ASC 820 establishes a three-level hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of the fund’s investments. The three levels are defined as follows:
Level 1: Valuations based on quoted prices for identical securities in active markets.
Level 2: Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Valuations based on inputs that are unobservable and significant to the fair value measurement.
The following is a summary of the inputs used to value the fund’s net assets as of the close of the reporting period:
| | | |
| | Valuation inputs |
| Investments in securities: | Level 1 | Level 2 | Level 3 |
| Municipal bonds and notes | $— | $396,332,902 | $— |
| Short-term investments | — | 14,616,727 | — |
| Totals by level | $— | $410,949,629 | $— |
|
| | | |
| | Valuation inputs |
| Other financial instruments: | Level 1 | Level 2 | Level 3 |
| Futures contracts | $154,880 | $— | $— |
| Totals by level | $154,880 | $— | $— |
The accompanying notes are an integral part of these financial statements.
| |
Managed Municipal Income Trust 23 |
Statement of assets and liabilities 4/30/24 (Unaudited)
| |
| ASSETS | |
| Investment in securities, at value (Notes 1 and 9): | |
| Unaffiliated issuers (identified cost $412,089,066) | $396,925,633 |
| Affiliated issuers (identified cost $14,023,996) (Note 6) | 14,023,996 |
| Interest and other receivables | 5,820,845 |
| Receivable for investments sold | 75,552 |
| Receivable for variation margin on futures contracts (Note 1) | 38,157 |
| Prepaid assets | 34,475 |
| Total assets | 416,918,658 |
| |
| LIABILITIES | |
| Payable for investments purchased | 875,234 |
| Payable for purchases of delayed delivery securities (Note 1) | 800,000 |
| Payable for shares of the fund repurchased | 210,892 |
| Payable for compensation of Manager (Note 2) | 419,013 |
| Payable for custodian fees (Note 2) | 6,938 |
| Payable for investor servicing fees (Note 2) | 25,729 |
| Payable for Trustee compensation and expenses (Note 2) | 121,318 |
| Payable for administrative services (Note 2) | 902 |
| Payable for floating rate notes issued (Note 1) | 12,299,679 |
| Preferred share remarketing agent fees | 26,907 |
| Distributions payable to shareholders | 1,185,493 |
| Distributions payable to preferred shareholders (Note 1) | 112,068 |
| Other accrued expenses | 68,204 |
| Total liabilities | 16,152,377 |
| Series A remarketed preferred shares: (240 shares authorized and issued at $100,000 per | |
| share) (Note 4) | 24,000,000 |
| Series C remarketed preferred shares: (1,507 shares authorized and issued at $50,000 per | |
| share) (Note 4) | 75,350,000 |
| Net assets | $301,416,281 |
| |
| REPRESENTED BY | |
| Paid-in capital — common shares (Unlimited shares authorized) (Notes 1 and 5) | $340,077,377 |
| Total distributable earnings (Note 1) | (38,661,096) |
| Total — Representing net assets applicable to common shares outstanding | $301,416,281 |
| |
| COMPUTATION OF NET ASSET VALUE | |
| Net asset value per common share ($301,416,281 divided by 45,739,545 shares) | $6.59 |
The accompanying notes are an integral part of these financial statements.
|
| 24 Managed Municipal Income Trust |
Statement of operations Six months ended 4/30/24 (Unaudited)
| |
| INVESTMENT INCOME | |
| Interest (including interest income of $130,234 from investments in affiliated issuers) (Note 6) | $9,681,180 |
| Total investment income | 9,681,180 |
| |
| EXPENSES | |
| Compensation of Manager (Note 2) | 1,099,154 |
| Investor servicing fees (Note 2) | 76,554 |
| Custodian fees (Note 2) | 7,851 |
| Trustee compensation and expenses (Note 2) | 8,372 |
| Administrative services (Note 2) | 5,946 |
| Interest and fees expense (Note 1) | 356,428 |
| Preferred share remarketing agent fees | 75,342 |
| Other | 242,887 |
| Fees waived and reimbursed by Manager (Note 2) | (269,807) |
| Total expenses | 1,602,727 |
| Expense reduction (Note 2) | (749) |
| Net expenses | 1,601,978 |
| | |
| Net investment income | 8,079,202 |
| |
| REALIZED AND UNREALIZED GAIN (LOSS) | |
| Net realized gain (loss) on: | |
| Securities from unaffiliated issuers (Notes 1 and 3) | (1,926,726) |
| Futures contracts (Note 1) | 25,667 |
| Swap contracts (Note 1) | (56,000) |
| Total net realized loss | (1,957,059) |
| Change in net unrealized appreciation on: | |
| Securities from unaffiliated issuers | 41,927,414 |
| Futures contracts | 154,880 |
| Swap contracts | 214,306 |
| Total change in net unrealized appreciation | 42,296,600 |
| | |
| Net gain on investments | 40,339,541 |
| | |
| Net increase in net assets resulting from operations | 48,418,743 |
| |
| Distributions to Series A and C remarketed preferred shareholders (Note 1): | |
| From ordinary income | |
| Taxable net investment income | (15,133) |
| From tax exempt net investment income | (2,987,657) |
| Net increase in net assets resulting from operations (applicable to common shareholders) | $45,415,953 |
The accompanying notes are an integral part of these financial statements.
