation — Insured Bonds
CAB		— Capital Appreciation Bonds
CDA		— Communities Development Authority
COP		— Certificates of Participation
DFA		— Development Finance Agency
EDA		— Economic Development Authority

See Notes to Financial Statements.


16		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

Western Asset Managed Municipals Fund Inc.


Abbreviations used in this schedule (cont’d):
FHA		— Federal Housing Administration
FNMA		— Federal National Mortgage Association
GO		— General Obligation
GTD		— Guaranteed
HEFA		— Health & Educational Facilities Authority
HFC		— Housing Finance Commission
IDA		— Industrial Development Authority
LOC		— Letter of Credit
MTA		— Metropolitan Transportation Authority
NATL		— National Public Finance Guarantee Corporation — Insured Bonds
PCFA		— Pollution Control Financing Authority
SIFMA		— Securities Industry and Financial Markets Association
SPA		— Standby Bond Purchase Agreement — Insured Bonds
TFA		— Transitional Finance Authority


Ratings table* (unaudited)
Standard & Poor’s/Moody’s/Fitch**
AAA/Aaa	0.5	%
AA/Aa	30.7
A	42.0
BBB/Baa	19.6
BB/Ba	1.9
B/B	0.3
A-1/VMIG 1	1.3
NR ***	3.7
	100.0	%

*	As a percentage of total investments.

The ratings shown are based on each portfolio security’s rating as determined by Standard & Poor’s, Moody’s or Fitch, each a Nationally Recognized Statistical Rating Organization (“NRSRO”). These ratings are the opinions of the NRSRO and are not measures of quality or guarantees of performance. Securities may be rated by other NRSROs, and these ratings may be higher or lower. In the event that a security is rated by multiple NRSROs and receives different ratings, the Fund will treat the security as being rated in the highest rating category received from a NRSRO.

***	The credit quality of unrated investments is evaluated based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments.

See Notes to Financial Statements.


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		17

Statement of assets and liabilities

May 31, 2016



Assets:
Investments, at value (Cost — $773,710,119)	$	878,321,141
Interest receivable		10,673,547
Receivable for securities sold		55,000
Prepaid expenses		62,525
*Total Assets*		*889,112,213*

Liabilities:
Variable Rate Demand Preferred Stock ($25,000 liquidation value per share; 8,703 shares issued and outstanding) (net of deferred offering costs of $1,591,198) (Note 5)		215,983,802
Payable for securities purchased		13,177,877
Investment management fee payable		408,840
Payable to broker — variation margin on open futures contracts		22,125
Directors’ fees payable		14,045
Due to custodian		6,081
Distributions payable to Variable Rate Demand Preferred Stockholders		5,276
Distributions payable to Auction Rate Cumulative Preferred Stockholders		2,151
Distributions payable		450
Accrued expenses		165,828
*Total Liabilities*		*229,786,475*
Series M, T, W, Th and F Auction Rate Cumulative Preferred Stock (1,283 shares authorized and issued at $25,000 for each share) (Note 6)		32,075,000
Total Net Assets Applicable to Common Shareholders	$	627,250,738

Net Assets Applicable to Common Shareholders:
Common stock par value ($0.001 par value, 42,971,108 common shares issued and outstanding; 500,000,000 common shares authorized)	$	42,971
Paid-in capital in excess of par value		528,648,914
Undistributed net investment income		15,379,619
Accumulated net realized loss on investments and futures contracts		(21,413,143)
Net unrealized appreciation on investments and futures contracts		104,592,377
Total Net Assets Applicable to Common Shareholders	$	627,250,738

Common Shares Outstanding		42,971,108

Net Asset Value Per Common Share		$14.60

See Notes to Financial Statements.


18		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

Statement of operations

For the Year Ended May 31, 2016



Investment Income:
*Interest*	$	*39,410,155*

Expenses:
Investment management fee (Note 2)		4,760,181
Liquidity fees (Note 5)		1,689,701
Distributions to Variable Rate Demand Preferred Stockholders (Notes 1 and 5)		402,184
Remarketing fees (Note 5)		221,203
Directors’ fees		153,007
Auction agent fees		102,838
Legal fees		100,631
Transfer agent fees		75,606
Audit and tax fees		68,420
Fund accounting fees		61,802
Amortization of Variable Rate Demand Preferred Stock offering costs (Note 5)		58,381
Stock exchange listing fees		36,670
Shareholder reports		33,169
Rating agency fees		22,940
Auction participation fees (Note 6)		16,171
Custody fees		10,303
Insurance		9,927
Miscellaneous expenses		28,818
*Total Expenses*		*7,851,952*
Net Investment Income		31,558,203

Realized and Unrealized Gain (Loss) on Investments and Futures Contracts (Notes 1, 3 and 4):
Net Realized Loss From:
Investment transactions		(7,443,252)
Futures contracts		(555,843)
*Net Realized Loss*		*(7,999,095)*
Change in Net Unrealized Appreciation (Depreciation) From:
Investments		18,535,025
Futures contracts		33,599
*Change in Net Unrealized Appreciation (Depreciation)*		*18,568,624*
Net Gain on Investments and Futures Contracts		10,569,529
Distributions Paid to Auction Rate Cumulative Preferred Stockholders From Net Investment Income (Notes 1 and 6)		(90,619)
Increase in Net Assets Applicable to Common Shareholders From Operations	$	42,037,113

See Notes to Financial Statements.


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		19

Statements of changes in net assets


For the Years Ended May 31,	2016		2015

Operations:
Net investment income	$	31,558,203	$	33,277,534
Net realized loss		(7,999,095)		(5,259,776)
Change in net unrealized appreciation (depreciation)		18,568,624		9,210,050
Distributions paid to Auction Rate Cumulative Preferred Stockholders from net investment income		(90,619)		(211,001)
*Increase in Net Assets Applicable to Common Shareholders From Operations*		*42,037,113*		*37,016,807*

Distributions to Common Shareholders From (Note 1):
Net investment income		(33,445,504)		(33,407,489)
*Decrease in Net Assets From Distributions to Common Shareholders*		*(33,445,504)*		*(33,407,489)*

Fund Share Transactions:
Net increase from tender and repurchase of Auction Rate Cumulative Preferred Shares (Note 6)		35,000		21,757,500
Reinvestment of distributions (129,634 and 17,024 shares issued, respectively)		1,833,971		239,576
*Increase in Net Assets From Fund Share Transactions*		*1,868,971*		*21,997,076*
*Increase in Net Assets Applicable to Common Shareholders*		*10,460,580*		*25,606,394*

Net Assets Applicable to Common Shareholders:
Beginning of year		616,790,158		591,183,764
End of year*	$	627,250,738	$	616,790,158
*Includes undistributed net investment income of:		$15,379,619		$17,396,465

See Notes to Financial Statements.


20		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

Statement of cash flows

For the Year Ended May 31, 2016



Increase (Decrease) in Cash:
Cash Provided (Used) by Operating Activities:
Net increase in net assets applicable to common shareholders resulting from operations	$	42,127,732
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided (used) by operating activities:
Purchases of portfolio securities		(66,249,996)
Sales of portfolio securities		42,508,312
Net purchases, sales and maturities of short-term investments		17,050,000
Net amortization of premium (accretion of discount)		(145,747)
Decrease in receivable for securities sold		1,561,185
Increase in interest receivable		(57,146)
Increase in prepaid expenses		(10,692)
Increase in payable for securities purchased		6,552,552
Increase in investment management fee payable		3,934
Increase in Directors’ fees payable		4,237
Decrease in accrued expenses		(10,957)
Increase in distributions payable to Variable Rate Demand Preferred Stockholders		5,276
Decrease in payable to broker — variation margin on open futures contracts		(23,375)
Net realized loss on investments		7,443,252
Change in net unrealized appreciation (depreciation) of investments		(18,535,025)
*Net Cash Provided by Operating Activities*		*32,223,542*

Cash Flows From Financing Activities:
Distributions paid on Common Stock		(31,611,083)
Repurchase of Auction Rate Cumulative Preferred Stock		(315,000)
Distributions paid on Auction Rate Cumulative Preferred Stock		(89,409)
Deferred preferred stock offering costs		(229,571)
Increase in due to custodian		6,081
*Net Cash Used in Financing Activities*		*(32,238,982)*
Net Decrease in Cash		(15,440)
Cash at Beginning of Year		15,440
Cash at End of Year		—

Non-Cash Financing Activities:
Proceeds from reinvestment of distributions	$	1,833,971

See Notes to Financial Statements.


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		21

Financial highlights


For a common share of capital stock outstanding throughout each year ended May 31:
	2016¹			2015¹			2014¹			2013¹			2012

Net asset value, beginning of year		$14.40			$13.80			$14.12			$13.98			$12.33

Income (loss) from operations:
Net investment income		0.74			0.78			0.79			0.81			0.84
Net realized and unrealized gain (loss)		0.24			0.09			(0.32)			0.12			1.60
Distributions paid to Auction Rate Cumulative Preferred Stockholders from net investment income		(0.00)	²		(0.00)	²		(0.01)			(0.01)			(0.01)
*Total income from operations*		*0.98*			*0.87*			*0.46*			*0.92*			*2.43*

Less distributions to common shareholders from:
Net investment income		(0.78)			(0.78)			(0.78)			(0.78)			(0.78)
*Total distributions to common shareholders*		*(0.78)*			*(0.78)*			*(0.78)*			*(0.78)*			*(0.78)*
Net increase from tender and repurchase of Auction Rate Cumulative Preferred Shares		*0.00*	²		*0.51*			—			—			—

Net asset value, end of year		$14.60			$14.40			$13.80			$14.12			$13.98

Market price, end of year		$14.82			$13.96			$13.17			$13.37			$13.86
*Total return, based on NAV^3,4*		*7.05*	%		*10.26*	%⁵		*3.78*	%		*6.66*	%		*20.38*	%
*Total return, based on Market Price⁶*		*12.19*	%		*12.26*	%		*4.82*	%		*1.90*	%		*20.09*	%

Net assets applicable to common shareholders, end of year (000s)		$627,251			$616,790			$591,184			$603,935			$594,962

Ratios to average net assets:⁷
Gross expenses		1.28	%		0.99	%		0.92	%		0.88	%		0.90	%
Net expenses		1.28			0.99			0.92			0.88			0.90
Net investment income		5.13			5.49			6.10			5.65			6.45

Portfolio turnover rate		5	%		4	%		1	%		19	%		12	%

Supplemental data:
Auction Rate Cumulative Preferred Stock at Liquidation Value, End of Year (000s)		$32,075			$32,425			$250,000			$250,000			$250,000
Variable Rate Demand Preferred Stock at Liquidation Value, End of Year (000s)		$217,575			$217,575			—			—			—
Asset Coverage Ratio for Auction Rate Cumulative Preferred Stock and Variable Rate Demand Preferred Stock⁸		351	%		347	%		336	%⁹		342	%⁹		338	%⁹
Asset Coverage, per $25,000 Liquidation Value per Share of Auction Rate Cumulative Preferred Stock and Variable Rate Demand Preferred Stock⁸		$87,813			$86,679			$84,118			$85,393			$84,496

See Notes to Financial Statements.


