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, 2014

ITEM 1. REPORT TO STOCKHOLDERS.

The Annual Report to Stockholders is filed herewith.

LOGO


Annual Report		May 31, 2014

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			17
Statement of operations			18
Statements of changes in net assets			19
Financial highlights			20
Notes to financial statements			21
Report of independent registered public accounting firm			30
Additional information			31
Annual chief executive officer and principal financial officer certifications			37
Other shareholder communications regarding accounting matters			38
Dividend reinvestment plan			39
Important tax information			41

Fund objective

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

*	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.

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, 2014. 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

Kenneth D. Fuller

Chairman, President and Chief Executive Officer

June 27, 2014


II		Western Asset Managed Municipals Fund Inc.

Investment commentary

Economic review

After generally expanding at a moderate pace since the end of the Great Recession, the U.S. economy experienced a setback toward the end of the twelve months ended May 31, 2014 (the “reporting period”). Looking back, U.S. gross domestic product (“GDP”)ⁱ growth, as reported by the U.S. Department of Commerce, was 2.5% during the second quarter of 2013. The economic expansion accelerated during the third quarter, with GDP growth of 4.1%, its best reading since the fourth quarter of 2011. The economy then moderated during the fourth quarter of 2013, as GDP growth was 2.6%. Slower growth was due to several factors, including a deceleration in private inventory investment, declining federal government spending and less residential fixed investments. The Commerce Department’s final reading for first quarter 2014 GDP growth, released after the reporting period ended, was -2.9%. This represented the first negative reading for GDP growth since the first quarter of 2011. The contraction was partially attributed to severe winter weather in the U.S., as well as slower growth overseas. In particular, the Commerce Department reported that moderating growth “primarily reflected negative contributions from private inventory investment, exports, state and local government spending, nonresidential fixed investment, and residential fixed investment that were partly offset by a positive contribution from personal consumption expenditures.”

The U.S. job market improved during the reporting period. When the period began, unemployment, as reported by the U.S. Department of Labor, was 7.5%. Unemployment fell to 7.3% in July 2013 and as low as 6.6% in January 2014, before ticking up to 6.7% in February and holding steady in March 2014. Unemployment then fell to 6.3% in April and was unchanged in May, the lowest level since September 2008. However, falling unemployment during the period was partially due to a decline in the workforce participation rate, which was 62.8% in both April and May 2014, matching the lowest level since 1978. The number of longer-term unemployed remained elevated, as roughly 34.6% of the 9.8 million Americans looking for work in May 2014 had been out of work for more than six months.

Sales of existing-homes fluctuated during the reporting period given changing mortgage rates and weather-related factors. According to the National Association of Realtors (“NAR”), after three consecutive monthly declines, existing-home sales rose 1.3% on a seasonally adjusted basis in April 2014 versus the previous month’s sales. Sales then rose 4.9% in May versus the previous month. The NAR reported that the median existing-home price for all housing types was $213,400 in May 2014, up 5.1% from May 2013. The inventory of homes available for sale in May 2014 was 2.2% higher than the previous month at a 5.6 month supply at the current sales pace and 6.0% higher than in May 2013.

The manufacturing sector continued to expand, although it decelerated on several occasions. Based on revised figures for the Institute for Supply Management’s Purchasing Managers’ Index (“PMI”)ⁱⁱ, manufacturing expanded during all twelve months of the reporting period. It peaked in November 2013, with a PMI of 57.0 (a reading below 50 indicates a contraction, whereas a reading above 50 indicates an expansion). This represented the PMI’s highest reading since


Western Asset Managed Municipals Fund Inc.		III

Investment commentary (cont’d)

April 2011. The PMI then moderated somewhat in December 2013 to 56.5 and fell to 51.3 in January 2014, its weakest reading since May 2013. However, the PMI moved up the next four months and was 55.4 in May 2014. During May, seventeen of the eighteen industries within the PMI expanded.

The Federal Reserve Board (“Fed”)ⁱⁱⁱ took a number of actions as it sought to meet its dual mandate of fostering maximum employment and price stability. As has been the case since December 2008, the Fed kept the federal funds rate^iv at a historically low range between zero and 0.25%. At its meeting in December 2012, prior to the beginning of the reporting period, the Fed announced that it would continue purchasing $40 billion per month of agency mortgage-backed securities (“MBS”), as well as initially purchasing $45 billion per month of longer-term Treasuries. At a press conference following its meeting that ended on June 19, 2013, then Fed Chairman Ben Bernanke said “…the Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year.” In a surprise to many investors, at its meeting that ended on September 18, 2013, the Fed did not taper its asset purchase program. Then, at its meeting that concluded on December 18, 2013, the Fed announced that it would begin reducing its monthly asset purchases, saying “Beginning in January 2014, the Committee will add to its holdings of agency MBS at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month.”

At each of the Fed’s next three meetings (January, March and May 2014), it announced further $10 billion tapering of its asset purchases. Finally, at its meeting that ended on June 18, 2014, after the reporting period ended, the Fed again cut its monthly asset purchases. Beginning in July, it will buy a total of $35 billion per month ($15 billion per month of agency MBS and $20 billion per month of longer-term Treasuries).

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

Sincerely,

LOGO

Kenneth D. Fuller

Chairman, President and Chief Executive Officer

June 27, 2014

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

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 Institute for Supply Management’s PMI is based on a survey of purchasing executives who buy the raw materials for manufacturing at more than 350 companies. It offers an early reading on the health of the manufacturing sector.

ⁱⁱⁱ	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.

^iv	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.


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. Effective on March 31, 2014, Mr. Leech joined the Fund’s portfolio management team. Mr. Leech has been employed by Western Asset as an investment professional for more than 20 years.

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

A. The spread sectors (non-Treasuries) experienced several periods of volatility but generally outperformed equal-durationⁱ Treasuries over the twelve months ended May 31, 2014. Risk aversion was prevalent at times given mixed economic data, shifting monetary policy by the Federal Reserve Board (“Fed”),ⁱⁱ the U.S government’s sixteen-day partial shutdown in October 2013 and several geopolitical issues.

Both short- and long-term Treasury yields moved higher during the twelve months ended May 31, 2014. Two-year Treasury yields rose from 0.30% at the beginning of the period to 0.37% at the end of the period. Their peak of 0.52% occurred on September 5, 2013 and they were as low as 0.27% in mid-June 2013. Ten-year Treasury yields were 2.16% at the beginning of the period and reached a low of 2.08% on June 6, 2013. Their peak of 3.04% occurred on December 31, 2013 and they ended the reporting period at 2.48%.

The municipal bond market modestly outperformed its taxable bond counterpart during the twelve month reporting period ended May 31, 2014. Over that time, the Barclays Municipal Bond Indexⁱⁱⁱand the Barclays U.S. Aggregate Index^iv returned 3.05% and 2.71%, respectively. The municipal bond market significantly lagged the taxable bond market during the first three months covered by this report. In addition to the negative impact of higher interest rates, investor sentiment for municipal bonds weakened


Western Asset Managed Municipals Fund Inc. 2014 Annual Report		1

Fund overview (cont’d)

given a number of well publicized events. These included questions regarding the future tax favored status for municipal bonds, as well as credit issues in Puerto Rico and the fallout from the city of Detroit’s bankruptcy filing. However, the municipal bond market then outperformed the taxable bond market during eight of the last nine months covered by this report. This turnaround was triggered by a number of factors, including improving fundamentals, attractive valuations, moderating supply and increased demand, especially by “crossover buyers,” such as pensions and hedge funds.

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

A. There were no significant changes to the Fund’s portfolio during the reporting period. That being said, toward the end of the period we reduced the Fund’s duration. The Fund employed the use of short U.S. Treasury futures during the reporting period to manage duration. This strategy slightly detracted from the Fund’s performance.

During the reporting period, we utilized leverage in the Fund. We generally maintained liabilities as a percentage of gross assets of approximately 30% 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, 2014.

Performance review

For the twelve months ended May 31, 2014, Western Asset Managed Municipals Fund Inc. returned 3.78% based on its net asset value (“NAV”)^v and 4.82% based on its New York Stock Exchange (“NYSE”) market price per share. The Fund’s unmanaged benchmark, the Barclays Municipal Bond Index (the “Index”), returned 3.05% for the same period. The Lipper General & Insured Municipal Debt (Leveraged) Closed-End Funds Category Average^vi returned 4.04% 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, 2014. Past performance is no guarantee of future results.