|
| Managed Municipal Income Trust 25 |
Statement of changes in net assets
| | |
| INCREASE (DECREASE) IN NET ASSETS | Six months ended 4/30/24* | Year ended 10/31/23 |
| Operations | | |
| Net investment income | $8,079,202 | $15,571,536 |
| Net realized loss on investments | (1,957,059) | (13,224,869) |
| Change in net unrealized appreciation of investments | 42,296,600 | 9,995,743 |
| Net increase in net assets resulting from operations | 48,418,743 | 12,342,410 |
| |
| Distributions to Series A and C remarketed preferred | | |
| shareholders (Note 1): | | |
| From ordinary income | | |
| Taxable net investment income | (15,133) | (8,043) |
| From tax exempt net investment income | (2,987,657) | (5,429,673) |
| Net increase in net assets resulting from operations | | |
| (applicable to common shareholders) | 45,415,953 | 6,904,694 |
| |
| Distributions to common shareholders (Note 1): | | |
| From ordinary income | | |
| Taxable net investment income | (13,624) | (742,130) |
| From tax exempt net investment income | (6,621,990) | (8,760,917) |
| From return of capital | — | (6,271,969) |
| Increase from issuance of common shares in connection | | |
| with reinvestment of distributions | — | 260,630 |
| Decrease from shares repurchased (Note 5) | (8,217,919) | (9,795,449) |
| Total increase (decrease) in net assets | 30,562,420 | (18,405,141) |
| |
| NET ASSETS | | |
| Beginning of period | 270,853,861 | 289,259,002 |
| End of period | $301,416,281 | $270,853,861 |
| |
| NUMBER OF FUND SHARES | | |
| Common shares outstanding at beginning of period | 47,098,000 | 48,738,809 |
| Shares issued in connection with dividend | | |
| reinvestment plan | — | 39,845 |
| Shares repurchased (Note 5) | (1,358,455) | (1,680,654) |
| Common shares outstanding at end of period | 45,739,545 | 47,098,000 |
| |
| Series A Remarketed preferred shares outstanding at | | |
| beginning and end of period | 240 | 240 |
| |
| Series C Remarketed preferred shares outstanding at | | |
| beginning and end of period | 1,507 | 1,507 |
*Unaudited.
The accompanying notes are an integral part of these financial statements.
|
| 26 Managed Municipal Income Trust |
Financial highlights
(For a common share outstanding throughout the period)
| | | | | | |
| PER-SHARE OPERATING PERFORMANCE | | | | | | |
| | Six | | | | | |
| | months | | | | | |
| | ended** | | | Year ended | | |
| | 4/30/24 | 10/31/23 | 10/31/22 | 10/31/21 | 10/31/20 | 10/31/19 |
| Net asset value, beginning of period | | | | | | |
| (common shares) | $5.75 | $5.94 | $8.19 | $7.91 | $8.15 | $7.64 |
| Investment operations: | | | | | | |
| Net investment income a | .17 | .32 | .30 | .31 | .33 | .38 |
| Net realized and unrealized | | | | | | |
| gain (loss) on investments | .85 | (.09) | (2.13) | .35 | (.17) | .54 |
| Total from investment operations | 1.02 | .23 | (1.83) | .66 | .16 | .92 |
| Distributions to preferred shareholders: | | | | | |
| From net investment income | (.06) | (.11) | (.03) | —e | (.02) | (.04) |
| From capital gains | — | — | —e | — | (.01) | (.01) |
| Total from investment operations | | | | | | |
| (applicable to common shareholders) | .96 | .12 | (1.86) | .66 | .13 | .87 |
| Distributions to common shareholders: | | | | | | |
| From net investment income | (.14) | (.20) | (.29) | (.32) | (.33) | (.31) |
| From capital gains | — | — | (.03) | (.06) | (.05) | (.07) |
| From return of capital | — | (.13) | (.07) | — | — | — |
| Total distributions | (.14) | (.33) | (.39) | (.38) | (.38) | (.38) |
| Increase from shares repurchased | .02 | .02 | —e | — | .01 | .02 |
| Net asset value, end of period | | | | | | |
| (common shares) | $6.59 | $5.75 | $5.94 | $8.19 | $7.91 | $8.15 |
| Market price, end of period | | | | | | |
| (common shares) | $5.85 | $5.14 | $5.75 | $8.25 | $7.64 | $7.97 |
| Total return at market price (%) | | | | | | |
| (common shares) b | 16.52* | (5.69) | (26.35) | 13.11 | 0.77 | 24.89 |
| Total return at net asset value (%) | | | | | | |
| (common shares) b | 17.11* | 1.87 | (23.46) | 8.44 | 1.93 | 11.91 |
| |
| RATIOS AND SUPPLEMENTAL DATA | | | | | | |
| Net assets, end of period | | | | | | |
| (common shares) (in thousands) | $301,416 | $270,854 | $289,259 | $401,053 | $386,602 | $401,242 |
| Ratio of expenses to average | | | | | | |
| net assets (including interest | | | | | | |
| expense) (%) c,d,f | .52*g | 1.21g | 1.09g | .93 | .98g | 1.01 |
| Ratio of net investment income | | | | | | |
| to average net assets (%) c | 1.66* | 3.27 | 3.75 | 3.73 | 3.92 | 4.21 |
| Portfolio turnover (%) | 10* | 45 | 24 | 21 | 38 | 36 |
(Continued on next page)
|
| Managed Municipal Income Trust 27 |
Financial highlights cont.