22		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

¹	Per share amounts have been calculated using the average shares method.

²	Amount represents less than $0.005 per share.

³	Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

⁴	The total return calculation assumes that distributions are reinvested at NAV. Prior to January 1, 2012, the total return calculation assumed the reinvestment of all distributions in accordance with the Fund’s dividend reinvestment plan. Past performance is no guarantee of future results.

⁵	The total return based on NAV reflects the impact of the tender and repurchase by the Fund of a portion of its Auction Rate Cumulative Preferred Shares at 90% of the per share liquidation preference. Absent this transaction, the total return based on NAV would have been 6.36%.

⁶	The total return calculation assumes that distributions are reinvested in accordance with the Fund’s dividend reinvestment plan. Past performance is no guarantee of future results.

⁷	Calculated on the basis of average net assets of common stock shareholders. Ratios do not reflect the effect of dividend payments to auction rate cumulative preferred stockholders.

⁸	Represents value of net assets plus the auction rate cumulative preferred stock and variable rate demand preferred stock, if any, at the end of the period divided by the auction rate cumulative preferred stock and variable rate demand preferred stock, if any, outstanding at the end of the period.

⁹	Added to conform to current period presentation.

See Notes to Financial Statements.


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		23

Notes to financial statements

1. Organization and significant accounting policies

Western Asset Managed Municipals Fund Inc. (the “Fund”) was incorporated in Maryland and is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund seeks to maximize current income exempt from federal income tax as is consistent with preservation of principal.

The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were issued.

(a) Investment valuation. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities. Investments in open-end funds are valued at the closing net asset value per share of each fund on the day of valuation. Short-term fixed income securities that will mature in 60 days or less are valued at amortized cost, unless it is determined that using this method would not reflect an investment’s fair value. Futures contracts are valued daily at the settlement price established by the board of trade or exchange on which they are traded. If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers or at the transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by the Fund’s Board of Directors.

The Board of Directors is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Legg Mason North Atlantic Fund Valuation Committee (the “Valuation Committee”). The Valuation Committee, pursuant to the policies adopted by the Board of Directors, is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies, and reporting to the Board of Directors. When determining the reliability of third party pricing information for investments


24		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.

The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making fair value determinations. Examples of possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a multiple thereof; risk premium/yield analysis; yield to maturity; and/or fundamental investment analysis. The Valuation Committee will also consider factors it deems relevant and appropriate in light of the facts and circumstances. Examples of possible factors include, but are not limited to, the type of security; the issuer’s financial statements; the purchase price of the security; the discount from market value of unrestricted securities of the same class at the time of purchase; analysts’ research and observations from financial institutions; information regarding any transactions or offers with respect to the security; the existence of merger proposals or tender offers affecting the security; the price and extent of public trading in similar securities of the issuer or comparable companies; and the existence of a shelf registration for restricted securities.

For each portfolio security that has been fair valued pursuant to the policies adopted by the Board of Directors, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such back testing monthly and fair valuation occurrences are reported to the Board of Directors quarterly.

The Fund uses valuation techniques to measure fair value that are consistent with the market approach and/or income approach, depending on the type of security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.

GAAP establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

•

Level 1 — quoted prices in active markets for identical investments

•

Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

•

Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		25

Notes to financial statements (cont’d)

The following is a summary of the inputs used in valuing the Fund’s assets and liabilities carried at fair value:


ASSETS
Description	Quoted Prices (Level 1)		Other Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Municipal bonds†		—	$	867,421,141		—	$	867,421,141
Short-term investments†		—		10,900,000		—		10,900,000
Total investments		—	$	878,321,141		—	$	878,321,141

LIABILITIES
Description	Quoted Prices (Level 1)		Other Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Other financial instruments:
Futures contracts	$	18,645		—		—	$	18,645

†	See Schedule of Investments for additional detailed categorizations.

(b) Futures contracts. The Fund uses futures contracts generally to gain exposure to, or hedge against, changes in interest rates or gain exposure to, or hedge against, changes in certain asset classes. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.

Upon entering into a futures contract, the Fund is required to deposit cash or cash equivalents with a broker in an amount equal to a certain percentage of the contract amount. This is known as the “initial margin” and subsequent payments (“variation margin”) are made or received by the Fund each day, depending on the daily fluctuation in the value of the contract. For certain futures, including foreign denominated futures, variation margin is not settled daily, but is recorded as a net variation margin payable or receivable. The daily changes in contract value are recorded as unrealized gains or losses in the Statement of Operations and the Fund recognizes a realized gain or loss when the contract is closed.

Futures contracts involve, to varying degrees, risk of loss in excess of the amounts reflected in the financial statements. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market.

(c) Securities traded on a when-issued basis. The Fund may trade securities on a when-issued basis. In a when-issued transaction, the securities are purchased or sold by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Fund at the time of entering into the transaction.

Purchasing such securities involves risk of loss if the value of the securities declines prior to settlement. These securities are subject to market fluctuations and their current value is determined in the same manner as for other securities.


26		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

(d) Security transactions and investment income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults or a credit event occurs that impacts the issuer, the Fund may halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default or credit event.

(e) Distributions to shareholders. Distributions to common shareholders from net investment income of the Fund, if any, are declared quarterly and paid on a monthly basis. The Fund intends to satisfy conditions that will enable interest from municipal securities, which is exempt from federal and certain state income taxes, to retain such tax-exempt status when distributed to the common shareholders of the Fund. Distributions to common shareholders of net realized gains, if any, are taxable and are declared at least annually. Distributions to common shareholders of the Fund are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.

Distributions to holders of Auction Rate Cumulative Preferred Stock (“ARCPS”) are accrued daily and paid on a weekly basis and are determined as described in Note 6. Distributions to holders of Variable Rate Demand Preferred Stock (“VRDPS”) are accrued on a daily basis and paid monthly as described in Note 5 and are treated as an operating expense as required by GAAP. For tax purposes, the payments made to the holders of the Fund’s VRDPS are treated as dividend or distributions.

(f) Compensating balance arrangements. The Fund has an arrangement with its custodian bank whereby a portion of the custodian’s fees is paid indirectly by credits earned on the Fund’s cash on deposit with the bank.

(g) Cash flow information. The Fund invests in securities and distributes dividends from net investment income and net realized gains, which are paid in cash and may be reinvested at the discretion of shareholders. These activities are reported in the Statement of Changes in Net Assets and additional information on cash receipts and cash payments are presented in the Statement of Cash Flows.

(h) Net asset value. The net asset value (“NAV”) 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) and on the last business day of the month. 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 NAV 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, including the aggregate liquidation value (i.e., $25,000 per outstanding share) of the VRDPS, and (2) the aggregate liquidation value (i.e., $25,000 per outstanding share) of the ARCPS.

(i) Federal and other taxes. It is the Fund’s policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986 (the “Code”), as amended, applicable to regulated investment companies. Accordingly, the Fund intends to


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		27

Notes to financial statements (cont’d)

distribute its taxable income and net realized gains, if any, to shareholders in accordance with timing requirements imposed by the Code. Therefore, no federal or state income tax provision is required in the Fund’s financial statements.

Management has analyzed the Fund’s tax positions taken on income tax returns for all open tax years and has concluded that as of May 31, 2016, no provision for income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

(j) Reclassification. GAAP requires that certain components of net assets be reclassified to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. During the current year, the following reclassifications have been made:


	Undistributed Net Investment Income		Accumulated Net Realized Loss		Paid-in Capital
(a)	$	58,381		—	$	(58,381)
(b)		(97,307)	$	97,307		—

^(a)	Reclassifications are due to non-deductible offering costs for tax purposes.

^(b)	Reclassifications are due to differences between book and tax accretion of market discount on fixed income securities.

2. Investment management agreement and other transactions with affiliates

Legg Mason Partners Fund Advisor, LLC (“LMPFA”) is the Fund’s investment manager and Western Asset Management Company (“Western Asset”) is the Fund’s subadviser. LMPFA and Western Asset are wholly-owned subsidiaries of Legg Mason, Inc. (“Legg Mason”).

LMPFA provides administrative and certain oversight services to the Fund. The Fund pays LMPFA an investment management fee, calculated daily and paid monthly, at an annual rate of 0.55% of the Fund’s average daily net assets. For the purposes of calculating the investment management fee, the aggregate liquidation value of the Preferred Stock is not deducted in determining the Fund’s average daily net assets.

LMPFA delegates to Western Asset the day-to-day portfolio management of the Fund. For its services, LMPFA pays Western Asset 70% of the net management fee it receives from the Fund.

All officers and one Director of the Fund are employees of Legg Mason or its affiliates and do not receive compensation from the Fund.

The Fund is permitted to purchase or sell securities from or to certain other affiliated funds or portfolios under specified conditions outlined in procedures adopted by the Board of Directors. The procedures have been designed to provide assurance that any purchase or sale of securities by the Fund from or to another fund or portfolio that is, or could be considered, an affiliate by virtue of having a common investment manager or subadviser (or


28		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

affiliated investment manager or subadviser), common Directors and/or common officers complies with Rule 17a-7 under the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. For the year ended May 31, 2016, such purchase and sale transactions were $91,558,377 and $93,626,448, respectively.

3. Investments

During the year ended May 31, 2016, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:


Purchases	$	66,249,996
Sales		42,508,312

At May 31, 2016, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:


Gross unrealized appreciation	$	107,570,568
Gross unrealized depreciation		(2,018,524)
Net unrealized appreciation	$	105,552,044

At May 31, 2016, the Fund had the following open futures contracts:


	Number of Contracts		Expiration Date		Basis Value		Market Value		Unrealized Depreciation
Contracts to Sell:
U.S. Treasury Long-Term Bonds		59		9/16	$	9,616,793	$	9,635,438	$	(18,645)

4. Derivative instruments and hedging activities

Below is a table, grouped by derivative type, that provides information about the fair value and the location of derivatives within the Statement of Assets and Liabilities at May 31, 2016.


LIABILITY DERIVATIVES¹
	Interest Rate Risk
Futures contracts²	$	18,645

¹	Generally, the balance sheet location for asset derivatives is receivables/net unrealized appreciation (depreciation) and for liability derivatives is payables/net unrealized appreciation (depreciation).