Performance Snapshot as of May 31, 2014
Price Per Share	12-month Total Return**
$13.80 (NAV)		3.78	%†
$13.17 (Market Price)		4.82	%‡

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.

*	For the tax character of distributions paid during the fiscal year ended May 31, 2014, please refer to page 28 of this report.


2		Western Asset Managed Municipals Fund Inc. 2014 Annual Report

‡ 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 positioning in a number of sectors. Overweights to the Industrial Revenue, Health Care and Transportation sectors were rewarded given their outperformance versus the Index. In addition, security selection in all three sectors enhanced the Fund’s results.

Elsewhere, from a credit quality perspective, the Fund’s allocation to BB-rated securities was additive for results given their outperformance versus the Index.

Q. What were the leading detractors from performance?

A. The largest detractor from relative performance during the reporting period was the Fund’s overweight to holdings in Puerto Rico. Despite rallying toward the end of the reporting period, this was not enough to offset their earlier weakness, as Commonwealth bonds significantly underperformed the Index during the reporting period as a whole.

Also impacting the Fund’s performance was its yield curve^vii positioning. The Fund maintained an overweight to the 22+ year portion of the municipal yield curve throughout the period, while having an underweight to the eight to seventeen year portion of the curve. This underweight position detracted from results, as it was the best performing portion of the municipal yield curve in the Index during the reporting period.

As mentioned, the Fund’s short U.S. Treasury futures position was a small detractor from performance as interest rates moved higher during the twelve months ended May 31, 2014.

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.

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 17, 2014

See Notes to Financial Statements.


Western Asset Managed Municipals Fund Inc. 2014 Annual Report		3

Fund overview (cont’d)

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 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 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 and outstanding preferred stock (if any) from the closing value of all securities held by the Fund (plus all other assets) and dividing the result (total investments) 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, 2014, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 77 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. 2014 Annual Report

Fund at a glance^† (unaudited)

Investment breakdown (%) as a percent of total investments

LOGO

†	The bar graph above represents the composition of the Fund’s investments as of May 31, 2014 and May 31, 2013 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.

‡	Represents less than 0.1%.


Western Asset Managed Municipals Fund Inc. 2014 Annual Report		5

Spread duration (unaudited)

Economic exposure — May 31, 2014

LOGO


Total Spread Duration
MMU		— 8.34
Benchmark		— 6.31

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. 2014 Annual Report

Effective duration (unaudited)

Interest rate exposure — May 31, 2014

LOGO


Total Effective Duration
MMU		— 8.02 years
Benchmark		— 7.16 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. 2014 Annual Report		7

Schedule of investments

May 31, 2014

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
Municipal Bonds — 137.7%
Alabama — 4.8%
Jefferson County, AL, Sewer Revenue		6.000	%		10/1/42	$	9,230,000	$	10,175,337
Jefferson County, AL, Sewer Revenue:
AGM		5.500	%		10/1/53		1,400,000		1,507,590
Convertible CAB		0.000	%		10/1/50		15,000,000		8,658,600	^(a)
Subordinated Lien Warrants		6.500	%		10/1/53		6,900,000		7,847,301
Total Alabama									28,188,828
Arizona — 4.9%
Greater Arizona Development Authority, Development Authority Infrastructure Revenue, Pinal County Road Project, NATL		5.000	%		8/1/19		3,705,000		4,013,145
Phoenix, AZ, Civic Improvement Corp. Airport Revenue		5.000	%		7/1/40		5,000,000		5,226,000
Salt Verde, AZ, Financial Corp. Gas Revenue		5.000	%		12/1/32		10,000,000		11,200,300
Salt Verde, AZ, Financial Corp. Gas Revenue		5.000	%		12/1/37		5,500,000		6,135,415
Salt Verde, AZ, Financial Corp. Senior Gas Revenue		5.250	%		12/1/28		2,000,000		2,308,760
Total Arizona									28,883,620
California — 23.3%
Bay Area Toll Authority, CA, Toll Bridge Revenue:
San Francisco Bay Area		1.160	%		4/1/24		7,000,000		7,039,830	^(a)(b)
San Francisco Bay Area		5.125	%		4/1/39		21,700,000		24,399,263
California Health Facilities Financing Authority Revenue, Stanford Hospital & Clinics		5.150	%		11/15/40		2,000,000		2,187,740
California Housing Finance Agency Revenue, Home Mortgage		4.700	%		8/1/24		2,110,000		2,130,340	^(c)
California State PCFA, Water Furnishing Revenue		5.000	%		11/21/45		12,500,000		12,766,000	^(c)(d)
California State PCFA, Water Furnishing Revenue		5.000	%		11/21/45		5,000,000		5,079,500	^(d)
California State, GO		0.805	%		12/1/17		4,000,000		4,037,600	^(a)(b)
California Statewide CDA Revenue, Methodist Hospital Project, FHA		6.625	%		8/1/29		5,235,000		6,231,849
California Statewide CDA, Student Housing Revenue, Provident Group-Pomona Properties LLC		5.750	%		1/15/45		1,770,000		1,759,769
Garden Grove, CA, Agency for Community Development, Tax Allocation, Refunding, AMBAC		5.000	%		10/1/29		7,375,000		7,197,115
Imperial Irrigation District, CA, Electric Revenue		5.500	%		11/1/41		2,750,000		2,992,385
Inland Valley, CA, Development Agency, Successor Agency Tax Allocation Revenue		5.000	%		9/1/44		2,405,000		2,571,258
Los Angeles County, CA, Public Works Financing Authority, Lease Revenue:
Multiple Capital Projects II		5.000	%		8/1/32		3,000,000		3,348,390
Multiple Capital Projects II		5.000	%		8/1/37		2,750,000		3,003,688

See Notes to Financial Statements.


8		Western Asset Managed Municipals Fund Inc. 2014 Annual Report

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
California — continued
Los Angeles, CA, Convention & Exhibition Center Authority, Lease Revenue		5.125	%		8/15/22	$	8,000,000	$	9,182,240
M-S-R Energy Authority, CA, Gas Revenue		7.000	%		11/1/34		3,430,000		4,679,652
M-S-R Energy Authority, CA, Gas Revenue		6.500	%		11/1/39		9,000,000		12,008,070
Modesto, CA, Irrigation District, COP, Capital Improvements		6.000	%		10/1/39		6,500,000		7,363,330
Rancho Cucamonga, CA, RDA, Tax Allocation, Rancho Redevelopment Projects, NATL		5.125	%		9/1/30		3,340,000		3,341,370
Riverside County, CA, Transportation Commission Sales Tax Revenue, Limited Tax		5.250	%		6/1/39		900,000		1,029,555
Riverside County, CA, Transportation Commission Toll Revenue:
Senior Lien		5.750	%		6/1/44		200,000		221,752
Senior Lien		5.750	%		6/1/48		600,000		662,898
Sacramento County, CA, COP, Unrefunded Balance, Public Facilities Project, NATL		5.375	%		2/1/19		590,000		591,752
San Bernardino County, CA, COP, Arrowhead Project		5.125	%		8/1/24		5,185,000		5,614,888
San Mateo County Community College District, COP, NATL		5.000	%		10/1/25		3,000,000		3,047,760	^(e)
Shafter Wasco Irrigation District Revenue, CA, COP		5.000	%		11/1/40		5,000,000		5,162,950
Total California									137,650,944
Colorado — 10.5%
Colorado Health Facilities Authority Revenue:
Catholic Health Initiatives		5.000	%		9/1/41		4,000,000		4,115,000
Sisters Leavenworth		5.000	%		1/1/35		6,000,000		6,411,360
Denver, CO, City & County Airport Revenue		6.125	%		11/15/25		10,945,000		14,232,440	^(c)(f)
Denver, CO, City & County Airport Revenue, Unrefunded Balance		6.125	%		11/15/25		13,630,000		13,669,527	^(c)
Public Authority for Colorado Energy, Natural Gas Purchase Revenue		6.500	%		11/15/38		18,000,000		23,821,920
Total Colorado									62,250,247
District of Columbia — 2.5%
District of Columbia, Hospital Revenue, Children’s Hospital Obligation, AGM		5.450	%		7/15/35		14,140,000		14,947,394
Florida — 10.0%
Miami-Dade County, FL, Aviation Revenue		5.000	%		10/1/30		6,000,000		6,554,160	^(c)
Miami-Dade County, FL, Aviation Revenue		5.500	%		10/1/41		10,000,000		11,205,800
Miami-Dade County, FL, Aviation Revenue, Miami International Airport		5.375	%		10/1/35		10,705,000		11,834,485
Miami-Dade County, FL, Expressway Authority Toll System Revenue		5.000	%		7/1/40		10,000,000		10,573,000
Orange County, FL, Health Facilities Authority Revenue, Hospital-Orlando Regional Healthcare		5.000	%		11/1/35		4,545,000		4,687,940

See Notes to Financial Statements.