* Not annualized.
** Unaudited.
a Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period.
b Total return assumes dividend reinvestment.
c Ratios reflect net assets available to common shares only; net investment income ratio also reflects reduction for dividend payments to preferred shareholders.
d Includes amounts paid through expense offset arrangements, if any (Note 2).
e Amount represents less than $0.01 per share.
f Includes interest and fee expense associated with borrowings which amounted to the following amounts as a percentage of average net assets:
| |
| | Percentage of average net assets |
| April 30, 2024 | 0.12% |
| October 31, 2023 | 0.35 |
| October 31, 2022 | 0.18 |
| October 31, 2021 | 0.05 |
| October 31, 2020 | 0.09 |
| October 31, 2019 | 0.14 |
g Reflects waiver of certain fund expenses in connection with the fund’s remarketing preferred shares during the period. As a result of such waiver, the expenses of the fund reflect a reduction as a percentage of average net assets for the periods noted below (Note 2):
| |
| | Percentage of average net assets |
| April 30, 2024 | 0.09% |
| October 31, 2023 | 0.18 |
| October 31, 2022 | 0.01 |
| October 31, 2020 | >0.01 |
The accompanying notes are an integral part of these financial statements.
|
| 28 Managed Municipal Income Trust |
Notes to financial statements 4/30/24 (Unaudited)
Unless otherwise noted, the “reporting period” represents the period from November 1, 2023 through April 30, 2024. The following table defines commonly used references within the Notes to financial statements:
| |
| References to | Represent |
| Franklin Templeton | Franklin Resources, Inc. |
| JPMorgan | JPMorgan Chase Bank, N.A. |
| OTC | Over-the-counter |
| PIL | Putnam Investments Limited, an affiliate of Putnam Management |
| Putnam Management | Putnam Investment Management, LLC, the fund’s manager, an indirect wholly-owned |
| | subsidiary of Franklin Templeton |
| State Street | State Street Bank and Trust Company |
Putnam Managed Municipal Income Trust (the fund) is a Massachusetts business trust, which is registered under the Investment Company Act of 1940, as amended, as a diversified closed-end management investment company. The goal of the fund is to seek a high level of current income exempt from federal income tax. The fund intends to achieve its goal by investing in a diversified portfolio of tax-exempt municipal securities which Putnam Management believes does not involve undue risk to income or principal. Up to 60% of the fund’s assets may consist of high-yield tax-exempt municipal securities that are below investment grade and involve special risk considerations. The fund also uses leverage, primarily by issuing preferred shares in an effort to enhance the returns for the common shareholders.
The fund’s shares trade on a stock exchange at market prices, which may be lower than the fund’s net asset value.
In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund’s management team expects the risk of material loss to be remote.
The fund has entered into contractual arrangements with an investment adviser, administrator, transfer agent and custodian, who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the fund’s Agreement and Declaration of Trust, any claims asserted by a shareholder against or on behalf of the fund, including claims against Trustees and Officers, must be brought in courts located within the Commonwealth of Massachusetts.
Note 1: Significant accounting policies
The fund follows the accounting and reporting guidance in Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services – Investment Companies (ASC 946) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP), including, but not limited to, ASC 946. The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations. Actual results could differ from those estimates. Subsequent events after the Statement of assets and liabilities date through the date that the financial statements were issued have been evaluated in the preparation of the financial statements.
Security valuation Portfolio securities and other investments are valued using policies and procedures adopted by the Board of Trustees. The Trustees have formed a Pricing Committee to oversee the implementation of these procedures and have delegated responsibility for valuing the fund’s assets in accordance with these procedures to Putnam Management. Putnam Management has established an internal Valuation Committee that is responsible for making fair value determinations, evaluating the effectiveness of the pricing policies of the fund and reporting to the Pricing Committee.
|
| Managed Municipal Income Trust 29 |
Tax-exempt bonds and notes are generally valued on the basis of valuations provided by an independent pricing service approved by the Trustees. Such services use information with respect to transactions in bonds, quotations from bond dealers, market transactions in comparable securities and various relationships between securities in determining value. These securities will generally be categorized as Level 2.
Market quotations are not considered to be readily available for certain debt obligations (including short-term investments with remaining maturities of 60 days or less) and other investments; such investments are valued on the basis of valuations furnished by an independent pricing service approved by the Trustees or dealers selected by Putnam Management. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities (which consider such factors as security prices, yields, maturities and ratings). These securities will generally be categorized as Level 2. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate.