²	Includes cumulative appreciation (depreciation) of futures contracts as reported in the footnotes. Only variation margin is reported within the receivables and/or payables on the Statement of Assets and Liabilities.

The following tables provide information about the effect of derivatives and hedging activities on the Fund’s Statement of Operations for the year ended May 31, 2016. The first table provides additional detail about the amounts and sources of gains (losses) realized on derivatives during the period. The second table provides additional information about the change in unrealized appreciation (depreciation) resulting from the Fund’s derivatives and hedging activities during the period.


AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED
	Interest Rate Risk
Futures contracts	$	(555,843)


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		29

Notes to financial statements (cont’d)


CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED
	Interest Rate Risk
Futures contracts	$	33,599

During the year ended May 31, 2016, the volume of derivative activity for the Fund was as follows:


	Average Market Value
Futures contracts (to sell)	$	8,379,260

The following table presents by financial instrument, the Fund’s derivative liabilities net of the related collateral pledged by the Fund at May 31, 2016:


	Gross Amount of Derivative Liabilities in the Statement of Assets and Liabilities¹		Collateral Pledged^2,3,4		Net Amount
Futures contracts⁵	$	22,125	$	(22,125)		—

¹	Absent an event of default or early termination, derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities.

²	Gross amounts are not offset in the Statement of Assets and Liabilities.

³	In some instances, the actual collateral received and/or pledged may be more than the amount shown here due to overcollateralization.

⁴	See the Schedule of Investments for securities pledge as collateral.

⁵	Amount represents the current day’s variation margin as reported in the Statement of Assets and Liabilities. It differs from the cumulative appreciation (depreciation) presented in the previous table.

5. Variable rate demand preferred stock

On March 4, 2015, the Fund completed a private offering of 8,703 shares of Series 1 Variable Rate Demand Preferred Stock (“VRDPS”). Net proceeds from the offering were used by the Fund to repurchase outstanding shares of Series M, Series T, Series W, Series TH and Series F Auction Rate Cumulative Preferred Stock (“ARCPS”) that had been accepted for payment pursuant to the tender offer (see Note 6). Offering costs incurred by the Fund in connection with the VRDPS issuance are being amortized to expense over the life of the VRDPS.

The table below summarizes the key terms of Series 1 of the VRDPS at May 31, 2016.


Series	Mandatory Redemption Date		Shares		Liquidation Preference Per Share		Aggregate Liquidation Value
Series 1		3/4/2045		8,703	$	25,000	$	217,575,000

The VRDPS shares are not listed on any securities exchange or automated quotation system. For financial reporting purposes, the VRDPS shares are considered debt of the Fund; therefore, the liquidation value, which approximates fair value of the VRDPS shares, is recorded as a liability on the Statement of Assets and Liabilities.

Holders of VRDPS have the right to tender their VRDPS shares for remarketing at a price equal to the liquidation preference amount plus all accumulated but unpaid dividends and at a date


30		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

which is no earlier than the seventh day following delivery of the notice to the tender and paying agent. The VRDPS shares include a liquidity feature that allows VRDPS holders to have their shares purchased by the liquidity provider with whom the Fund has contracted in the event of a failed remarketing where purchase orders are not sufficient in number to be matched with the sale orders. The Fund is required to redeem the VRDPS shares owned by the liquidity provider after six months of continuous, unsuccessful remarketing. The Fund pays a monthly remarketing fee at the annual rate of 0.10% of the liquidation value of each VRDPS share outstanding on the first calendar day of the preceding calendar month. These fees are shown as remarketing fees on the Statement of Operations.

Holders of VRDPS are entitled to receive monthly cumulative cash dividends, payable on the first business day of each calendar month, at a variable rate set weekly by the remarketing agent. The dividend rate is generally based upon a spread over a base rate and cannot exceed a maximum rate. In the event of a failed remarketing, the dividend rate will reset to the maximum rate. The maximum rate is determined, in part, based upon the long-term rating assigned to the VRDPS. In the event the Fund fails to make a scheduled dividend payment, all outstanding shares of the VRDPS are subject to mandatory tender.

Subject to certain conditions, the VRDPS shares may be redeemed, in whole or in part, at any time at the option of the Fund. The redemption price per share is equal to the liquidation value per share plus any accumulated but unpaid dividends. The Fund is required to redeem its VRDPS on the mandatory redemption date, March 4, 2045. In addition, the Fund is required to redeem certain of the VRDPS shares if the Fund fails to maintain certain asset coverage and rating agency guidelines.

The Fund has entered into a fee agreement with the liquidity provider that requires monthly payment of an annual liquidity fee. These fees are shown as liquidity fees on the Statement of Operations. The fee agreement between the Fund and the liquidity provider is scheduled to terminate on March 1, 2017. The Fund has the right, which is exercisable 120 to 90 days prior to the scheduled termination date, to request that the liquidity provider extend the term of the agreement for an additional period. The Fund may also terminate the agreement early. In the event the fee agreement is not renewed or is terminated in advance, and the Fund does not enter into a fee agreement with an alternate liquidity provider, the VRDPS will be subject to mandatory purchase by the liquidity provider prior to the termination of the fee agreement. The Fund is required to redeem any VRDPS purchased by the liquidity provider six months after the purchase date.

The VRDPS ranks senior to the Fund’s outstanding common stock and on parity with any other preferred stock. The Fund may not declare dividends or make other distributions on shares of its common stock unless the Fund has declared and paid full cumulative dividends on the VRDPS, due on or prior to the date of the common stock dividend or distribution, and meets the VRDPS asset coverage and rating agency requirements.

The holders of the VRDPS have one vote per share and vote together with the holders of common stock of the Fund as a single class except on matters affecting only the holders of VRDPS or the holders of common stock. Pursuant to the 1940 Act, holders of the VRDPS have the right to elect two Directors of the Fund, voting separately as a class.


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		31

Notes to financial statements (cont’d)

The annualized dividend rate for the VRDPS shares for the year ended May 31, 2016 was 0.18%. VRDPS shares issued and outstanding remained constant during the year ended May 31, 2016.

6. Auction rate cumulative preferred stock

As of May 31, 2016, the Fund had 129 shares outstanding of Series M, 283 shares outstanding of Series T, 276 shares outstanding of Series W, 534 shares outstanding of Series Th and 61 shares outstanding of Series F, each of Auction Rate Cumulative Preferred Stock (“ARCPS”).

On January 22, 2015, the Fund announced that it had commenced an issuer tender offer for up to 100% of its outstanding ARCPS at a price equal to 90% of the liquidation preference of $25,000 per share (or $22,500 per share), plus any unpaid dividends accrued through February 27, 2015, the expiration date of the tender offer.

The Fund’s tender offer was conditioned upon the Fund closing on the private offering of VRDPS with an aggregate liquidation preference at least equal to the aggregate liquidation preference of ARCPS accepted for tender.

On March 4, 2015, the Fund announced the final results for its issuer tender offer and all shares that were validly tendered and not withdrawn during the offering period were accepted for payment. The Fund accepted for payment 1,871 Series M ARCPS, 1,717 Series T ARCPS, 1,710 Series W ARCPS, 1,466 Series Th ARCPS and 1,939 Series F ARCPS, which represented 93.55% of outstanding Series M ARCPS, 85.85% of outstanding Series T ARCPS, 85.50% of outstanding Series W ARCPS, 73.30% of outstanding Series Th ARCPS, and 96.95% of outstanding Series F ARCPS. In aggregate, the Fund accepted for payment 8,703 ARCPS, which represented 87.03% of the outstanding ARCPS. The ARCPS that were not tendered will remain outstanding. The difference between the liquidation preference of the ARCPS and the actual purchase price of the tendered ARCPS was recognized by the Fund in the Statement of Changes in Net Assets as an increase in net assets applicable to common shares resulting from the tender and repurchase of the ARCPS by the Fund.

In September 2015, the Fund repurchased 14 Series W ARCPS in a private transaction at a price equal to 90% of the liquidation preference of $25,000 per share (or $22,500 per share), plus any unpaid dividends. The difference between the liquidation preference of the ARCPS and the actual purchase price of the tendered ARCPS was recognized by the Fund in the Statement of Changes in Net Assets as an increase in the assets applicable to common shares resulting from the tender and repurchase of the ARCPS by the Fund.

The ARCPS’ dividends are cumulative at a rate determined at an auction and the dividend period is typically seven days. The dividend rate cannot exceed a certain maximum rate, including in the event of a failed auction, unless the Board of Directors of the Fund authorizes an increased maximum rate. To the extent capital gains and other taxable income are allocated to holders of Preferred Shares for tax purposes, the Fund will likely have to pay higher dividends to holders of Preferred shares to compensate them for the increased tax liability to them resulting from such allocation. Due to failed auctions experienced by the Fund’s ARCPS starting February 14, 2008, the Fund paid the applicable maximum rate,


32		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

which was calculated as 110% of the prevailing 30-days “AA” Financial Composite Commercial Paper Rate. The Fund may pay higher maximum rates if the rating of the Fund’s ARCPS were to be lowered by the rating agencies.

The dividend rates ranged from 0.077% to 0.485% during the year ended May 31, 2016. At May 31, 2016, the dividend rates in effect were as follows:


	Series M			Series T			Series W			Series Th			Series F
Dividend rates		0.474	%		0.485	%		0.426	%		0.426	%		0.474	%

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 the liquidation preference, which is the sum 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”), an indirect wholly-owned subsidiary of Citigroup, acts as the broker/dealer in connection with the auction of ARCPS. For all periods since the ARCPS have been outstanding, the participation fee has been paid at the annual rate of 0.25% of the purchase price of the ARCPS that the broker/dealer places at the auction rate, however, on August 3, 2009, CGM reduced the participation fees to annual rate of 0.05% of the purchase price of the ARCPS, in the case of a failed auction. For the year ended May 31, 2016, CGM earned $16,171 as the participating broker/dealer.

7. Distributions to common shareholders subsequent to May 31, 2016

The following distributions to common shareholders have been declared by the Fund’s Board of Directors and are payable subsequent to the period end of this report:


Record Date	Payable Date		Amount
6/17/2016		6/24/2016	$	.065
7/22/2016		7/29/2016	$	.065
8/19/2016		8/26/2019	$	.065

8. Stock repurchase program

On November 16, 2015, the Fund announced that the Fund’s Board of Directors (the “Board”) had authorized the Fund to repurchase in the open market up to approximately 10% of the Fund’s outstanding common stock when the Fund’s shares are trading at a discount to net asset value. The Board has directed management of the Fund to repurchase shares of common stock at such times and in such amounts as management reasonably believes may enhance stockholder value. The Fund is under no obligation to purchase shares at any specific discount levels or in any specific amounts. During the period ended May 31, 2016, the Fund did not repurchase any shares.