Western Asset Managed Municipals Fund Inc. 2014 Annual Report		9

Schedule of investments (cont’d)

May 31, 2014

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
Florida — continued
Orange County, FL, School Board, COP, AGC		5.500	%		8/1/34	$	8,000,000	$	8,748,720
Orlando, FL, State Sales Tax Payments Revenue		5.000	%		8/1/32		5,000,000		5,390,600
Total Florida									58,994,705
Georgia — 4.5%
Atlanta, GA, Water & Wastewater Revenue		6.250	%		11/1/39		13,000,000		15,207,530
DeKalb, Newton & Gwinnett Counties, GA, Joint Development Authority Revenue, GGC Foundation LLC Project		6.125	%		7/1/40		6,220,000		7,084,580
Main Street Natural Gas Inc., GA, Gas Project Revenue		5.000	%		3/15/22		4,000,000		4,518,720
Total Georgia									26,810,830
Hawaii — 1.2%
Hawaii State Airports System Revenue		5.000	%		7/1/39		7,000,000		7,428,260
Illinois — 7.2%
Chicago, IL, O’Hare International Airport Revenue		5.625	%		1/1/35		6,415,000		7,129,695
Chicago, IL, O’Hare International Airport Revenue		5.750	%		1/1/39		6,000,000		6,652,800
Illinois Finance Authority Revenue:
Advocate Health Care & Hospitals Corp. Network		6.250	%		11/1/28		2,445,000		2,839,819
Depaul University		6.125	%		10/1/40		5,000,000		5,780,550
Memorial Health System		5.500	%		4/1/39		7,000,000		7,387,030
Metropolitan Pier & Exposition Authority, IL, Dedicated State Tax Revenue, McCormick Project		5.250	%		6/15/50		12,000,000		12,658,440
Total Illinois									42,448,334
Indiana — 3.9%
Indiana Finance Authority, Wastewater Utility Revenue, CWA Authority		5.000	%		10/1/41		5,000,000		5,373,600
Indiana State Finance Authority Revenue, Private Activity-Ohio River Bridges East End Crossing Project		5.000	%		7/1/44		5,000,000		5,154,350	^(c)
Indianapolis, IN, Thermal Energy System		5.000	%		10/1/25		5,000,000		5,496,300
Richmond, IN, Hospital Authority Revenue, Reid Hospital & Health Care Services Inc. Project		6.625	%		1/1/39		5,000,000		5,757,750
Valparaiso, IN, Exempt Facilities Revenue, Pratt Paper LLC Project		7.000	%		1/1/44		1,000,000		1,096,400	^(c)
Total Indiana									22,878,400
Iowa — 1.7%
Iowa State Finance Authority Midwestern Disaster Area Revenue:
Iowa Fertilizer Co. Project		5.000	%		12/1/19		2,450,000		2,557,433
Iowa Fertilizer Co. Project		5.250	%		12/1/25		7,100,000		7,412,826
Total Iowa									9,970,259
Kentucky — 1.9%
Louisville & Jefferson County, KY, Metropolitan Government Health System Revenue, Norton Healthcare Inc.		5.250	%		10/1/36		11,000,000		11,267,300

See Notes to Financial Statements.


10		Western Asset Managed Municipals Fund Inc. 2014 Annual Report

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
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	$	5,397,200	^(a)(b)
Massachusetts — 5.6%
Massachusetts State DFA Revenue:
Boston University		5.000	%		10/1/29		3,000,000		3,410,130
Boston University, AMBAC		5.000	%		10/1/39		3,500,000		3,627,645
Broad Institute Inc.		5.250	%		4/1/37		8,000,000		8,771,760
Milford Regional Medical Center		5.750	%		7/15/43		500,000		538,910
Massachusetts State HEFA Revenue, Suffolk University		5.750	%		7/1/39		8,000,000		8,686,720
Massachusetts State Housing Finance Agency Revenue		7.000	%		12/1/38		4,575,000		4,960,032
Massachusetts State School Building Authority Sales Tax Revenue		5.000	%		5/15/43		3,000,000		3,357,750
Total Massachusetts									33,352,947
Michigan — 2.8%
Lansing, MI, Board of Water & Light Utility System Revenue		5.000	%		7/1/37		7,000,000		7,749,910
Michigan State Building Authority Revenue, Facilities Program		5.250	%		10/15/47		650,000		716,112
Royal Oak, MI, Hospital Finance Authority Revenue:
William Beaumont Hospital		5.000	%		9/1/39		2,500,000		2,687,375
William Beaumont Hospital		8.250	%		9/1/39		4,000,000		5,216,880	^(e)(g)
Total Michigan									16,370,277
Missouri — 2.7%
Kansa City, MO, Water Revenue		5.250	%		12/1/32		1,000,000		1,158,530
Missouri State HEFA Revenue:
Children’s Mercy Hospital		5.625	%		5/15/39		6,000,000		6,416,880
Lutheran Senior Services		5.000	%		2/1/44		2,710,000		2,834,497	^(h)
Platte County, MO, IDA Revenue, Refunding & Improvement Zona Rosa Retail Project		5.000	%		12/1/32		5,000,000		5,337,700
Total Missouri									15,747,607
Nebraska — 0.5%
Nebraska Public Power Generation Agency Revenue, Whelan Energy Center Unit 2-A, AMBAC		5.000	%		1/1/25		3,000,000		3,250,740
Nevada — 2.3%
Reno, NV, Hospital Revenue, Washoe Medical Centre, AGM		5.500	%		6/1/33		12,750,000		13,482,870
New Jersey — 10.7%
New Jersey State EDA Revenue		5.000	%		6/15/26		2,500,000		2,760,525
New Jersey State EDA Revenue:
Continental Airlines Inc. Project		4.875	%		9/15/19		2,645,000		2,707,210	^(c)
Continental Airlines Inc. Project		5.125	%		9/15/23		2,000,000		2,061,680	^(c)
Continental Airlines Project		5.250	%		9/15/29		3,000,000		3,104,790	^(c)

See Notes to Financial Statements.


Western Asset Managed Municipals Fund Inc. 2014 Annual Report		11

Schedule of investments (cont’d)