Investments in open-end investment companies (excluding exchange-traded funds), if any, which can be classified as Level 1 or Level 2 securities, are valued based on their net asset value. The net asset value of such investment companies equals the total value of their assets less their liabilities and divided by the number of their outstanding shares.
To the extent a pricing service or dealer is unable to value a security or provides a valuation that Putnam Management does not believe accurately reflects the security’s fair value, the security will be valued at fair value by Putnam Management, which has been designated as valuation designee pursuant to Rule 2a–5 under the Investment Company Act of 1940, in accordance with policies and procedures approved by the Trustees. Certain investments, including certain restricted and illiquid securities and derivatives, are also valued at fair value following procedures approved by the Trustees. These valuations consider such factors as significant market or specific security events such as interest rate or credit quality changes, various relationships with other securities, discount rates, U.S. Treasury, U.S. swap and credit yields, index levels, convexity exposures, recovery rates, sales and other multiples and resale restrictions. These securities are classified as Level 2 or as Level 3 depending on the priority of the significant inputs.
To assess the continuing appropriateness of fair valuations, the Valuation Committee reviews and affirms the reasonableness of such valuations on a regular basis after considering all relevant information that is reasonably available. Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security in a current sale and does not reflect an actual market price, which may be different by a material amount.
Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.
Interest income, net of any applicable withholding taxes, if any, is recorded on the accrual basis. Amortization and accretion of premiums and discounts on debt securities, if any, is recorded on the accrual basis.
Futures contracts The fund uses futures contracts for hedging treasury term structure risk and for yield curve positioning.
The potential risk to the fund is that the change in value of futures contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, if interest or exchange rates move unexpectedly or if the counterparty to the contract is unable to perform. With futures, there is minimal counterparty credit risk to the fund since futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default. Risks may exceed amounts recognized on the Statement of assets and liabilities. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as “variation margin.”
Futures contracts outstanding at period end, if any, are listed after the fund’s portfolio.
|
| 30 Managed Municipal Income Trust |
Total return swap contracts The fund entered into OTC and/or centrally cleared total return swap contracts, which are arrangements to exchange a market-linked return for a periodic payment, both based on a notional principal amount, for hedging inflation, for gaining exposure to inflation and for hedging and gaining exposure to interest rate and term structure risk.
To the extent that the total return of the security, index or other financial measure underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the fund will receive a payment from or make a payment to the counterparty. OTC and/or centrally cleared total return swap contracts are marked to market daily based upon quotations from an independent pricing service or market maker. Any change is recorded as an unrealized gain or loss on OTC total return swaps. Daily fluctuations in the value of centrally cleared total return swaps are settled through a central clearing agent and are recorded in variation margin on the Statement of assets and liabilities and recorded as unrealized gain or loss. Payments received or made are recorded as realized gains or losses. Certain OTC and/or centrally cleared total return swap contracts may include extended effective dates. Payments related to these swap contracts are accrued based on the terms of the contract. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or in the price of the underlying security or index, the possibility that there is no liquid market for these agreements or that the counterparty may default on its obligation to perform. The fund’s maximum risk of loss from counterparty risk or central clearing risk is the fair value of the contract. This risk may be mitigated for OTC total return swap contracts by having a master netting arrangement between the fund and the counterparty and for centrally cleared total return swap contracts through the daily exchange of variation margin. There is minimal counterparty risk with respect to centrally cleared total return swap contracts due to the clearinghouse guarantee fund and other resources that are available in the event of a clearing member default. Risk of loss may exceed amounts recognized on the Statement of assets and liabilities.
OTC and/or centrally cleared total return swap contracts outstanding, including their respective notional amounts at period end, if any, are listed after the fund’s portfolio.
Master agreements The fund is a party to ISDA (International Swaps and Derivatives Association, Inc.) Master Agreements (Master Agreements) with certain counterparties that govern OTC derivative and foreign exchange contracts entered into from time to time. The Master Agreements may contain provisions regarding, among other things, the parties’ general obligations, representations, agreements, collateral requirements, events of default and early termination. With respect to certain counterparties, in accordance with the terms of the Master Agreements, collateral pledged to the fund is held in a segregated account by the fund’s custodian and, with respect to those amounts which can be sold or repledged, is presented in the fund’s portfolio.
Collateral pledged by the fund is segregated by the fund’s custodian and identified in the fund’s portfolio. Collateral can be in the form of cash or debt securities issued by the U.S. Government or related agencies or other securities as agreed to by the fund and the applicable counterparty. Collateral requirements are determined based on the fund’s net position with each counterparty.
Termination events applicable to the fund may occur upon a decline in the fund’s net assets below a specified threshold over a certain period of time. Termination events applicable to counterparties may occur upon a decline in the counterparty’s long-term and short-term credit ratings below a specified level. In each case, upon occurrence, the other party may elect to terminate early and cause settlement of all derivative and foreign exchange contracts outstanding, including the payment of any losses and costs resulting from such early termination, as reasonably determined by the terminating party. Any decision by one or more of the fund’s counterparties to elect early termination could impact the fund’s future derivative activity.