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		33

Notes to financial statements (cont’d)

9. Income tax information and distributions to shareholders


	2016		2015
Distributions paid from:
Tax-exempt income:	$	33,445,504		$33,407,489
Auction Rate Cumulative Preferred Stockholders		90,619		211,001
Variable Rate Demand Preferred Stock		402,184		78,208
Total tax-exempt distributions	$	33,938,307		$33,696,698

Taxable income:
Common Shareholders	$	462		—
Auction Rate Cumulative Preferred Stockholders		1		—
Variable Rate Demand Preferred Stock		3		—
Total taxable distributions	$	466		—
Total distributions paid	$	33,938,773		$33,696,698

As of May 31, 2016, the components of accumulated earnings on a tax basis were as follows:


Undistributed tax-exempt income — net	$	15,373,800
Undistributed ordinary income — net		90,184
Total undistributed earnings	$	15,463,984
Deferred capital losses*		(14,638,623)
Capital loss carryforward**		(7,734,187)
Other book/tax temporary differences^(a)		(65,720)
Unrealized appreciation (depreciation)^(b)		105,533,399
Total accumulated earnings (losses) — net	$	98,558,853

These capital losses have been deferred in the current year as either short-term or long-term losses. The losses will be deemed to occur on the first day of the next taxable year in the same character as they were originally deferred and will be available to offset future capital gains. These losses must be utilized before any of the Fund’s capital loss carryforward may be utilized.

**	As of May 31, 2016, the Fund had the following net capital loss carryforward remaining:


Year of Expiration	Amount
5/31/2018	$	(3,349,357	)
5/31/2019		(4,384,830	)
	$	(7,734,187	)

These amounts will be available to offset any future taxable capital gains.

^(a)	Other book/tax temporary differences are attributable to the realization for tax purposes of unrealized gains (losses) on certain futures contracts and book/tax differences in the timing of the deductibility of various expenses.

^(b)	The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales and the difference between book & tax accretion methods for market discount on fixed income securities.


34		Western Asset Managed Municipals Fund Inc. 2016 Annual Report

Report of independent registered public accounting firm

The Board of Directors and Shareholders

Western Asset Managed Municipals Fund Inc.:

We have audited the accompanying statement of assets and liabilities of Western Asset Managed Municipals Fund Inc., including the schedule of investments, as of May 31, 2016, and the related statement of operations and cash flows for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2016, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Western Asset Managed Municipals Fund Inc. as of May 31, 2016, the results of its operations and its cash flows for the year then ended, changes in its net assets for each of the years in the two-year period then ended, and financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

LOGO

New York, New York

July 19, 2016


Western Asset Managed Municipals Fund Inc. 2016 Annual Report		35

Additional information (unaudited)

Information about Directors and Officers

The business and affairs of Western Asset Managed Municipals Fund Inc. (the “Fund”) are conducted by management under the supervision and subject to the direction of its Board of Directors. The business address of each Director is c/o Jane Trust, Legg Mason, 100 International Drive, 11th Floor, Baltimore, Maryland 21202. Information pertaining to the Directors and officers of the Fund is set forth below.

The Fund’s annual proxy statement includes additional information about Directors and is available, without charge, upon request by calling the Fund at 1-888-777-0102.


Independent Directors^†:

Robert D. Agdern
Year of birth		1950
Position(s) held with Fund¹		Director and Member of Nominating and Audit Committees, Class III
Term of office¹ and length of time served		Since 2015
Principal occupation(s) during past five years		Member of the Advisory Committee of the Dispute Resolution Research Center at the Kellogg Graduate School of Business, Northwestern University (since 2002); formerly, Deputy General Counsel responsible for western hemisphere matters for BP PLC (1999 to 2001); formerly, Associate General Counsel at Amoco Corporation responsible for corporate, chemical, and refining and marketing matters and special assignments (1993 to 1998) (Amoco merged with British Petroleum in 1998 forming BP PLC).
Number of portfolios in fund complex overseen by Director (including the Fund)		31
Other board memberships held by Director during past five years		None

Carol L. Colman
Year of birth		1946
Position(s) held with Fund¹		Director and Member of Nominating and Audit Committees, Class I
Term of office¹ and length of time served		Since 2006
Principal occupation(s) during past five years		President, Colman Consulting Company (consulting)
Number of portfolios in fund complex overseen by Director (including the Fund)		31
Other board memberships held by Director during past five years		None

Daniel P. Cronin
Year of birth		1946
Position(s) held with Fund¹		Director and Member of Nominating and Audit Committees, Class II
Term of office¹ and length of time served		Since 2006
Principal occupation(s) during past five years		Retired; formerly, Associate General Counsel, Pfizer Inc. (prior to and including 2004)
Number of portfolios in fund complex overseen by Director (including the Fund)		31
Other board memberships held by Director during past five years		None


36		Western Asset Managed Municipals Fund Inc.


Independent Directors cont’d

Paolo M. Cucchi
Year of birth		1941
Position(s) held with Fund¹		Director and Member of Nominating and Audit Committees, Class I
Term of office¹ and length of time served		Since 2001
Principal occupation(s) during past five years		Emeritus Professor of French and Italian (since 2014) and formerly, Vice President and Dean of The College of Liberal Arts (1984 to 2009) and Professor of French and Italian (2009 to 2014) at Drew University
Number of portfolios in fund complex overseen by Director (including the Fund)		31
Other board memberships held by Director during past five years		None

Leslie H. Gelb
Year of birth		1937
Position(s) held with Fund¹		Director and Member of Nominating and Audit Committees, Class II
Term of office¹ and length of time served		Since 2006
Principal occupation(s) during past five years		President Emeritus (since 2003); formerly, Senior Board Fellow (2003 to 2015) and President, (prior to 2003), the Council on Foreign Relations; formerly, Columnist, Deputy Editorial Page Editor and Editor, Op-Ed Page, The New York Times
Number of portfolios in fund complex overseen by Director (including the Fund)		31
Other board memberships held by Director during past five years		Director of two registered investment companies advised by Aberdeen Asset Management Asia Limited (since 1994); Director, Encyclopedia Brittanica; Director, Centre Partners IV and V, LP and Affiliates

William R. Hutchinson
Year of birth		1942
Position(s) held with Fund¹		Director and Member of Nominating and Audit Committees, Class III
Term of office¹ and length of time served		Since 1995
Principal occupation(s) during past five years		President, W.R. Hutchinson & Associates Inc. (Consulting) (since 2001)
Number of portfolios in fund complex overseen by Director (including the Fund)		31
Other board memberships held by Director during past five years		Director (Non-Executive Chairman of the Board (since December 1, 2009)), Associated Banc Corp. (banking) (since 1994)


Western Asset Managed Municipals Fund Inc.		37

Additional information (unaudited) (cont’d)

Information about Directors and Officers


Independent Directors cont’d

Eileen A. Kamerick
Year of birth		1958
Position(s) held with Fund¹		Director and Member of Nominating and Audit Committees, Class II
Term of office¹ and length of time served		Since 2013
Principal occupation(s) during past five years		Senior Adviser to Chief Executive Officer (since 2016), formerly, Executive Vice President and Chief Financial Officer, ConnectWise, Inc. (software and services company) (2015 to 2016) and Adjunct Professor, Washington University in St.· Louis and University of Iowa law schools (since 2007); formerly, CFO, Press Ganey Associates (health care informatics company) (2012 to 2014); formerly, Managing Director and CFO, Houlihan Lokey (international investment bank) (2010 to 2012)
Number of portfolios in fund complex overseen by Director (including the Fund)		31
Other board memberships held by Director during past five years		Director of Associated Banc-Corp (financial services company) (since 2007); Westell Technologies, Inc. (technology company) (since 2003)

Riordan Roett
Year of birth		1938
Position(s) held with Fund¹		Director and Member of the Nominating and Audit Committees, Class III
Term of office¹ and length of time served		Since 2007
Principal occupation(s) during past five years		The Sarita and Don Johnston Professor of Political Science and Director of Latin American Studies, Paul H. Nitze School of Advanced International Studies, The Johns Hopkins University (since 1973)
Number of portfolios in fund complex overseen by Director (including the Fund)		31
Other board memberships held by Director during past five years		None


38		Western Asset Managed Municipals Fund Inc.


Interested Director and Officer:

Jane Trust, CFA²
Year of birth		1962
Position(s) held with Fund¹		Director, Chairman, President and Chief Executive Officer, Class I
Term of office¹ and length of time served		Since 2015
Principal occupation(s) during past five years		Managing Director of Legg Mason & Co., LLC (“Legg Mason & Co.”) (since 2016); Officer and/or Trustee/Director of 161 funds associated with Legg Mason Partners Fund Advisor, LLC (“LMPFA”) or its affiliates (since 2015); President and Chief Executive Officer of LMPFA (since 2015); formerly, Senior Vice President of LMPFA (2015); formerly, Director of ClearBridge, LLC (formerly, Legg Mason Capital Management, LLC) (2007 to 2014); formerly, Managing Director of Legg Mason Investment Counsel & Trust Co. (2000 to 2007)
Number of portfolios in fund complex overseen by Director (including the Fund)		154
Other board memberships held by Director during past five years		None

Additional Officers:

Ted P. Becker Legg Mason 620 Eighth Avenue, 49th Floor, New York, NY 10018
Year of birth		1951
Position(s) held with Fund¹		Chief Compliance Officer
Term of office¹ and length of time served		Since 2006
Principal occupation(s) during past five years		Director of Global Compliance at Legg Mason (since 2006); Chief Compliance Officer of LMPFA (since 2006); Managing Director of Compliance of Legg Mason & Co. (since 2005); Chief Compliance Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2006) and Legg Mason & Co. predecessors (prior to 2006)

Jenna Bailey Legg Mason 100 First Stamford Place, 6th Floor, Stamford, CT 06902
Year of birth		1978
Position(s) held with Fund¹		Identity Theft Prevention Officer
Term of office¹ and length of time served		Since 2015
Principal occupation(s) during past five years		Identity Theft Prevention Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2015); Compliance Officer of Legg Mason & Co. (since 2013); Assistant Vice President of Legg Mason & Co. (since 2011); formerly, Associate Compliance Officer of Legg Mason & Co. (2011 to 2013); formerly, Risk Manager of U.S. Distribution of Legg Mason & Co. (2007 to 2011)


Western Asset Managed Municipals Fund Inc.		39

Additional information (unaudited) (cont’d)