May 31, 2014

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
New Jersey — continued
Private Activity-The Goethals Bridge Replacement Project, AGM		5.125	%		7/1/42	$	2,500,000	$	2,668,500	^(c)
School Facilities Construction		1.660	%		3/1/28		15,000,000		14,775,900	^(a)
New Jersey State Higher Education Assistance Authority, Student Loan Revenue		5.625	%		6/1/30		12,320,000		13,844,970
New Jersey State Higher Education Assistance Authority, Student Loan Revenue, AGC		6.125	%		6/1/30		10,000,000		10,766,500	^(c)
New Jersey State Housing & Mortgage Finance Agency Revenue		6.375	%		10/1/28		3,010,000		3,046,571
New Jersey State Turnpike Authority Revenue		0.540	%		1/1/17		5,000,000		5,003,150	^(a)
New Jersey State Turnpike Authority Revenue		0.740	%		1/1/18		2,500,000		2,503,725	^(a)(b)
Total New Jersey									63,243,521
New Mexico — 1.0%
New Mexico State Hospital Equipment Loan Council, Hospital Revenue, Presbyterian Healthcare Services		6.125	%		8/1/28		5,000,000		5,654,400
New York — 10.4%
Liberty, NY, Development Corporation Revenue:
Goldman Sachs Headquarters		5.250	%		10/1/35		4,000,000		4,680,920
Goldman Sachs Headquarters		5.500	%		10/1/37		1,485,000		1,797,741
Long Island Power Authority, NY, Electric System Revenue		6.000	%		5/1/33		24,570,000		28,580,069
MTA, NY, Revenue		5.250	%		11/15/40		5,000,000		5,494,950
New York City, NY, Municipal Water Finance Authority, Water & Sewer Systems Revenue, Second General Resolution Fiscal 2013		5.000	%		6/15/47		5,000,000		5,479,000
New York City, NY, TFA, Building Aid Revenue		5.000	%		1/15/32		4,000,000		4,453,400
New York Liberty Development Corp., Liberty Revenue:
4 World Trade Center LLC Project		5.750	%		11/15/51		5,000,000		5,585,900
Second Priority, Bank of America Tower		5.125	%		1/15/44		1,000,000		1,065,860
Port Authority of New York & New Jersey		5.000	%		1/15/41		3,820,000		4,169,683
Total New York									61,307,523
North Carolina — 0.6%
Harnett County, NC, GO:
Custody Receipts, AMBAC		5.250	%		6/1/24		1,505,000		1,505,000	^(e)
Custody Receipts, AMBAC		5.250	%		6/1/24		110,000		110,349
North Carolina Capital Facilities Finance Agency, Educational Facilities Revenue:
Elizabeth City State University Housing Foundation LLC Project, AMBAC		5.000	%		6/1/23		1,000,000		1,000,650
Elizabeth City State University Housing Foundation LLC Project, AMBAC		5.000	%		6/1/33		1,250,000		1,249,987
Total North Carolina									3,865,986

See Notes to Financial Statements.


12		Western Asset Managed Municipals Fund Inc. 2014 Annual Report

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
Ohio — 2.0%
JobsOhio Beverage System Statewide Liquor Profits Revenue		5.000	%		1/1/38	$	8,000,000	$	8,629,920
Ohio State Water Development Authority, Environmental Improvement Revenue, U.S. Steel Corp. Project		6.600	%		5/1/29		3,000,000		3,333,150
Total Ohio									11,963,070
Oregon — 0.2%
Oregon State Housing & Community Services Department, Mortgage Revenue, Single-Family Mortgage Program		5.050	%		7/1/26		535,000		545,898	^(c)
Umatilla County, OR, Hospital Facility Authority Revenue, Catholic Health Initiatives		5.000	%		5/1/32		535,000		535,936
Total Oregon									1,081,834
Pennsylvania — 2.4%
Pennsylvania State Public School Building Authority Lease Revenue, Philadelphia School District Project, AGM		5.000	%		6/1/33		7,255,000		7,676,080
Pennsylvania State Turnpike Commission Revenue		5.250	%		12/1/41		6,000,000		6,449,220
Total Pennsylvania									14,125,300
Puerto Rico — 3.7%
Puerto Rico Commonwealth, GO		8.000	%		7/1/35		170,000		151,512
Puerto Rico Commonwealth, GO, Public Improvement		5.000	%		7/1/41		800,000		552,008
Puerto Rico Sales Tax Financing Corp., Sales Tax Revenue		5.750	%		8/1/37		2,500,000		2,116,350
Puerto Rico Sales Tax Financing Corp., Sales Tax Revenue		5.250	%		8/1/41		8,550,000		6,605,901
Puerto Rico Sales Tax Financing Corp., Sales Tax Revenue		5.000	%		8/1/43		10,000,000		7,360,600
Puerto Rico Sales Tax Financing Corp., Sales Tax Revenue		5.000	%		8/1/46		6,175,000		5,260,421
Total Puerto Rico									22,046,792
Rhode Island — 0.9%
Rhode Island State Health & Educational Building Corp., Revenue, Hospital Financing		7.000	%		5/15/39		5,000,000		5,609,900
South Carolina — 0.5%
South Carolina State Ports Authority Revenue		5.250	%		7/1/40		2,500,000		2,707,625
Tennessee — 0.1%
Hardeman County, TN, Correctional Facilities Corp., Correctional Facilities Revenue		7.750	%		8/1/17		500,000		500,795
Texas — 13.1%
Dallas-Fort Worth, TX, International Airport Revenue, Joint Improvement		5.000	%		11/1/45		10,000,000		10,577,400
Grand Parkway Transportation Corp., TX, System Toll Revenue, Convertible CAB, Step Bond		0.000	%		10/1/36		4,000,000		2,799,720	^(a)
Harris County, TX, Cultural Education Facilities Finance Corp. Revenue, Memorial Herman Health System		1.010	%		6/1/23		4,500,000		4,484,745	^(a)
Harris County, TX, Health Facilities Development Corp., School Health Care System Revenue		5.750	%		7/1/27		1,000,000		1,269,190	^(f)

See Notes to Financial Statements.


Western Asset Managed Municipals Fund Inc. 2014 Annual Report		13

Schedule of investments (cont’d)

May 31, 2014

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
Texas — continued
Love Field Airport Modernization Corp., TX, Special Facilities Revenue, Southwest Airlines Co. Project		5.250	%		11/1/40	$	15,000,000	$	15,971,700
New Hope Cultural Education Facilities Corp., TX, Student Housing Revenue, Collegiate Housing College Station LLC, Texas A&M University Proect		5.000	%		4/1/46		750,000		801,592
North Texas Tollway Authority Revenue		5.750	%		1/1/33		5,000,000		5,565,000
North Texas Tollway Authority Revenue		5.750	%		1/1/40		15,000,000		16,733,250
Texas Municipal Gas Acquisition & Supply Corp. I, Gas Supply Revenue		5.625	%		12/15/17		1,470,000		1,621,675
Texas Private Activity Bond Surface Transportation Corp. Revenue, LBJ Infrastructure Group LLC		7.000	%		6/30/40		7,000,000		8,329,580
Texas State Municipal Gas Acquisition & Supply Corp. III, Gas Supply Revenue		5.000	%		12/15/27		8,550,000		9,389,439
Total Texas									77,543,291
Virginia — 0.9%
Virginia State Small Business Financing Authority Revenue:
Elizabeth River Crossings OpCo LLC Project		5.250	%		1/1/32		3,000,000		3,192,600	^(c)
Elizabeth River Crossings OpCo LLC Project		5.500	%		1/1/42		2,000,000		2,122,960	^(c)
Total Virginia									5,315,560
Total Investments before Short-Term Investments (Cost — $737,127,447)									814,286,359
Short-Term Investments — 3.3%
Florida — 0.1%
Miami-Dade County, FL, Professional Sports Franchise Facilities Tax Revenue, LOC-Wells Fargo Bank N.A.		0.060	%		10/1/48		400,000		400,000	^(i)(j)
Illinois — 0.3%
Illinois DFA, IDR, Profile Packaging Inc. Project, LOC-LaSalle Bank N.A.		0.220	%		7/1/18		600,000		600,000	^(c)(i)(j)
Illinois State Health Facilities Authority Revenue, Evanston Hospital Corp., SPA-Wells Fargo Bank N.A.		0.050	%		6/1/35		1,422,000		1,422,000	^(i)(j)
Total Illinois									2,022,000
Missouri — 0.2%
Missouri State HEFA Revenue, St. Louis University, SPA-U.S. Bank NA		0.100	%		10/1/24		1,300,000		1,300,000	^(i)(j)
New York — 2.2%
New York City, NY, GO:
LIQ-Dexia Credit Local		0.280	%		4/1/35		2,700,000		2,700,000	^(i)(j)
SPA-Dexia Credit Local		0.250	%		8/1/28		2,350,000		2,350,000	^(i)(j)
New York City, NY, Municipal Water Finance Authority, Water & Sewer System Revenue:
Second General Resolution, SPA-Dexia Credit Local		0.260	%		6/15/32		2,085,000		2,085,000	^(i)(j)
SPA-Dexia Credit Local		0.250	%		6/15/32		2,100,000		2,100,000	^(i)(j)

See Notes to Financial Statements.