At the close of the reporting period, the fund did not have a net liability position on open derivative contracts subject to the Master Agreements.
Tender option bond transactions The fund may participate in transactions whereby a fixed-rate bond is transferred to a tender option bond trust (TOB trust) sponsored by a broker. The TOB trust funds the purchase of the fixed rate bonds by issuing floating-rate bonds to third parties and allowing the fund to retain the residual interest in the TOB trust’s assets and cash flows, which are in the form of inverse floating rate bonds. The inverse floating rate bonds held by the fund give the fund the right to (1) cause the holders of the floating rate bonds to tender their notes at par, and (2) to have the fixed-rate bond held by the TOB trust transferred to the fund, causing the TOB trust to collapse. The fund accounts for the transfer of the fixed-rate bond to the TOB trust as a
|
| Managed Municipal Income Trust 31 |
secured borrowing by including the fixed-rate bond in the fund’s portfolio and including the floating rate bond as a liability in the Statement of assets and liabilities. At the close of the reporting period, the fund’s investments with a value of $22,313,171 were held by the TOB trust and served as collateral for $12,299,679 in floating-rate bonds outstanding. For the reporting period ended, the fund incurred interest expense of $309,305 for these investments based on an average interest rate of 3.59%.
Federal taxes It is the policy of the fund to distribute all of its income within the prescribed time period and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended (the Code), applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
The fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (ASC 740). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The fund did not have a liability to record for any unrecognized tax benefits in the accompanying financial statements. No provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.
Under the Regulated Investment Company Modernization Act of 2010, the fund will be permitted to carry forward capital losses incurred for an unlimited period and the carry forwards will retain their character as either short-term or long-term capital losses. At October 31, 2023, the fund had the following capital loss carryovers available, to the extent allowed by the Code, to offset future net capital gain, if any:
| | |
| | Loss carryover | |
| Short-term | Long-term | Total |
| $8,838,363 | $10,227,210 | $19,065,573 |
Tax cost of investments includes adjustments to net unrealized appreciation (depreciation) which may not necessarily be final tax cost basis adjustments, but closely approximate the tax basis unrealized gains and losses that may be realized and distributed to shareholders. The aggregate identified cost on a tax basis is $425,775,234, resulting in gross unrealized appreciation and depreciation of $18,920,845 and $33,591,570, respectively, or net unrealized depreciation of $14,670,725.
Distributions to shareholders Distributions to common and preferred shareholders from net investment income, if any, are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. The fund pays targeted distribution rates to its common shareholders. Distributions are sourced first from tax-exempt and ordinary income. The balance of the distributions, if any, comes next from capital gain and then will constitute a return of capital. A return of capital is not taxable; rather it reduces a shareholder’s tax basis in their shares of the fund. The fund may make return of capital distributions to achieve the targeted distribution rates. Dividends on remarketed preferred shares become payable when, as and if declared by the Trustees. Each dividend period for the remarketed preferred Series A shares is generally a 28 day period, and generally a 7 day period for Series C. The applicable dividend rate for the remarketed preferred shares on April 30, 2024 was 5.882% on Series A, and 5.882% for Series C. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal year. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations.
During the reporting period, the fund has experienced unsuccessful remarketings of its remarketed preferred shares. As a result, dividends to the remarketed preferred shares have been paid at the “maximum dividend rate,” pursuant to the fund’s by-laws, which, based on the current credit quality of the remarketed preferred shares, equals 110% of the 60-day “AA” composite commercial paper rate.
Determination of net asset value Net asset value of the common shares is determined by dividing the value of all assets of the fund, less all liabilities and the liquidation preference (redemption value of preferred shares, plus accumulated and unpaid dividends) of any outstanding remarketed preferred shares, by the total number of common shares outstanding as of period end.
|
| 32 Managed Municipal Income Trust |
Note 2: Management fee, administrative services and other transactions
The fund pays Putnam Management for management and investment advisory services quarterly based on the average net assets of the fund, including assets attributable to preferred shares. Such fee is based on the following annual rates based on the average weekly net assets attributable to common and preferred shares.
The lesser of (i) 0.550% of average net assets attributable to common and preferred shares outstanding, or (ii) the following rates:
| | | | |
| | of the first $500 million of average | | | of the next $5 billion of average weekly |
| 0.650% | weekly net assets, | | 0.425% | net assets, |
| | of the next $500 million of average | | | of the next $5 billion of average weekly |
| 0.550% | weekly net assets, | | 0.405% | net assets, |
| | of the next $500 million of average | | | of the next $5 billion of average weekly |
| 0.500% | weekly net assets, | | 0.390% | net assets and |
| | of the next $5 billion of average weekly | | 0.380% | of any excess thereafter. |
| 0.450% | net assets, | | | |
For the reporting period, the management fee represented an effective rate (excluding the impact from any expense waivers in effect) of 0.271% of the fund’s average net assets attributable to common and preferred shares outstanding.