Information about Directors and Officers


Additional Officers cont’d

Robert I. Frenkel Legg Mason 100 First Stamford Place, 6th Floor, Stamford, CT 06902
Year of birth		1954
Position(s) held with Fund¹		Secretary and Chief Legal Officer
Term of office¹ and length of time served		Since 2003
Principal occupation(s) during past five years		Vice President and Deputy General Counsel of Legg Mason (since 2006); Managing Director and General Counsel — U.S. Mutual Funds for Legg Mason & Co. (since 2006) and Legg Mason & Co. predecessors (since 1994); Secretary and Chief Legal Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2006) and Legg Mason & Co. predecessors (prior to 2006)

Thomas C. Mandia Legg Mason 100 First Stamford Place, 6th Floor, Stamford, CT 06902
Year of birth		1962
Position(s) held with Fund¹		Assistant Secretary
Term of office¹ and length of time served		Since 2006
Principal occupation(s) during past five years		Managing Director and Deputy General Counsel of Legg Mason & Co. (since 2005) and Legg Mason & Co. predecessors (prior to 2005); Secretary of LMPFA (since 2006); Assistant Secretary of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2006) and Legg Mason & Co. predecessors (prior to 2006); Secretary of LM Asset Services, LLC (“LMAS”) (since 2002) and Legg Mason Fund Asset Management, Inc. (“LMFAM”) (since 2013) (formerly registered investment advisers)

Richard F. Sennett Legg Mason 100 International Drive, 7th Floor, Baltimore, MD 21202
Year of birth		1970
Position(s) held with Fund¹		Principal Financial Officer
Term of office¹ and length of time served		Since 2011
Principal occupation(s) during past five years		Principal Financial Officer and Treasurer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2011 and since 2013); Managing Director of Legg Mason & Co. and Senior Manager of the Treasury Policy group for Legg Mason & Co.’s Global Fiduciary Platform (since 2011); formerly, Chief Accountant within the SEC’s Division of Investment Management (2007 to 2011); formerly, Assistant Chief Accountant within the SEC’s Division of Investment Management (2002 to 2007)


40		Western Asset Managed Municipals Fund Inc.


Additional Officers cont’d

Steven Frank Legg Mason 620 Eighth Avenue, 49th Floor, New York, NY 10018
Year of birth		1967
Position(s) held with Fund¹		Treasurer
Term of office¹ and length of time served		Since 2010
Principal occupation(s) during past five years		Director of Legg Mason & Co. (since 2015); Treasurer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2010); formerly, Vice President of Legg Mason & Co. and Legg Mason & Co. predecessors (2002 to 2015); formerly, Controller of certain mutual funds associated with Legg Mason & Co. or its affiliates (prior to 2010)

Jeanne M. Kelly Legg Mason 620 Eighth Avenue, 49th Floor, New York, NY 10018
Year of birth		1951
Position(s) held with Fund¹		Senior Vice President
Term of office¹ and length of time served		Since 2007
Principal occupation(s) during past five years		Senior Vice President of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2007); Senior Vice President of LMPFA (since 2006); President and Chief Executive Officer of LMAS and LMFAM (since 2015); Managing Director of Legg Mason & Co. (since 2005) and Legg Mason & Co. predecessors (prior to 2005); formerly, Senior Vice President of LMFAM (2013 to 2015)

^†	Directors who are not “interested persons” of the Fund within the meaning of Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”).

The Fund’s Board of Directors is divided into three classes: Class I, Class II and Class III. The terms of office of the Class I, II and III Directors expire at the Annual Meetings of Stockholders in the year 2018, year 2016 and year 2017, respectively, or thereafter in each case when their respective successors are duly elected and qualified. The Fund’s executive officers are chosen each year, to hold office until their successors are duly elected and qualified.

²	Effective August 1, 2015, Ms. Trust became a Director. In addition, Ms. Trust is an “interested person” of the Fund as defined in the 1940 Act because Ms. Trust is an officer of LMPFA and certain of its affiliates.


Western Asset Managed Municipals Fund Inc.		41

Annual chief executive officer and principal financial officer certifications (unaudited)

The Fund’s Chief Executive Officer (“CEO”) has submitted to the NYSE the required annual certification and the Fund also has included the Certifications of the Fund’s CEO and Principal Financial Officer required by Section 302 of the Sarbanes-Oxley Act in the Fund’s Form N-CSR filed with the SEC for the period of this report.


42		Western Asset Managed Municipals Fund Inc.

Other shareholder communications regarding accounting matters (unaudited)

The Fund’s Audit Committee has established guidelines and procedures regarding the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters (collectively, “Accounting Matters”). Persons with complaints or concerns regarding Accounting Matters may submit their complaints to the Chief Compliance Officer (“CCO”). Persons who are uncomfortable submitting complaints to the CCO, including complaints involving the CCO, may submit complaints directly to the Fund’s Audit Committee Chair. Complaints may be submitted on an anonymous basis.

The CCO may be contacted at:

Legg Mason & Co., LLC

Compliance Department

620 Eighth Avenue, 49th Floor

New York, New York 10018

Complaints may also be submitted by telephone at 1-800-742-5274. Complaints submitted through this number will be received by the CCO.


Western Asset Managed Municipals Fund Inc.		43

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 Computershare Inc., 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 Computershare Inc. 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 98% of 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), Computershare Inc. 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 Computershare Inc. has completed its purchases, the market price exceeds the net asset value of the common stock as of the valuation time, Computershare Inc. 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) 98% of 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 Computershare Inc. is unable to stop open market purchases and cause the Fund to issue the remaining shares, the average per share purchase price paid by Computershare Inc. 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. Computershare Inc. will begin to purchase common stock on the open market as soon as practicable after the determination date for the dividend or capital gains distribution, but in no event shall such 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.

Computershare Inc. maintains all shareholder accounts in the Plan and furnishes written confirmations of all transactions in each account, including information needed by a


44		Western Asset Managed Municipals Fund Inc.

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 Computershare Inc. 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. Computershare Inc.’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 Computershare Inc., 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 Computershare Inc. 211 Quality Circle, Suite 210, College Station, TX 77845-4470 or by telephone at 1-888-888-0151.


Western Asset Managed Municipals Fund Inc.		45

Important tax information (unaudited)

The following information is provided with respect to the distributions paid to Common Shareholders during the taxable year ended May 31, 2016:


Record date:	Monthly		Monthly		Monthly
Payable date:	June 2015 - September 2015		October 2015		November 2015 - May 2016
Tax-exempt income	100.000	%	99.983	%	100.000	%
Taxable income	0.000	%	0.017	%	0.000	%

All of the distributions paid to holders of Variable Rate Demand Preferred Stock and holders of Auction Rate Cumulative Preferred Stock consist of tax-exempt income, except for $4, which is designated as taxable ordinary income.

The following information is applicable to non-U.S. resident shareholders:

*	All of the ordinary income distributions paid by the Fund represent Qualified Net Interest Income and Qualified Short-Term Gain eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

Please retain this information for your records.


46		Western Asset Managed Municipals Fund Inc.

Western Asset

Managed Municipals Fund Inc.

Directors

Robert D. Agdern

Carol L. Colman

Daniel P. Cronin

Paolo M. Cucchi

Leslie H. Gelb

William R. Hutchinson

Eileen A. Kamerick

Riordan Roett

Jane Trust*

Chairman

Officers

Jane Trust*

President and Chief Executive Officer

Richard F. Sennett

Principal Financial Officer

Ted P. Becker

Chief Compliance Officer

Jenna Bailey

Identity Theft Prevention Officer

Robert I. Frenkel

Secretary and Chief Legal Officer

Thomas C. Mandia

Assistant Secretary

Steven Frank

Treasurer

Jeanne M. Kelly

Senior Vice President

Western Asset Managed Municipals Fund Inc.

620 Eighth Avenue

49th Floor

New York, NY 10018

Investment manager

Legg Mason Partners Fund Advisor, LLC

Subadviser

Western Asset Management Company

Auction agent

Deutsche Bank

60 Wall Street

New York, NY 10005

Custodian

State Street Bank and Trust Company

1 Lincoln Street

Boston, MA 02111

Transfer agent

Computershare Inc.**

211 Quality Circle, Suite 210

College Station, TX 77845-4470

*	Effective August 1, 2015, Ms. Trust became a Director, Chairman, President and Chief Executive Officer.

**	Effective March 14, 2016, Computershare Inc. serves as the Fund’s transfer agent.

Independent registered public accounting firm

KPMG LLP

345 Park Avenue

New York, NY 10154

Legal counsel

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, NY 10017

New York Stock Exchange Symbol

MMU

Legg Mason Funds Privacy and Security Notice

Your Privacy and the Security of Your Personal Information is Very Important to the Legg Mason Funds

This Privacy and Security Notice (the “Privacy Notice”) addresses the Legg Mason Funds’ privacy and data protection practices with respect to nonpublic personal information the Funds receive. The Legg Mason Funds include any funds sold by the Funds’ distributor, Legg Mason Investor Services, LLC, as well as Legg Mason-sponsored closed-end funds and certain closed-end funds managed or sub-advised by Legg Mason or its affiliates. The provisions of this Privacy Notice apply to your information both while you are a shareholder and after you are no longer invested with the Funds.

The Type of Nonpublic Personal Information the Funds Collect About You

The Funds collect and maintain nonpublic personal information about you in connection with your shareholder account. Such information may include, but is not limited to:

•

Personal information included on applications or other forms;

•

Account balances, transactions, and mutual fund holdings and positions;

•

Online account access user IDs, passwords, security challenge question responses; and

•

Information received from consumer reporting agencies regarding credit history and creditworthiness (such as the amount of an individual’s total debt, payment history, etc.).

How the Funds Use Nonpublic Personal Information About You

The Funds do not sell or share your nonpublic personal information with third parties or with affiliates for their marketing purposes, or with other financial institutions or affiliates for joint marketing purposes, unless you have authorized the Funds to do so. The Funds do not disclose any nonpublic personal information about you except as may be required to perform transactions or services you have authorized or as permitted or required by law. The Funds may disclose information about you to:

•

Employees, agents, and affiliates on a “need to know” basis to enable the Funds to conduct ordinary business or comply with obligations to government regulators;

•

Service providers, including the Funds’ affiliates, who assist the Funds as part of the ordinary course of business (such as printing, mailing services, or processing or servicing your account with us) or otherwise perform services on the Funds’ behalf, including companies that may perform marketing services solely for the Funds;

•

The Funds’ representatives such as legal counsel, accountants and auditors; and

•

Fiduciaries or representatives acting on your behalf, such as an IRA custodian or trustee of a grantor trust.