14		Western Asset Managed Municipals Fund Inc. 2014 Annual Report

Western Asset Managed Municipals Fund Inc.


Security	Rate			Maturity Date		Face Amount		Value
New York — continued
New York City, NY, TFA Revenue, Future Tax Secured, SPA-Citibank N.A.		0.080	%		8/1/31	$	1,300,000	$	1,300,000	^(i)(j)
New York, NY, GO, Subordinated, LOC-Dexia Credit Local		0.250	%		3/1/34		2,315,000		2,315,000	^(i)(j)
Total New York									12,850,000
North Carolina — 0.1%
Raleigh, NC, COP, Downtown Improvement Project, SPA-Wells Fargo Bank N.A.		0.060	%		2/1/34		700,000		700,000	^(i)(j)
Pennsylvania — 0.1%
Mercer County, PA, GO		0.110	%		10/1/31		200,000		200,000	^(i)(j)
Philadelphia, PA, Authority For Industrial Development, Gift of Life Donor Programme Project, LOC-Commerce Bank N.A.		0.050	%		12/1/34		200,000		200,000	^(i)(j)
Total Pennsylvania									400,000
Vermont — 0.3%
Vermont State Housing Finance Agency Revenue, AGM		0.150	%		5/1/37		800,000		800,000	^(c)(i)(j)
Vermont State Housing Finance Agency Revenue, Multiple Purpose, SPA-Bank of New York Mellon		0.150	%		11/1/37		1,000,000		1,000,000	^(c)(i)(j)
Total Vermont									1,800,000
Total Short-Term Investments (Cost — $19,472,000)									19,472,000
Total Investments — 141.0% (Cost — $756,599,447#)									833,758,359
Auction Rate Cumulative Preferred Stock, at Liquidation Value — (42.3)%									(250,000,000	)
Other Assets in Excess of Liabilities — 1.3%									7,425,405
Total Net Assets — 100.0%								$	591,183,764

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

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

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

^(d)

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.

^(e)	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.

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

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

⁽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 $755,971,848.

See Notes to Financial Statements.


Western Asset Managed Municipals Fund Inc. 2014 Annual Report		15

Schedule of investments (cont’d)

May 31, 2014

Western Asset Managed Municipals Fund Inc.


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
FHA		— Federal Housing Administration
GO		— General Obligation
HEFA		— Health & Educational Facilities Authority
IDA		— Industrial Development Authority
IDR		— Industrial Development Revenue
LIQ		— Liquidity Facility
LOC		— Letter of Credit
MTA		— Metropolitan Transportation Authority
NATL		— National Public Finance Guarantee Corporation — Insured Bonds
PCFA		— Pollution Control Financing Authority
RDA		— Redevelopment Agency
SPA		— Standby Bond Purchase Agreement — Insured Bonds
TFA		— Transitional Finance Authority


Ratings Table* (unaudited)
Standard & Poor’s/Moody’s/Fitch**
AAA/Aaa	5.5	%
AA/Aa	29.9
A	46.9
BBB/Baa	12.0
BB/Ba	1.7
B/B	1.0
A-1/VMIG 1	2.3
NR	0.7
	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.

See Notes to Financial Statements.


16		Western Asset Managed Municipals Fund Inc. 2014 Annual Report

Statement of assets and liabilities

May 31, 2014



Assets:
Investments, at value (Cost — $756,599,447)	$	833,758,359
Cash		18,882
Interest receivable		10,586,249
Receivable for securities sold		78,000
Receivable from broker — variation margin on open futures contracts		51,406
Prepaid expenses		42,062
*Total Assets*		*844,534,958*

Liabilities:
Payable for securities purchased		2,814,985
Investment management fee payable		390,583
Directors’ fees payable		5,696
Distributions payable to Auction Rate Cumulative Preferred Stockholders		4,856
Accrued expenses		135,074
*Total Liabilities*		*3,351,194*
Series M, T, W, Th and F Auction Rate Cumulative Preferred Stock (2,000 shares for each series authorized and issued at $25,000 for each share) (Note 5)		250,000,000
Total Net Assets	$	591,183,764

Net Assets:
Par value ($0.001 par value, 42,824,450 common shares issued and outstanding; 500,000,000 common shares authorized)	$	42,824
Paid-in capital in excess of par value		504,776,866
Undistributed net investment income		17,994,258
Accumulated net realized loss on investments and futures contracts		(8,443,887)
Net unrealized appreciation on investments and futures contracts		76,813,703
Total Net Assets	$	591,183,764

Shares Outstanding		42,824,450

Net Asset Value	$	13.80

See Notes to Financial Statements.


Western Asset Managed Municipals Fund Inc. 2014 Annual Report		17

Statement of operations

For the Year Ended May 31, 2014



Investment Income:
*Interest*	$	*39,034,168*

Expenses:
Investment management fee (Note 2)		4,434,700
Auction participation fees (Note 5)		125,206
Directors’ fees		96,796
Legal fees		79,205
Transfer agent fees		70,124
Audit and tax fees		67,840
Fund accounting fees		54,704
Auction agent fees		40,263
Stock exchange listing fees		39,418
Shareholder reports		30,454
Rating agency fees		22,589
Insurance		12,595
Custody fees		10,302
Miscellaneous expenses		14,113
*Total Expenses*		*5,098,309*
Net Investment Income		33,935,859

Realized and Unrealized Gain (Loss) on Investments and Futures Contracts (Notes 1, 3 and 4):
Net Realized Loss From:
Investment transactions		(15,961,891)
Futures contracts		(1,255,746)
*Net Realized Loss*		*(17,217,637)*
Change in Net Unrealized Appreciation (Depreciation) From:
Investments		4,073,742
Futures contracts		(345,209)
*Change in Net Unrealized Appreciation (Depreciation)*		*3,728,533*
Net Loss on Investments and Futures Contracts		(13,489,104)
Distributions Paid to Auction Rate Cumulative Preferred Stockholders from Net Investment Income (Note 1)		(288,752)
Increase in Net Assets from Operations	$	20,158,003

See Notes to Financial Statements.


18		Western Asset Managed Municipals Fund Inc. 2014 Annual Report

Statements of changes in net assets


For the Years Ended May 31,	2014		2013

Operations:
Net investment income	$	33,935,859	$	34,443,299
Net realized gain (loss)		(17,217,637)		19,578,655
Change in net unrealized appreciation (depreciation)		3,728,533		(14,333,149)
Distributions paid to auction rate cumulative preferred stockholders from net investment income		(288,752)		(611,285)
*Increase in Net Assets From Operations*		*20,158,003*		*39,077,520*

Distributions to Shareholders From (Note 1):
Net investment income		(33,393,060)		(33,280,985)
*Decrease in Net Assets From Distributions to Shareholders*		*(33,393,060)*		*(33,280,985)*

Fund Share Transactions:
Reinvestment of distributions (38,433 and 223,837 shares issued, respectively)		483,415		3,177,040
*Increase in Net Assets From Fund Share Transactions*		*483,415*		*3,177,040*
*Increase (Decrease) in Net Assets*		*(12,751,642)*		*8,973,575*

Net Assets:
Beginning of year		603,935,406		594,961,831
End of year*	$	591,183,764	$	603,935,406
*Includesundistributed net investment income of:		$17,994,258		$17,848,788

See Notes to Financial Statements.