If dividends payable on remarketed preferred shares during any dividend payment period plus any expenses attributable to remarketed preferred shares for that period exceed the fund’s gross income attributable to the proceeds of the remarketed preferred shares during that period, then the fee payable to Putnam Management for that period will be reduced by the amount of the excess (but not more than the effective management fees rate under the contract multiplied by the liquidation preference of the remarketed preferred shares outstanding during the period). For the reporting period, Putnam Management reimbursed $269,807 to the fund. Any amount in excess of the fee payable to Putnam Management for a given period will be used to reduce any subsequent fee payable to Putnam Management, as may be necessary. As of April 30, 2024, this excess amounted to $2,030,966.
PIL is authorized by the Trustees to manage a separate portion of the assets of the fund as determined by Putnam Management from time to time. PIL did not manage any portion of the assets of the fund during the reporting period. If Putnam Management were to engage the services of PIL, Putnam Management would pay a quarterly sub-management fee to PIL for its services at an annual rate of 0.20% of the average net assets of the portion of the fund managed by PIL.
On January 1, 2024, a subsidiary of Franklin Templeton acquired Putnam U.S. Holdings I, LLC (“Putnam Holdings”), the parent company of Putnam Management and PIL, in a stock and cash transaction (the “Transaction”). As a result of the Transaction, Putnam Management and PIL became indirect, wholly-owned subsidiaries of Franklin Templeton. The Transaction also resulted in the automatic termination of the investment management contract between the fund and Putnam Management and the sub-management contract for the fund between Putnam Management and PIL that were in place for the fund before the Transaction (together, the “Previous Advisory Contracts”). However, for the period from January 1, 2024 until March 19, 2024, Putnam Management and PIL continued to provide uninterrupted services with respect to the fund pursuant to interim investment management and sub-management contracts (together, the “Interim Advisory Contracts”) that were approved by the Board of Trustees. The terms of the Interim Advisory Contracts were identical to those of the Previous Advisory Contracts, except for the term of the contracts and those provisions required by regulation. On March 19, 2024, new investment management and sub-management contracts were approved by fund shareholders at a shareholder meeting held in connection with the Transaction (together, the “New Advisory Contracts”). The New Advisory Contracts took effect on March 19, 2024 and replaced the Interim Advisory Contracts. The terms of the New Advisory Contracts are substantially similar to those of the Previous Advisory Contracts, and the fee rates payable under the New Advisory Contracts are the same as the fee rates under the Previous Advisory Contracts.
Effective June 1, 2024, under an agreement with Putnam Management, Franklin Templeton Services, LLC, a wholly-owned subsidiary of Franklin Templeton and an affiliate of Putnam Management, will provide certain administrative services to the fund. The fee for those services will be paid by Putnam Management based on the fund’s average daily net assets, and is not an additional expense of the fund.
The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.
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| Managed Municipal Income Trust 33 |
Custodial functions for the fund’s assets are provided by State Street. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes.
Putnam Investor Services, Inc., an affiliate of Putnam Management, provides investor servicing agent functions to the fund. Putnam Investor Services, Inc. was paid a monthly fee for investor servicing at an annual rate of 0.05% of the fund’s average daily net assets. The amounts incurred for investor servicing agent functions during the reporting period are included in Investor servicing fees in the Statement of operations.
The fund has entered into expense offset arrangements with Putnam Investor Services, Inc. and State Street whereby Putnam Investor Services, Inc.’s and State Street’s fees are reduced by credits allowed on cash balances. For the reporting period, the fund’s expenses were reduced by $749 under the expense offset arrangements.
Each Independent Trustee of the fund receives an annual Trustee fee, of which $239, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees also are reimbursed for expenses they incur relating to their services as Trustees.
The fund has adopted a Trustee Fee Deferral Plan (the Deferral Plan) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable from July 1, 1995 through December 31, 2023. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan (the Pension Plan) covering all Trustees of the fund who have served as a Trustee for at least five years and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.
Note 3: Purchases and sales of securities
During the reporting period, the cost of purchases and the proceeds from sales, excluding short-term investments, were as follows:
| | |
| | Cost of purchases | Proceeds from sales |
| Investments in securities (Long-term) | $42,237,774 | $69,829,671 |
| U.S. government securities (Long-term) | — | — |
| Total | $42,237,774 | $69,829,671 |
The fund may purchase or sell investments from or to other Putnam funds in the ordinary course of business, which can reduce the fund’s transaction costs, at prices determined in accordance with SEC requirements and policies approved by the Trustees. During the reporting period, purchases or sales of long-term securities from or to other Putnam funds, if any, did not represent more than 5% of the fund’s total cost of purchases and/or total proceeds from sales.
Note 4: Preferred shares
The Series A (240) and C (1,507) Remarketed Preferred shares are redeemable at the option of the fund on any dividend payment date at a redemption price of $100,000 per Series A Remarketed Preferred share and $50,000 per Series C Remarketed Preferred share, plus an amount equal to any dividends accumulated on a daily basis but unpaid through the redemption date (whether or not such dividends have been declared) and, in certain circumstances, a call premium.