NOT PART OF THE ANNUAL REPORT

Legg Mason Funds Privacy and Security Notice (cont’d)

Except as otherwise permitted by applicable law, companies acting on the Funds’ behalf are contractually obligated to keep nonpublic personal information the Funds provide to them confidential and to use the information the Funds share only to provide the services the Funds ask them to perform.

The Funds may disclose nonpublic personal information about you when necessary to enforce their rights or protect against fraud, or as permitted or required by applicable law, such as in connection with a law enforcement or regulatory request, subpoena, or similar legal process. In the event of a corporate action or in the event a Fund service provider changes, the Funds may be required to disclose your nonpublic personal information to third parties. While it is the Funds’ practice to obtain protections for disclosed information in these types of transactions, the Funds cannot guarantee their privacy policy will remain unchanged.

Keeping You Informed of the Funds’ Privacy and Security Practices

The Funds will notify you annually of their privacy policy as required by federal law. While the Funds reserve the right to modify this policy at any time they will notify you promptly if this privacy policy changes.

The Funds’ Security Practices

The Funds maintain appropriate physical, electronic and procedural safeguards designed to guard your nonpublic personal information. The Funds’ internal data security policies restrict access to your nonpublic personal information to authorized employees, who may use your nonpublic personal information for Fund business purposes only.

Although the Funds strive to protect your nonpublic personal information, they cannot ensure or warrant the security of any information you provide or transmit to them, and you do so at your own risk. In the event of a breach of the confidentiality or security of your nonpublic personal information, the Funds will attempt to notify you as necessary so you can take appropriate protective steps. If you have consented to the Funds using electronic communications or electronic delivery of statements, they may notify you under such circumstances using the most current email address you have on record with them.

In order for the Funds to provide effective service to you, keeping your account information accurate is very important. If you believe that your account information is incomplete, not accurate or not current, or if you have questions about the Funds’ privacy practices, write the Funds using the contact information on your account statements, email the Funds by clicking on the Contact Us section of the Funds’ website at www.leggmason.com, or contact the Fund at 1-888-777-0102.

NOT PART OF THE ANNUAL REPORT

Western Asset Managed Municipals Fund Inc.

620 Eighth Avenue

49th Floor

New York, NY 10018

Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Fund may purchase, at market prices, shares of its common stock and preferred stock.

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q from the Fund, shareholders can call 1-888-777-0102.

Information on how the Fund voted proxies relating to portfolio securities during the prior 12-month period ended June 30th of each year and a description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling 1-888-777-0102, (2) at www.lmcef.com and (3) on the SEC’s website at www.sec.gov.

This report is transmitted to the shareholders of Western Asset Managed Municipals Fund Inc. for their information. This is not a prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or any securities mentioned in this report.

Computershare Inc.

211 Quality Circle, Suite 210

College Station, TX 77845-4470

WASX010003 7/16 SR16-2821

ITEM 2. CODE OF ETHICS.

The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

The Board of Directors of the registrant has determine that Eileen A. Kamerick, a member of the Board’s Audit Committee, possesses the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as an “audit committee financial expert and that she is independent for purposes of this item.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

a) Audit Fees. The aggregate fees billed in the last two fiscal years ending May 31, 2015 and May 31, 2016 (the “Reporting Periods”) for professional services rendered by the Registrant’s principal accountant (the “Auditor”) for the audit of the Registrant’s annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $63,500 in 2015 and $49,300 in 2016.

b) Audit-Related Fees. The aggregate fees billed in the Reporting Period for assurance and related services by the Auditor that are reasonably related to the performance of the Registrant’s financial statements were $40,000 in 2015 and $14,700 in 2016.

In addition, there were no Audit-Related Fees billed in the Reporting Period for assurance and related services by the Auditor to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Western Asset Managed Municipals Fund Inc. (“service affiliates”), that were reasonably related to the performance of the annual audit of the service affiliates. Accordingly, there were no such fees that required pre-approval by the Audit Committee for the Reporting Periods.

(c) Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning (“Tax Services”) were $3,840 in 2015 and $0 in 2016. These services consisted of (i)review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments, and (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held.

There were no fees billed for tax services by the Auditors to service affiliates during the Reporting Periods that required pre-approval by the Audit Committee.

d) All Other Fees. There were no other fees billed in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) for the Item 4 for the Western Asset Managed Municipals Fund Inc.

All Other Fees. There were no other non-audit services rendered by the Auditor to Legg Mason Partners Fund Advisors, LLC (“LMPFA”), and any entity controlling, controlled by or under common control with LMPFA that provided ongoing services to Western Asset Managed Municipals Fund Inc. requiring pre-approval by the Audit Committee in the Reporting Period.

(e) Audit Committee’s pre–approval policies and procedures described in paragraph(c) (7) of Rule 2-01 of Regulation S-X.

(1) The Charter for the Audit Committee (the “Committee”) of the Board of each registered investment company (the “Fund”) advised by LMPFA or one of their affiliates (each, an “Adviser”) requires that the Committee shall approve (a) all audit and permissible non-audit services to be provided to the Fund and (b) all permissible non-audit services to be provided by the Fund’s independent auditors to the Adviser and any Covered Service Providers if the engagement relates directly to the operations and financial reporting of the Fund. The Committee may implement policies and procedures by which such services are approved other than by the full Committee.

The Committee shall not approve non-audit services that the Committee believes may impair the independence of the auditors. As of the date of the approval of this Audit Committee Charter, permissible non-audit services include any professional services (including tax services), that are not prohibited services as described below, provided to the Fund by the independent auditors, other than those provided to the Fund in connection with an audit or a review of the financial statements of the Fund. Permissible non-audit services may not include: (i) bookkeeping or other services related to the accounting records or financial statements of the Fund; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, fairness opinions or contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service the Public Company Accounting Oversight Board determines, by regulation, is impermissible.

Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Fund, the Adviser and any service providers controlling, controlled by or under common control with the Adviser that provide ongoing services to the Fund (“Covered Service Providers”) constitutes not more than 5% of the total amount of revenues paid to the independent auditors during the fiscal year in which the permissible non-audit services are provided to (a) the Fund, (b) the Adviser and (c) any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund during the fiscal year in which the

services are provided that would have to be approved by the Committee; (ii) the permissible non-audit services were not recognized by the Fund at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit.

(2) For the Western Asset Managed Municipals Fund Inc., the percentage of fees that were approved by the audit committee, with respect to: Audit-Related Fees were 100% and 100% for 2015 and 2016; Tax Fees were 100% and 100% for 2015 and 2016; and Other Fees were 100% and 100% for 2015 and 2016.

(f) N/A

(g) Non-audit fees billed by the Auditor for services rendered to Western Asset Managed Municipals Fund Inc., LMPFA and any entity controlling, controlled by, or under common control with LMPFA that provides ongoing services to Western Asset Managed Municipals Fund Inc. during the reporting period were $0 in 2016.

(h) Yes. Western Asset Managed Municipals Fund Inc.’s Audit Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates, which were not pre-approved (not requiring pre-approval), is compatible with maintaining the Accountant’s independence. All services provided by the Auditor to the Western Asset Managed Municipals Fund Inc. or to Service Affiliates, which were required to be pre-approved, were pre-approved as required.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

a) Registrant has a separately-designated standing Audit Committee established in accordance with Section 3(a)58(A) of the Exchange Act. The Audit Committee consists of the following Board members:

Robert D. Agdern

William R. Hutchinson

Paolo M. Cucchi

Daniel P. Cronin

Carol L. Colman

Leslie H. Gelb

Eileen A. Kamerick

Dr. Riordan Roett

b) Not applicable

ITEM 6. SCHEDULE OF INVESTMENTS.

Included herein under Item 1.

ITEM 7. PROXY VOTING – LMPFA & Western Asset Management Company (and affiliates)

Proxy Voting Guidelines and Procedures

Legg Mason Partners Fund Advisor, LLC (“LMPFA”) delegates the responsibility for voting proxies for the fund to the subadviser through its contracts with the subadviser. The subadviser will use its own proxy voting policies and procedures to vote proxies. Accordingly, LMPFA does not expect to have proxy-voting responsibility for the fund. Should LMPFA become responsible for voting proxies for any reason, such as the inability of the subadviser to provide investment advisory services, LMPFA shall utilize the proxy voting guidelines established by the most recent subadviser to vote proxies until a new subadviser is retained.

The subadviser’s Proxy Voting Policies and Procedures govern in determining how proxies relating to the fund’s portfolio securities are voted and are provided below. Information regarding how each fund voted proxies (if any) relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge (1) by calling 888-777-0102, (2) on the fund’s website at http://www.lmcef.com and (3) on the SEC’s website at http://www.sec.gov.

Background

Western Asset Management Company (“WA” or “Western Asset” or the “subadviser”) has adopted and implemented policies and procedures that we believe are reasonably designed to ensure that proxies are voted in the best interest of clients, in accordance with our fiduciary duties and SEC Rule 206(4)-6 under the Investment Advisers Act of 1940 (“Advisers Act”). Our authority to vote the proxies of our clients is established through investment management agreements or comparable documents, and our proxy voting guidelines have been tailored to reflect these specific contractual obligations. In addition to SEC requirements governing advisers, our proxy voting policies reflect the long-standing fiduciary standards and responsibilities for ERISA accounts. Unless a manager of ERISA assets has been expressly precluded from voting proxies, the Department of Labor has determined that the responsibility for these votes lies with the Investment Manager.

In exercising its voting authority, Western Asset will not consult or enter into agreements with officers, directors or employees of Legg Mason Inc. or any of its affiliates (except that WA may so consult and agree with each other) regarding the voting of any securities owned by its clients.

Western Asset’s proxy voting procedures are designed and implemented in a way that is reasonably expected to ensure that proxy matters are handled in the best interest of our clients. While the guidelines included in the procedures are intended to provide a benchmark for voting standards, each vote is ultimately cast on a case-by-case basis, taking into consideration Western Asset’s contractual obligations to our clients and all other relevant facts and circumstances at the time of the vote (such that these guidelines may be overridden to the extent Western Asset deems appropriate).

Procedures

Responsibility and Oversight

The Western Asset Legal and Compliance Department (“Legal and Compliance Department”) is responsible for administering and overseeing the proxy voting process. The gathering of proxies is coordinated through the Corporate Actions area of Investment Support (“Corporate Actions”). Research analysts and portfolio managers are responsible for determining appropriate voting positions on each proxy utilizing any applicable guidelines contained in these procedures.