Western Asset Managed Municipals Fund Inc. 2014 Annual Report		19

Financial highlights


For a share of capital stock outstanding throughout each year ended May 31:
	2014¹			2013¹			2012			2011			2010

Net asset value, beginning of year		$14.12			$13.98			$12.33			$12.84			$11.80

Income (loss) from operations:
Net investment income		0.79			0.81			0.84			0.87			0.88
Net realized and unrealized gain (loss)		(0.32)			0.12			1.60			(0.58)			0.91
Distributions paid to auction rate cumulative preferred stockholders from net investment income		(0.01)			(0.01)			(0.01)			(0.02)			(0.03)
*Total income from operations*		*0.46*			*0.92*			*2.43*			*0.27*			*1.76*

Less distributions from:
Net investment income		(0.78)			(0.78)			(0.78)			(0.78)			(0.72)

Net asset value, end of year		$13.80			$14.12			$13.98			$12.33			$12.84

Market price, end of year		$13.17			$13.37			$13.86			$12.26			$12.90
*Total return, based on NAV^2,3*		*3.78*	%		*6.66*	%		*20.38*	%		*2.47*	%		*15.44*	%
*Total return, based on Market Price⁴*		*4.82*	%		*1.90*	%		*20.09*	%		*1.42*	%		*23.29*	%

Net assets, end of year (000s)		$591,184			$603,935			$594,962			$522,160			$539,182

Ratios to average net assets:⁵
Gross expenses		0.92	%		0.88	%		0.90	%		0.95	%		0.97	%
Net expenses⁶		0.92			0.88			0.90			0.95			0.97
Net investment income		6.10			5.65			6.45			7.09			7.06

Portfolio turnover rate		1	%		19	%		12	%		23	%		28	%

Auction Rate Cumulative Preferred Stock:
Total Amount Outstanding (000s)		$250,000			$250,000			$250,000			$250,000			$250,000
Asset Coverage Per Share		84,118			85,393			84,496			77,216			78,918
Involuntary Liquidating Preference Per Share⁷		25,000			25,000			25,000			25,000			25,000

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

²	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.

³	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.

⁴	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.

⁵	Calculated on the basis of average net assets of common stock shareholders. Ratios do not reflect the effect of dividend payments to preferred stockholders.

⁶	The impact of compensating balance arrangements, if any, was less than 0.01%.

⁷	Excludes accumulated and unpaid distributions.

See Notes to Financial Statements.


20		Western Asset Managed Municipals Fund Inc. 2014 Annual Report

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. 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 American 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 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.


Western Asset Managed Municipals Fund Inc. 2014 Annual Report		21

Notes to financial statements (cont’d)

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.


22		Western Asset Managed Municipals Fund Inc. 2014 Annual Report

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†		—	$	814,286,359		—	$	814,286,359
Short-term investments†		—		19,472,000		—		19,472,000
Total investments		—	$	833,758,359		—	$	833,758,359

LIABILITIES
Description	Quoted Prices (Level 1)		Other Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Other financial instruments:
Futures contracts	$	345,209		—		—	$	345,209

†	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. 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.


Western Asset Managed Municipals Fund Inc. 2014 Annual Report		23

Notes to financial statements (cont’d)

(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 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 shareholders of the Fund. Distributions of net realized gains, if any, are taxable and are declared at least annually. Distributions to 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.

(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) 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, and (2) the aggregate liquidation value (i.e., $25,000 per outstanding share) of the ARCPS.

(h) 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 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, 2014, 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.


24		Western Asset Managed Municipals Fund Inc. 2014 Annual Report

(i) 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 values per share. During the current year, the following reclassifications have been made:


	Undistributed Net Investment Income		Accumulated Net Realized Loss		Paid-in Capital
(a)	$	74,921	$	14,881,549	$	(14,956,470)
(b)		(183,498)		183,498		—

^(a)	Reclassifications are due to the expiration of a capital loss carryfoward and a taxable overdistribution.

^(b)	Reclassifications are due to differences between book and tax accretion of market discount on fixed income securities, book/tax differences in the treatment of distributions and book/tax differences in the treatment of various items.

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 plus the aggregate liquidation value of the Fund’s preferred stock.

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.

3. Investments

During the year ended May 31, 2014, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:


Purchases	$	6,835,295
Sales		9,222,367

At May 31, 2014, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:


Gross unrealized appreciation	$	84,001,646
Gross unrealized depreciation		(6,215,135)
Net unrealized appreciation	$	77,786,511

At May 31, 2014, 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		235		9/14	$	31,959,947	$	32,305,156	$	(345,209)


Western Asset Managed Municipals Fund Inc. 2014 Annual Report		25

Notes to financial statements (cont’d)

4. Derivative instruments and hedging activities

GAAP requires enhanced disclosure about an entity’s derivative 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, 2014.


LIABILITY DERIVATIVES¹
	Interest Rate Risk
Futures contracts²	$	345,209

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 of 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, 2014. 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	$	(1,255,746)


CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED
	Interest Rate Risk
Futures contracts	$	(345,209)

During the year ended May 31, 2014, the volume of derivative activity for the Fund was as follows:


	Average Market Value
Futures contracts (to sell)	$	18,002,858

The following table presents by financial instrument, the Fund’s derivative assets net of the related collateral held by the Fund at May 31, 2014:


	Gross Amount of Derivative Assets in the Statement of Assets and Liabilities^1,2		Collateral Received		Net Amount
Futures contracts³	$	51,406		—	$	51,406

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 not offset in the Statement of Assets and Liabilities.


26		Western Asset Managed Municipals Fund Inc. 2014 Annual Report

³	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. Auction rate cumulative preferred stock

As of May 31, 2014, the Fund had 2,000 shares outstanding each of Series M, Series T, Series W, Series Th and Series F Auction Rate Cumulative Preferred Stock (“ARCPS”). 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, which was calculated as 110% of the prevailing 30-day “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 0.066% to 0.246% during the year ended May 31, 2014. At May 31, 2014, the dividend rates in effect were as follows:


	Series M			Series T			Series W			Series Th			Series F
Dividend rates		0.131	%		0.131	%		0.131	%		0.131	%		0.098	%

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. (“CGMI”) currently acts as the broker/dealer in connection with the auction of ARCPS. After each auction, the auction agent will pay to the participating broker/dealer, from monies the Fund provides, a participation fee at the annual rate of 0.25% of the purchase price of the ARCPS that the broker/dealer places at the auction. However effective August 3, 2009, CGMI reduced its participation fee to an 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, 2014, the Fund incurred auction participation fees of $125,206 for CGMI’s services as the participating broker/dealer.


Western Asset Managed Municipals Fund Inc. 2014 Annual Report		27

Notes to financial statements (cont’d)

6. Distributions subsequent to May 31, 2014

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


Record Date	Payable Date		Amount
6/20/14		6/27/14	$	0.0650
7/18/14		7/25/14	$	0.0650
8/22/14		8/29/14	$	0.0650

7. Income tax information and distributions to shareholders

The tax character of distributions paid during the fiscal years ended May 31, was as follows:


	2014		2013
Distributions Paid From:
Tax-exempt income	$	33,178,307	$	33,280,985
Auction Rate Cumulative Preferred Stockholders		284,838		611,285
Total Tax-Exempt Distributions	$	33,463,145	$	33,892,270
Taxable Income:
Ordinary income	$	214,753		—
Auction Rate Cumulative Preferred Stockholders		3,914		—
Total taxable distributions	$	218,667		—
Total distributions	$	33,681,812	$	33,892,270

As of May 31, 2014, the components of accumulated earnings on a tax basis were as follows:


Undistributed tax-exempt income — net	$	18,075,497
Deferred Capital Losses*		(1,682,508)
Capital loss carryforward**		(7,734,187)
Other book/tax temporary differences^(a)		263,970
Unrealized appreciation (depreciation)^(b)		77,441,302
Total accumulated earnings (losses) — net	$	86,364,074

*	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.

**	As of May 31, 2014, the Fund had the following net capital loss carryforwards 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.


28		Western Asset Managed Municipals Fund Inc. 2014 Annual Report

8. Recent accounting pronouncement

The Fund has adopted the disclosure provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Update 2011-11 (“ASU 2011-11”), Balance Sheet (Topic 210) — Disclosures about Offsetting Assets and Liabilities along with the related scope clarification provisions of FASB Accounting Standards Update 2013-01 (“ASU 2013-01”) entitled Balance Sheet (Topic 210) — Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 is intended to enhance disclosures on the offsetting of financial assets and liabilities by requiring entities to disclose both gross and net information about financial instruments and transactions that are either offset in the statement of assets and liabilities or subject to a master netting agreement or similar arrangement. ASU 2013-01 limits the scope of ASU 2011-11’s disclosure requirements on offsetting to financial assets and financial liabilities related to derivatives, repurchase and reverse repurchase agreements, and securities lending and securities borrowing transactions.


Western Asset Managed Municipals Fund Inc. 2014 Annual Report		29

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. (the “Fund”), including the schedule of investments, as of May 31, 2014, and the related statement of operations 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, 2014, 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, 2014, the results of its operations for the year then ended, its 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, in conformity with U.S. generally accepted accounting principles.