It is anticipated that dividends paid to holders of remarketed preferred shares will be considered tax-exempt dividends under the Internal Revenue Code of 1986. To the extent that the fund earns taxable income and capital gains by the conclusion of a fiscal year, it may be required to apportion to the holders of the remarketed preferred shares throughout that year additional dividends as necessary to result in an after-tax equivalent to the applicable dividend rate for the period.
Under the Investment Company Act of 1940, the fund is required to maintain asset coverage of at least 200% with respect to the remarketed preferred shares. Additionally, the fund’s bylaws impose more stringent asset coverage requirements and restrictions relating to the rating of the remarketed preferred shares by the shares’ rating agencies. Should these requirements not be met, or should dividends accrued on the remarketed preferred
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| 34 Managed Municipal Income Trust |
shares not be paid, the fund may be restricted in its ability to declare dividends to common shareholders or may be required to redeem certain of the remarketed preferred shares. At April 30, 2024, no such restrictions have been placed on the fund.
Note 5: Shares repurchased
In September 2023, the Trustees approved the renewal of the repurchase program to allow the fund to repurchase up to 10% of its outstanding common shares over the 365 day period ending September 30, 2024 (based on shares outstanding as of September 30, 2023). Prior to this renewal, the Trustees had approved a repurchase program to allow the fund to repurchase up to 10% of its outstanding common shares over the 365 day period ending September 30, 2023 (based on shares outstanding as of September 30, 2022). Repurchases are made when the fund’s shares are trading at less than net asset value and in accordance with procedures approved by the fund’s Trustees.
For the reporting period, the fund repurchased 1,358,455 common shares for an aggregate purchase price of $8,217,919, which reflects a weighted-average discount from net asset value per share of 8.83%. The weighted-average discount reflects the payment of commissions by the fund to execute repurchase trades.
For the previous fiscal year, the fund repurchased 1,680,654 common shares for an aggregate purchase price of $9,795,449, which reflected a weighted-average discount from net asset value per share of 8.84%. The weighted-average discount reflected the payment of commissions by the fund to execute repurchase trades.
At the close of the reporting period, Putnam Investments, LLC owned approximately 2,200 shares of the fund (0.005% of the fund’s shares outstanding), valued at $14,498 based on net asset value.
Note 6: Affiliated transactions
Transactions during the reporting period with any company which is under common ownership or control were as follows:
| | | | | |
| | | | | | Shares |
| | | | | | outstanding |
| | | | | | and fair |
| | Fair value as | Purchase | Sale | Investment | value as |
| Name of affiliate | of 10/31/23 | cost | proceeds | income | of 4/30/24 |
| Short-term investments | | | | | |
| Putnam Short Term | | | | | |
| Investment Fund | | | | | |
| Class P‡ | $3,978,234 | $56,595,262 | $46,549,500 | $130,234 | $14,023,996 |
| Total Short-term | | | | | |
| investments | $3,978,234 | $56,595,262 | $46,549,500 | $130,234 | $14,023,996 |
‡ Management fees charged to Putnam Short Term Investment Fund have been waived by Putnam Management. There were no realized or unrealized gains or losses during the period.
Note 7: Market, credit and other risks
In the normal course of business, the fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the contracting party to the transaction to perform (credit risk). The fund may be exposed to additional credit risk that an institution or other entity with which the fund has unsettled or open transactions will default. The fund may invest in higher-yielding, lower-rated bonds that may have a higher rate of default.
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| Managed Municipal Income Trust 35 |
Note 8: Summary of derivative activity
The volume of activity for the reporting period for any derivative type that was held during the period is listed below and was based on an average of the holdings at the end of each fiscal quarter:
| |
| Futures contracts (number of contracts) | 30 |
| OTC total return swap contracts (notional) | $290,000 |
The following is a summary of the fair value of derivative instruments as of the close of the reporting period:
| | | | |
| Fair value of derivative instruments as of the close of the reporting period | |
| | ASSET DERIVATIVES | LIABILITY DERIVATIVES |
| Derivatives not | | | | |
| accounted for as | Statement of | | Statement of | |
| hedging instruments | assets and | | assets and | |
| under ASC 815 | liabilities location | Fair value | liabilities location | Fair value |
| | Receivables, Net | | | |
| | assets — Unrealized | | Payables, Net assets — | |
| Interest rate contracts | appreciation | $154,880 * | Unrealized depreciation | $— |
| Total | | $154,880 | | $— |
* Includes cumulative appreciation/depreciation of futures contracts as reported in the fund’s portfolio. Only current day’s variation margin is reported within the Statement of assets and liabilities.