Client Authority

The Investment Management Agreement for each client is reviewed at account start-up for proxy voting

instructions. If an agreement is silent on proxy voting, but contains an overall delegation of discretionary authority or if the account represents assets of an ERISA plan, Western Asset will assume responsibility for proxy voting. The Legal and Compliance Department maintains a matrix of proxy voting authority.

Proxy Gathering

Registered owners of record, client custodians, client banks and trustees (“Proxy Recipients”) that receive proxy materials on behalf of clients should forward them to Corporate Actions. Proxy Recipients for new clients (or, if Western Asset becomes aware that the applicable Proxy Recipient for an existing client has changed, the Proxy Recipient for the existing client) are notified at start-up of appropriate routing to Corporate Actions of proxy materials received and reminded of their responsibility to forward all proxy materials on a timely basis. If Western Asset personnel other than Corporate Actions receive proxy materials, they should promptly forward the materials to Corporate Actions.

Proxy Voting

Once proxy materials are received by Corporate Actions, they are forwarded to the Legal and Compliance Department for coordination and the following actions:

Proxies are reviewed to determine accounts impacted.

Impacted accounts are checked to confirm Western Asset voting authority.

Legal and Compliance Department staff reviews proxy issues to determine any material conflicts of interest. (See conflicts of interest section of these procedures for further information on determining material conflicts of interest.)

If a material conflict of interest exists, (i) to the extent reasonably practicable and permitted by applicable law, the client is promptly notified, the conflict is disclosed and Western Asset obtains the client’s proxy voting instructions, and (ii) to the extent that it is not reasonably practicable or permitted by applicable law to notify the client and obtain such instructions (e.g., the client is a mutual fund or other commingled vehicle or is an ERISA plan client), Western Asset seeks voting instructions from an independent third party.

Legal and Compliance Department staff provides proxy material to the appropriate research analyst or portfolio manager to obtain their recommended vote. Research analysts and portfolio managers determine votes on a case-by-case basis taking into account the voting guidelines contained in these procedures. For avoidance of doubt, depending on the best interest of each individual client, Western Asset may vote the same proxy differently for different clients. The analyst’s or portfolio manager’s basis for their decision is documented and maintained by the Legal and Compliance Department.

Legal and Compliance Department staff votes the proxy pursuant to the instructions received in (d) or (e) and returns the voted proxy as indicated in the proxy materials.

Timing

Western Asset personnel act in such a manner to ensure that, absent special circumstances, the proxy gathering and proxy voting steps noted above can be completed before the applicable deadline for returning proxy votes.

Recordkeeping

Western Asset maintains records of proxies voted pursuant to Section 204-2 of the Advisers Act and ERISA DOL Bulletin 94-2. These records include:

A copy of Western Asset’s policies and procedures.

Copies of proxy statements received regarding client securities.

A copy of any document created by Western Asset that was material to making a decision how to vote proxies.

Each written client request for proxy voting records and Western Asset’s written response to both verbal and written client requests.

A proxy log including:

Issuer name;

Exchange ticker symbol of the issuer’s shares to be voted;

Committee on Uniform Securities Identification Procedures (“CUSIP”) number for the shares to be voted;

A brief identification of the matter voted on;

Whether the matter was proposed by the issuer or by a shareholder of the issuer;

Whether a vote was cast on the matter;

A record of how the vote was cast; and

Whether the vote was cast for or against the recommendation of the issuer’s management team.

Records are maintained in an easily accessible place for five years, the first two in Western Asset’s offices.

Disclosure

Part II of the WA Form ADV contains a description of Western Asset’s proxy policies. Clients will be provided a copy of these policies and procedures upon request. In addition, upon request, clients may receive reports on how their proxies have been voted.

Conflicts of Interest

All proxies are reviewed by the Legal and Compliance Department for material conflicts of interest. Issues to be reviewed include, but are not limited to:

Whether Western Asset (or, to the extent required to be considered by applicable law, its affiliates) manages assets for the company or an employee group of the company or otherwise has an interest in the company;

Whether Western Asset or an officer or director of Western Asset or the applicable portfolio manager or analyst responsible for recommending the proxy vote (together, “Voting Persons”) is a close relative of or has a personal or business relationship with an executive, director or person who is a candidate for director of the company or is a participant in a proxy contest; and

Whether there is any other business or personal relationship where a Voting Person has a personal interest in the outcome of the matter before shareholders.

Voting Guidelines

Western Asset’s substantive voting decisions turn on the particular facts and circumstances of each proxy vote and are evaluated by the designated research analyst or portfolio manager. The examples outlined below are meant as guidelines to aid in the decision making process.

Guidelines are grouped according to the types of proposals generally presented to shareholders. Part I deals with proposals which have been approved and are recommended by a company’s board of directors; Part II deals with proposals submitted by shareholders for inclusion in proxy statements; Part III addresses issues relating to voting shares of investment companies; and Part IV addresses unique considerations pertaining to foreign issuers.

I.	Board Approved Proposals

The vast majority of matters presented to shareholders for a vote involve proposals made by a company itself that have been approved and recommended by its board of directors. In view of the enhanced corporate governance practices currently being implemented in public companies, Western Asset generally votes in support of decisions reached by independent boards of directors. More specific guidelines related to certain board-approved proposals are as follows:

1. Matters relating to the Board of Directors

Western Asset votes proxies for the election of the company’s nominees for directors and for board-approved proposals on other matters relating to the board of directors with the following exceptions:

Votes are withheld for the entire board of directors if the board does not have a majority of independent directors or the board does not have nominating, audit and compensation committees composed solely of independent directors.

Votes are withheld for any nominee for director who is considered an independent director by the company and who has received compensation from the company other than for service as a director.

Votes are withheld for any nominee for director who attends less than 75% of board and committee meetings without valid reasons for absences.

Votes are cast on a case-by-case basis in contested elections of directors.

2. Matters relating to Executive Compensation

Western Asset generally favors compensation programs that relate executive compensation to a company’s long-term performance. Votes are cast on a case-by-case basis on board-approved proposals relating to executive compensation, except as follows:

Except where the firm is otherwise withholding votes for the entire board of directors, Western Asset votes for stock option plans that will result in a minimal annual dilution.

Western Asset votes against stock option plans or proposals that permit replacing or repricing of underwater options.

Western Asset votes against stock option plans that permit issuance of options with an exercise price below the stock’s current market price.

Except where the firm is otherwise withholding votes for the entire board of directors, Western Asset votes for employee stock purchase plans that limit the discount for shares purchased under the plan to no more than 15% of their market value, have an offering period of 27 months or less and result in dilution of 10% or less.

3. Matters relating to Capitalization

The management of a company’s capital structure involves a number of important issues, including cash flows, financing needs and market conditions that are unique to the circumstances of each company. As a result, Western Asset votes on a case-by-case basis on board-approved proposals involving changes to a company’s capitalization except where Western Asset is otherwise withholding votes for the entire board of directors.

Western Asset votes for proposals relating to the authorization of additional common stock.

Western Asset votes for proposals to effect stock splits (excluding reverse stock splits).

Western Asset votes for proposals authorizing share repurchase programs.

4. Matters relating to Acquisitions, Mergers, Reorganizations and Other Transactions

Western Asset votes these issues on a case-by-case basis on board-approved transactions.

5. Matters relating to Anti-Takeover Measures

Western Asset votes against board-approved proposals to adopt anti-takeover measures except as follows:

Western Asset votes on a case-by-case basis on proposals to ratify or approve shareholder rights plans.

Western Asset votes on a case-by-case basis on proposals to adopt fair price provisions.

6. Other Business Matters

Western Asset votes for board-approved proposals approving such routine business matters such as changing the company’s name, ratifying the appointment of auditors and procedural matters relating to the shareholder meeting.

Western Asset votes on a case-by-case basis on proposals to amend a company’s charter or bylaws.

Western Asset votes against authorization to transact other unidentified, substantive business at the meeting.

II.	Shareholder Proposals

SEC regulations permit shareholders to submit proposals for inclusion in a company’s proxy statement. These proposals generally seek to change some aspect of a company’s corporate governance structure or to change some aspect of its business operations. Western Asset votes in accordance with the recommendation of the company’s board of directors on all shareholder proposals, except as follows:

1. Western Asset votes for shareholder proposals to require shareholder approval of shareholder rights plans.

2. Western Asset votes for shareholder proposals that are consistent with Western Asset’s proxy voting guidelines for board-approved proposals.

3. Western Asset votes on a case-by-case basis on other shareholder proposals where the firm is otherwise withholding votes for the entire board of directors.

III.	Voting Shares of Investment Companies

Western Asset may utilize shares of open or closed-end investment companies to implement its investment strategies. Shareholder votes for investment companies that fall within the categories listed in Parts I and II above are voted in accordance with those guidelines.

1. Western Asset votes on a case-by-case basis on proposals relating to changes in the investment objectives of an investment company taking into account the original intent of the fund and the role the fund plays in the clients’ portfolios.

2. Western Asset votes on a case-by-case basis all proposals that would result in increases in expenses (e.g., proposals to adopt 12b-1 plans, alter investment advisory arrangements or approve fund mergers) taking into account comparable expenses for similar funds and the services to be provided.

IV.	Voting Shares of Foreign Issuers

In the event Western Asset is required to vote on securities held in non-U.S. issuers – i.e. issuers that are incorporated under the laws of a foreign jurisdiction and that are not listed on a U.S. securities exchange or the NASDAQ stock market, the following guidelines are used, which are premised on the existence of a sound corporate governance and disclosure framework. These guidelines, however, may not be appropriate under some circumstances for foreign issuers and therefore apply only where applicable.

1. Western Asset votes for shareholder proposals calling for a majority of the directors to be independent of management.

2. Western Asset votes for shareholder proposals seeking to increase the independence of board nominating, audit and compensation committees.

3. Western Asset votes for shareholder proposals that implement corporate governance standards similar to those established under U.S. federal law and the listing requirements of U.S. stock exchanges, and that do not otherwise violate the laws of the jurisdiction under which the company is incorporated.

4. Western Asset votes on a case-by-case basis on proposals relating to (1) the issuance of common stock in excess of 20% of a company’s outstanding common stock where shareholders do not have preemptive rights, or (2) the issuance of common stock in excess of 100% of a company’s outstanding common stock where shareholders have preemptive rights.

Retirement Accounts

For accounts subject to ERISA, as well as other Retirement Accounts, Western Asset is presumed to have the responsibility to vote proxies for the client. The Department of Labor (“DOL”) has issued a bulletin that states that investment managers have the responsibility to vote proxies on behalf of Retirement Accounts unless the authority to vote proxies has been specifically reserved to another named fiduciary. Furthermore, unless Western Asset is expressly precluded from voting the proxies, the DOL has determined that the responsibility remains with the investment manager.