LOGO

New York, New York

July 23, 2014


30		Western Asset Managed Municipals Fund Inc. 2014 Annual Report

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 Kenneth D. Fuller, 100 International Drive, 11th Floor, Baltimore, Maryland 21202. Information pertaining to the Directors and officers of the Fund is set forth below.


Independent Directors^†:
Carol L. Colman
Year of birth		1946
Position(s) held with Fund¹		Director and Member of the 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		None

Daniel P. Cronin
Year of birth		1946
Position(s) held with Fund¹		Director and Member of the 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		None

Paolo M. Cucchi
Year of birth		1941
Position(s) held with Fund¹		Director and Member of the 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, Professor of French and Italian (2009 to 2014) at Drew University; formerly, Vice President and Dean of College of Liberal Arts at Drew University (1984 to 2009)
Number of portfolios in fund complex overseen by Director (including the Fund)		31
Other board memberships held by Director		None


Western Asset Managed Municipals Fund Inc.		31

Additional information (unaudited) (cont’d)

Information about Directors and Officers


Independent Directors cont’d
Leslie H. Gelb
Year of birth		1937
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 2006
Principal occupation(s) during past five years		President Emeritus and Senior Board Fellow (since 2003), The Council on Foreign Relations; formerly, 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		Director of two registered investment companies advised by Aberdeen Asset Management Asia Limited India Fund, Inc. and Asia Tigers Fund, Inc. (since 1994)

William R. Hutchinson
Year of birth		1942
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 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		Director (Non-Executive Chairman of the Board (since December 1, 2009)), Associated Banc Corp. (banking) (since 1994)

Eileen A. Kamerick
Year of birth		1958
Position(s) held with Fund		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		CFO, Press Ganey Associates (health care informatics company) (since 2012); formerly Managing Director and CFO, Houlihan Lokey (international investment bank) (2010 to 2012); Senior Vice President, CFO & CLO, Tecta America Corp. (commercial roofing company) (2008 to 2010); Executive Vice President and CFO, Bearing Point Inc. (management and technology consulting firm) (2008); Executive Vice President, CFO and CAO Heidrick & Struggles (international executive search and leadership consulting firm) (2004 to 2008)
Number of portfolios in fund complex everseen by Director (including the Fund)		31
Other board memberships held by Director		Director of Associated Banc-Corp (financial services company) (since 2007); Westell Technologies, Inc. (technology company) (since 2003)


32		Western Asset Managed Municipals Fund Inc.


Independent Directors cont’d
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 Western Hemisphere Studies, Paul H. Nitze School of Advanced International Studies, The John Hopkins University (since 1973)
Number of portfolios in fund complex overseen by Director (including the Fund)		31
Other board memberships held by Director		None

Jeswald W. Salacuse²
Year of birth		1938
Position(s) held with Fund¹		Director and Member of the Nominating and Audit Committees, Class II
Term of office¹ and length of time served		Since 2007
Principal occupation(s) during past five years		Visiting Professor of Law, Harvard University Law School (January 2014 to June 2014); Henry J. Braker Professor of Commercial Law, The Fletcher School of Law and Diplomacy, Tufts University (since 1986); President and Member, Arbitration Tribunal, World Bank/ICSID (since 2004)
Number of portfolios in fund complex overseen by Director (including the Fund)		31
Other board memberships held by Director		Director of two registered investment companies advised by Aberdeen Asset Management Asia Limited (since 1993)


Western Asset Managed Municipals Fund Inc.		33

Additional information (unaudited) (cont’d)

Information about Directors and Officers


Interested Director and Officer:
Kenneth D. Fuller³
Year of birth		1958
Position(s) held with Fund¹		Director, Chairman, President and Chief Executive Officer, Class I
Term of office¹ and length of time served		Since 2013
Principal occupation(s) during past five years		Managing Director of Legg Mason & Co., LLC (“Legg Mason & Co.”) (since 2013); Officer and/or Trustee/Director of 169 funds associated with Legg Mason Partners Fund Advisor, LLC (“LMPFA”) or its affiliates (since 2013); President and Chief Executive Officer of LM Asset Services, LLC (“LMAS”) (formerly, a registered investment adviser) (since 2013); formerly, Senior Vice President of LMPFA (2012 to 2013); formerly, Director of Legg Mason & Co. (2012 to 2013); formerly, Vice President of Legg Mason & Co. (2009 to 2012); formerly, Vice President — Equity Division of T. Rowe Price Associates (1993 to 2009), as well as Investment Analyst and Portfolio Manager for certain asset allocation accounts (2004 to 2009).
Number of portfolios in fund complex overseen by Director (including the Fund)		157
Other board memberships held by Director		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)


34		Western Asset Managed Municipals Fund Inc.


Additional Officers cont’d
Vanessa A. Williams Legg Mason 100 First Stamford Place, 6th Floor, Stamford, CT 06902
Year of birth		1979
Position(s) with Fund¹		Identity Theft Prevention Officer
Term of office¹ and length of time served		Since 2011
Principal occupation(s) during past five years		Vice President of Legg Mason & Co. (since 2012); Identity Theft Prevention Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2011); Chief Anti-Money Laundering Compliance Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2011); formerly, Senior Compliance Officer of Legg Mason & Co. (2006 to 2008) and Legg Mason & Co. predecessors (prior to 2006)

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 of Global 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 SBFM (since 2002) and LMFAM (since 2013)


Western Asset Managed Municipals Fund Inc.		35

Additional information (unaudited) (cont’d)

Information about Directors and Officers


Additional Officers cont’d
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 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)

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		Vice President of Legg Mason & Co. and Legg Mason & Co. predecessors (since 2002); Treasurer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2010); 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) 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) and LMFAM (since 2013); Managing Director of Legg Mason & Co. (since 2005) and Legg Mason & Co. predecessors (prior to 2005)

^†	Directors who are not “interested persons” of the Fund within the meaning of Section 2(a)(19) of 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 2015, year 2016 and year 2014, respectively, or thereafter in each case when their respective successors are duly elected and qualified. The Fund’s executive officers are chosen each year at the first meeting of the Fund’s Board of Directors following the Annual Meeting of Stockholders, to hold office until the meeting of the Board following the next Annual Meeting of Stockholders and until their successors are duly elected and qualified.

²	Mr. Salacuse has retired from the Board of Directors, effective June 30, 2014.

³	Mr. Fuller is an “interested person” of the Fund as defined in the 1940 Act because Mr. Fuller is an officer of LMPFA and certain of its affiliates.


36		Western Asset Managed Municipals Fund Inc.

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.


Western Asset Managed Municipals Fund Inc.		37

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.


38		Western Asset Managed Municipals Fund Inc.

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 American Stock Transfer & Trust Company (“AST”), 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 AST 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), AST 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 AST has completed its purchases, the market price exceeds the net asset value of the common stock as of the valuation time, AST 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 AST is unable to stop open market purchases and cause the Fund to issue the remaining shares, the average per share purchase price paid by AST 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. AST 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.

AST maintains all shareholder accounts in the Plan and furnishes written confirmations of all transactions in each account, including information needed by a shareholder for personal and tax records. The automatic reinvestment of dividends and capital gains distributions


Western Asset Managed Municipals Fund Inc.		39

Dividend reinvestment plan (unaudited) (cont’d)

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 AST 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. AST’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 AST, 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 American Stock Transfer & Trust Company, 6201 15th Avenue, Brooklyn, New York 11219 or by telephone at 1-888-888-0151.


40		Western Asset Managed Municipals Fund Inc.

Important tax information (unaudited)

The following information is provided with respect to the distributions paid to Common Stock Shareholders during the taxable year ended May 31, 2014:


Distributions Paid	June 2013 — November 2013			December 2013			January 2014 — May 2014
Tax-Exempt Interest		100.00	%		94.77	%		100.000	%
Taxable Ordinary Income		—			7.72	%		—	*

Additionally, all distributions paid to auction rate cumulative preferred stockholders during the taxable year ended May 31, 2014 except for the taxable portion noted in the table below qualify as tax-exempt interest dividends for Federal income tax purposes.