In order to comply with the DOL’s position, Western Asset will be presumed to have the obligation to vote proxies for its Retirement Accounts unless Western Asset has obtained a specific written instruction indicating that: (a) the right to vote proxies has been reserved to a named fiduciary of the client, and (b) Western Asset is precluded from voting proxies on behalf of the client. If Western Asset does not receive such an instruction, Western Asset will be responsible for voting proxies in the best interests of the Retirement Account client and in accordance with any proxy voting guidelines provided by the client.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

(a)(1):


NAME AND ADDRESS	LENGTH OF TIME SERVED	PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
S. Kenneth Leech Western Asset 385 East Colorado Blvd. Pasadena, CA 91101	Since 2014	Responsible for the day-to-day management with other members of the Fund’s portfolio management team; Chief Investment Officer of Western Asset from 1998 to 2008 and since 2014; Senior Advisor/Chief Investment Officer Emeritus of Western Asset from 2008-2013; Co- Chief Investment Officer of Western Asset from 2013-2014.

David Fare Western Asset 385 East Colorado Blvd. Pasadena, CA 91101	Since 2004	Responsible for the day-to-day management with other members of the Fund’s portfolio management team; portfolio manager at Western Asset since 2005; prior to that time, Mr. Fare was with Citigroup Asset Management or one of its affiliates since 1989.

Robert Amodeo Western Asset 385 East Colorado Blvd. Pasadena, CA 91101	Since 2007	Responsible for the day-to-day management with other members of the Fund’s portfolio management team; portfolio manager at Western Asset since 2005; prior to that time, Mr. Amodeo was a Managing Director and portfolio manager with Salomon Brothers Asset Management Inc from 1992 to 2005.

Dennis J. McNamara*

Western Asset

385 East Colorado Blvd.

Pasadena, CA 91101

Since 2012

Responsible for the day-to-day management with other members of the Fund’s portfolio management team; portfolio manager at Western Asset since 2001.

*	Mr. McNamara will step down as member of the Fund’s portfolio management team on or about August 1, 2016.

(a)(2): DATA TO BE PROVIDED BY FINANCIAL CONTROL

The following tables set forth certain additional information with respect to the fund’s portfolio managers for the fund. Unless noted otherwise, all information is provided as of May 31, 2016.

Other Accounts Managed by Portfolio Managers

The table below identifies the number of accounts (other than the fund) for which the fund’s portfolio managers have day-to-day management responsibilities and the total assets in such accounts, within each of the following categories: registered investment companies, other pooled investment vehicles, and other accounts. For each category, the number of accounts and total assets in the accounts where fees are based on performance is also indicated.


Name of PM	Type of Account	Number of Accounts Managed	Total Assets Managed	Number of Accounts Managed for which Advisory Fee is Performance- Based	Assets Managed for which Advisory Fee is Performance- Based
S. Kenneth Leech‡	Other Registered Investment Companies Other Pooled Vehicles Other Accounts	108 274 608	$172.3 billion $86.3 billion $175.6 billion	None 7 69	None $1.5 billion $18.4 billion
Robert E. Amodeo‡	Other Registered Investment Companies Other Pooled Vehicles Other Accounts	20 1 12	$15.4 billion $140 million $3.7 billion	None None None	None None None

David T. Fare‡

Other Registered Investment Companies

Other Pooled Vehicles

Other Accounts

None

$13.9 billion

None

$1.3 billion

None

Dennis McNamara‡*

Other Registered Investment Companies

Other Pooled Vehicles

Other Accounts

109

$115.5 billion

$6.8 billion

$45.5 billion

None

$96 million

$1.5 billion

‡

The numbers above reflect the overall number of portfolios managed by employees of Western Asset Management Company (“Western Asset”). Mr. Leech is involved in the management of all the Firm’s portfolios, but they are not solely responsible for particular portfolios. Western Asset’s investment discipline emphasizes a team approach that combines the efforts of groups of specialists working in different market sectors. They are responsible for overseeing implementation of Western Asset’s overall investment ideas and coordinating the work of the various sector teams. This structure ensures that client portfolios benefit from a consensus that draws on the expertise of all team members.

*	Mr. McNamara will step down as member of the Fund’s portfolio management team on or about August 1, 2016.

(a)(3): Investment Professional Compensation

With respect to the compensation of the investment professionals, Western Asset’s compensation system assigns each employee a total compensation range, which is derived from annual market surveys that benchmark each role with its job function and peer universe. This method is designed to reward employees with total compensation reflective of the external market value of their skills, experience, and ability to produce desired results. Standard compensation includes competitive base salaries, generous employee benefits, and a retirement plan.

In addition, the subadviser’s employees are eligible for bonuses. These are structured to closely align the interests of employees with those of the subadviser, and are determined by the professional’s job function and pre-tax performance as measured by a formal review process. All bonuses are completely discretionary. The principal factor considered is an investment professional’s investment performance versus appropriate peer groups and benchmarks (e.g., a securities index and with respect to a fund, the benchmark set forth in the fund’s Prospectus to which the fund’s average annual total returns are compared or, if none,

the benchmark set forth in the fund’s annual report). Performance is reviewed on a 1, 3 and 5 year basis for compensation—with 3 years having the most emphasis. The subadviser may also measure an investment professional’s pre-tax investment performance against other benchmarks, as it determines appropriate. Because investment professionals are generally responsible for multiple accounts (including the funds) with similar investment strategies, they are generally compensated on the performance of the aggregate group of similar accounts, rather than a specific account. Other factors that may be considered when making bonus decisions include client service, business development, length of service to the subadviser, management or supervisory responsibilities, contributions to developing business strategy and overall contributions to the subadviser’s business.

Finally, in order to attract and retain top talent, all professionals are eligible for additional incentives in recognition of outstanding performance. These are determined based upon the factors described above and include Legg Mason stock options and long-term incentives that vest over a set period of time past the award date.

Potential Conflicts of Interest

The subadviser has adopted compliance policies and procedures to address a wide range of potential conflicts of interest that could directly impact client portfolios. For example, potential conflicts of interest may arise in connection with the management of multiple portfolios (including portfolios managed in a personal capacity). These could include potential conflicts of interest related to the knowledge and timing of a portfolio’s trades, investment opportunities and broker selection. Portfolio managers are privy to the size, timing, and possible market impact of a portfolio’s trades.

It is possible that an investment opportunity may be suitable for both a portfolio and other accounts managed by a portfolio manager, but may not be available in sufficient quantities for both the portfolio and the other accounts to participate fully. Similarly, there may be limited opportunity to sell an investment held by a portfolio and another account. A conflict may arise where the portfolio manager may have an incentive to treat an account preferentially as compared to a portfolio because the account pays a performance-based fee or the portfolio manager, the subadviser or an affiliate has an interest in the account. The subadviser has adopted procedures for allocation of portfolio transactions and investment opportunities across multiple client accounts on a fair and equitable basis over time. Eligible accounts that can participate in a trade generally share the same price on a pro-rata allocation basis, taking into account differences based on factors such as cash availability, investment restrictions and guidelines, and portfolio composition versus strategy.

With respect to securities transactions, the subadviser determines which broker or dealer to use to execute each order, consistent with their duty to seek best execution of the transaction. However, with respect to certain other accounts (such as pooled investment vehicles that are not registered investment companies and other accounts managed for organizations and individuals), the subadviser may be limited by the client with respect to the selection of brokers or dealers or may be instructed to direct trades through a particular broker or dealer. In these cases, trades for a portfolio in a particular security may be placed separately from, rather than aggregated with, such other accounts. Having separate transactions with respect to a security may temporarily affect the market price of the security or the execution of the transaction, or both, to the possible detriment of a portfolio or the other account(s) involved. Additionally, the management of multiple portfolios and/or other accounts may result in a portfolio manager devoting unequal time and attention to the management of each portfolio and/or other account. The subadviser’s team approach to portfolio management and block trading approach seeks to limit this potential risk.

The subadviser also maintains a gift and entertainment policy to address the potential for a business contact to give gifts or host entertainment events that may influence the business judgment of an employee. Employees are permitted to retain gifts of only a nominal value and are required to make reimbursement for

entertainment events above a certain value. All gifts (except those of a de minimis value) and entertainment events that are given or sponsored by a business contact are required to be reported in a gift and entertainment log which is reviewed on a regular basis for possible issues.

Employees of the subadviser have access to transactions and holdings information regarding client accounts and the subadviser’s overall trading activities. This information represents a potential conflict of interest because employees may take advantage of this information as they trade in their personal accounts. Accordingly, the subadviser maintains a Code of Ethics that is compliant with Rule 17j-1 under the Investment Company Act of 1940, as amended, and Rule 204A-1 under the Investment Advisers Act of 1940, to address personal trading. In addition, the Code of Ethics seeks to establish broader principles of good conduct and fiduciary responsibility in all aspects of the subadviser’s business. The Code of Ethics is administered by the Legal and Compliance Department and monitored through the subadviser’s compliance monitoring program.

The subadviser may also face other potential conflicts of interest with respect to managing client assets, and the description above is not a complete description of every conflict of interest that could be deemed to exist. The subadviser also maintains a compliance monitoring program and engages independent auditors to conduct a SOC1/ISAE 3402 audit on an annual basis. These steps help to ensure that potential conflicts of interest have been addressed.

Investment Professional Securities Ownership

The table below identifies the dollar range of securities beneficially owned by the named investment professional as of May 31, 2016.


Portfolio Manager(s)		Dollar Range of Portfolio Securities Beneficially Owned
S. Kenneth Leech		A
David T. Fare		A
Robert Amodeo		A
Dennis McNamara*		A

*	Mr. McNamara will step down as member of the Fund’s portfolio management team on or about August 1, 2016.

Dollar Range ownership is as follows:

A: none

B: $1 - $10,000

C: 10,001 - $50,000

D: $50,001 - $100,000

E: $100,001 - $500,000

F: $500,001 - $1 million

G: over $1 million

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

NONE.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

NONE.

ITEM 11. 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 second fiscal quarter of the period covered by this report that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting.

ITEM 12. EXHIBITS.

(a) (1) Code of Ethics attached hereto.

Exhibit

99.CODE ETH

(a) (2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 attached hereto.

Exhibit 99.CERT

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto.

Exhibit 99.906CERT

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.

Western Asset Managed Municipals Fund Inc.


By:		/s/ Jane Trust
		Jane Trust
		Chief Executive Officer

Date:		July 22, 2016

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/ Jane Trust
		Jane Trust
		Chief Executive Officer

Date:		July 22, 2016


By:		/s/ Richard F. Sennett
		Richard F. Sennett
		Principal Financial Officer

Date:		July 22, 2016