Series:

Record
Date

Payable
Date

Tax-Exempt
Portion

Taxable
Portion

Series M

12/16/2013

12/17/2013

27.78

72.22

Series T

12/17/2013

12/18/2013

27.78

72.22

Series W

12/18/2013

12/19/2013

25.93

74.07

Series H

12/19/2013

12/20/2013

27.78

72.22

Series F

12/20/2013

12/23/2013

39.06

60.94

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

*	Additionally, all of the taxable 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.


Western Asset Managed Municipals Fund Inc.		41

Western Asset

Managed Municipals Fund Inc.

Directors

Carol L. Colman

Daniel P. Cronin

Paolo M. Cucchi

Kenneth D. Fuller

Chairman

Leslie H. Gelb

William R. Hutchinson

Eileen A. Kamerick

Riordan Roett

Jeswald W. Salacuse*

Officers

Kenneth D. Fuller

President and Chief Executive Officer

Richard F. Sennett

Principal Financial Officer

Ted P. Becker

Chief Compliance Officer

Vanessa A. Williams

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

American Stock Transfer & Trust Company

6201 15th Avenue

Brooklyn, NY 11219

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

*	Mr. Salacuse has retired from the Board of Directors, effective June 30, 2014.

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.

Revised April 2011

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 in the open market.

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) on the Fund’s website 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.

American Stock

Transfer & Trust Company

6201 15th Avenue

Brooklyn, NY 11219

WASX010003 7/14 SR14-2249

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, 2013 and May 31, 2014 (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 $62,500 in 2013 and $63,000 in 2014.

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 $0 in 2013 and $0 in 2014.

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 $6,500 in 2013 and $3,800 in 2014. 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 2013 and 2014; Tax Fees were 100% and 100% for 2013 and 2014; and Other Fees were 100% and 100% for 2013 and 2014.

(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 2014.

(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:

William R. Hutchinson

Paolo M. Cucchi

Daniel P. Cronin

Carol L. Colman

Leslie H. Gelb

Eileen A. Kamerick

Dr. Riordan Roett

Jeswald W. Salacuse (Effective June 30, 2014, Mr. Salacuse retired from the Audit Committee and the Board of Directors.)

b) Not applicable

ITEM 6.

SCHEDULE OF INVESTMENTS.

Included herein under Item 1.

ITEM 7.

DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES

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”) have 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.

Policy

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.

INVESTMENT PROFESSIONALS 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 March 31, 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.

(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, 2014.

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	103	$ 185.0 billion	None	None
	Other Pooled Vehicles	242	$92.3 billion	9	$1.5 billion
	Other Accounts	678	$179.1 billion	55	$17.0 billion

Robert E. Amodeo‡	Other Registered Investment Companies	21	$14.9 billion	None	None
	Other Pooled Vehicles	None	None	None	None
	Other Accounts	18	$3.1 billion	None	None


David T. Fare ‡	Other Registered Investment Companies	16	$12.9 billion	None	None
	Other Pooled Vehicles	None	None	None	None
	Other Accounts	2	$850 million	None	None
Dennis McNamara‡	Other Registered Investment Companies	34	$138.5 billion	None	None
	Other Pooled Vehicles	22	$10.8 billion	1	$272.7 million
	Other Accounts	142	$51.5 billion	8	$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.

(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

Conflicts of Interest

The manager, the subadviser and investment professionals have interests which conflict with the interests of the fund. There is no guarantee that the policies and procedures adopted by the manager, the subadviser and the fund will be able to identify or mitigate these conflicts of interest.

Some examples of material conflicts of interest include:

Allocation of Limited Time and Attention. An investment professional who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts. An investment professional may not be able to formulate as complete a strategy or identify equally attractive investment opportunities for each of those funds and accounts as might be the case if he or she were to devote substantially more attention to the management of a single fund. Such an investment professional may make general determinations across multiple funds, rather than tailoring a unique approach for each fund. The effects of this conflict may be more pronounced where funds and/or accounts overseen by a particular investment professional have different investment strategies.

Allocation of Limited Investment Opportunities; Aggregation of Orders. If an investment professional identifies a limited investment opportunity that may be suitable for multiple funds and/or accounts, the opportunity may be allocated among these several funds or accounts, which may limit the fund’s ability to take full advantage of the investment opportunity. Additionally, the subadviser may aggregate transaction orders for multiple accounts for purpose of execution. Such aggregation may cause the price or brokerage costs to be less favorable to a particular client than if similar transactions were not being executed concurrently for other accounts. In addition, the subadviser’s trade allocation policies may result in the fund’s orders not being fully executed or being delayed in execution.

Pursuit of Differing Strategies. At times, an investment professional may determine that an investment opportunity may be appropriate for only some of the funds and/or accounts for which he or she exercises investment responsibility, or may decide that certain of the funds and/or accounts should take differing positions with respect to a particular security. In these cases, the investment professional may place separate transactions for one or more funds or accounts which may affect the market price of the security or the execution of the transaction, or both, to the detriment or benefit of one or more other funds and/or accounts. For example, an investment professional may determine that it would be in the interest of another account to sell a security that the fund holds long, potentially resulting in a decrease in the market value of the security held by the fund.

Cross Trades. Investment professionals may manage funds that engage in cross trades, where one of the manager’s funds or accounts sells a particular security to another fund or account managed by the same manager. Cross trades may pose conflicts of interest because of, for example, the possibility that one account sells a security to another account at a higher price than an independent third party would pay or otherwise enters into a transaction that it would not enter into with an independent party, such as the sale of a difficult-to-obtain security.

Selection of Broker/Dealers. Investment professionals may select or influence the selection of the brokers and dealers that are used to execute securities transactions for the funds and/or accounts that they supervise. In addition to executing trades, some brokers and dealers provide the subadviser with brokerage and research services, These services may be taken into account in the selection of brokers and dealers whether a broker is being selected to effect a trade on an agency basis for a commission or (as is normally the case for the funds) whether a dealer is being selected to effect a trade on a principal basis. This may result in the payment of higher brokerage fees and/or execution at a less favorable price than might have

otherwise been available. The services obtained may ultimately be more beneficial to certain of the manager’s funds or accounts than to others (but not necessarily to the funds that pay the increased commission or incur the less favorable execution). A decision as to the selection of brokers and dealers could therefore yield disproportionate costs and benefits among the funds and/or accounts managed.

Variation in Financial and Other Benefits. A conflict of interest arises where the financial or other benefits available to an investment professional differ among the funds and/or accounts that he or she manages. If the amount or structure of the investment manager’s management fee and/or an investment professional’s compensation differs among funds and/or accounts (such as where certain funds or accounts pay higher management fees or performance-based management fees), the investment professional might be motivated to help certain funds and/or accounts over others. Similarly, the desire to maintain assets under management or to enhance the investment professional’s performance record or to derive other rewards, financial or otherwise, could influence the investment professional in affording preferential treatment to those funds and/or accounts that could most significantly benefit the investment professional. An investment professional may, for example, have an incentive to allocate favorable or limited opportunity investments or structure the timing of investments to favor such funds and/or accounts. Also, an investment professional’s or the manager’s or the subadviser’s desire to increase assets under management could influence the investment professional to keep a fund open for new investors without regard to potential benefits of closing the fund to new investors. Additionally, the investment professional might be motivated to favor funds and/or accounts in which he or she has an ownership interest or in which the investment manager and/or its affiliates have ownership interests. Conversely, if an investment professional does not personally hold an investment in the fund, the investment professional’s conflicts of interest with respect to the fund may be more acute.

Related Business Opportunities. The investment manager or its affiliates may provide more services (such as distribution or recordkeeping) for some types of funds or accounts than for others. In such cases, an investment professional may benefit, either directly or indirectly, by devoting disproportionate attention to the management of funds and/or accounts that provide greater overall returns to the investment manager and its affiliates.

Investment Professional Securities Ownership

The table below identifies the dollar range of securities beneficially owned by the named investment professional as of May 31, 2014.


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

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/ Kenneth D. Fuller
		Kenneth D. Fuller Chief Executive Officer

Date:		July 25, 2014

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/ Kenneth D. Fuller
		Kenneth D. Fuller
		Chief Executive Officer

Date:		July 25, 2014

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

Date:		July 25, 2014