The following is a summary of realized and change in unrealized gains or losses of derivative instruments in the Statement of operations for the reporting period (Note 1):
| | | |
| Amount of realized gain or (loss) on derivatives recognized in net gain or (loss) on investments | |
| Derivatives not accounted for as hedging | | | |
| instruments under ASC 815 | Futures | Swaps | Total |
| Interest rate contracts | $25,667 | $(56,000) | $(30,333) |
| Total | $25,667 | $(56,000) | $(30,333) |
| |
| Change in unrealized appreciation or (depreciation) on derivatives recognized in net gain or (loss) |
| on investments | | | |
| Derivatives not accounted for as hedging | | | |
| instruments under ASC 815 | Futures | Swaps | Total |
| Interest rate contracts | $154,880 | $214,306 | $369,186 |
| Total | $154,880 | $214,306 | $369,186 |
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| 36 Managed Municipal Income Trust |
Note 9: Offsetting of financial and derivative assets and liabilities
The following table summarizes any derivatives, repurchase agreements and reverse repurchase agreements, at the end of the reporting period, that are subject to an enforceable master netting agreement or similar agreement. For securities lending transactions or borrowing transactions associated with securities sold short, if any, see Note 1. For financial reporting purposes, the fund does not offset financial assets and financial liabilities that are subject to the master netting agreements in the Statement of assets and liabilities.
| | |
| | JPMorgan Securities LLC | Total |
| Assets: | | |
| Futures contracts§ | $38,157 | $38,157 |
| Total Assets | $38,157 | $38,157 |
| Liabilities: | | |
| Futures contracts§ | — | — |
| Total Liabilities | $— | $— |
| Total Financial and Derivative Net Assets | $38,157 | $38,157 |
| Total collateral received (pledged)†## | $— | |
| Net amount | $38,157 | |
| Controlled collateral received (including | | |
| TBA commitments)** | $— | $— |
| Uncontrolled collateral received | $— | $— |
| Collateral (pledged) (including TBA commitments)** | $— | $— |
** Included with Investments in securities on the Statement of assets and liabilities.
† Additional collateral may be required from certain brokers based on individual agreements.
##Any over-collateralization of total financial and derivative net assets is not shown. Collateral may include amounts related to unsettled agreements.
§ Includes current day’s variation margin only as reported on the Statement of assets and liabilities, which is not collateralized. Cumulative appreciation/(depreciation) for futures contracts is represented in the tables listed after the fund’s portfolio. Collateral pledged for initial margin on futures contracts, which is not included in the table above, amounted to $247,888.
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| Managed Municipal Income Trust 37 |
Shareholder meeting results (Unaudited)
April 26, 2024 annual meeting
At the meeting, a proposal to fix the number of trustees at 12 was approved as follows:
| | |
| Votes for | Votes against | Abstentions |
| 33,150,069 | 1,465,004 | 840,487 |
At the meeting, each of the nominees for Trustees was elected as follows:
| | |
| | Votes for | Votes withheld |
| Liaquat Ahamed | 32,118,042 | 3,337,523 |
| Barbara M. Baumann | 32,533,490 | 2,922,075 |
| Catharine Bond Hill | 32,491,979 | 2,963,586 |
| Kenneth R. Leibler | 32,207,708 | 3,247,857 |
| Jennifer Williams Murphy | 32,451,186 | 3,004,379 |
| Marie Pillai | 32,382,480 | 3,073,084 |
| Robert L. Reynolds | 32,176,569 | 3,278,996 |
| Manoj P. Singh | 32,196,954 | 3,258,611 |
| Mona K. Sutphen | 32,067,187 | 3,388,378 |
| Jane E. Trust | 32,543,046 | 2,912,519 |
A quorum was not present with respect to the matter of electing two Trustees to be voted on by the preferred shareholders voting as a separate class. As a result, in accordance with the fund’s Declaration of Trust and Bylaws, independent Trustees Katinka Domotorffy and George Putnam III remain in office and continue to serve as Trustees.
A Proposal did not pass to convert Putnam Managed Municipal Income Trust to an open-end investment company and approving certain related amendments to its Declaration of Trust.
| | |
| Votes for | Votes against | Broker Non votes |
| 1,838,975 | 10,400,189 | 22,044,042 |
March 19, 2024 special meeting
At the meeting, a new Management Contract for your fund with Putnam Investment Management, LLC was approved, as follows:
| | |
| Votes for | Votes against | Abstentions/Votes withheld |
| 21,027,410 | 1,677,560 | 2,180,535 |
At the meeting, a new Sub-Management Contract for your fund between Putnam Investment Management, LLC and Putnam Investments Limited was approved, as follows:
| | |
| Votes for | Votes against | Abstentions/Votes withheld |
| 20,952,659 | 1,753,639 | 2,179,209 |
All tabulations are rounded to the nearest whole number.
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| 38 Managed Municipal Income Trust |
Fund information
| | |
| Investment Manager | Trustees | Michael J. Higgins |
| Putnam Investment | Kenneth R. Leibler, Chair | Vice President, Treasurer, |
| Management, LLC | Barbara M. Baumann, Vice Chair | and Clerk |
| 100 Federal Street | Liaquat Ahamed | |
| Boston, MA 02110 | Katinka Domotorffy | Jonathan S. Horwitz |
| | Catharine Bond Hill | Executive Vice President, |
| Investment Sub-Advisor | Gregory G. McGreevey | Principal Executive Officer, |
| Putnam Investments Limited | Jennifer Williams Murphy | and Compliance Liaison |
| Cannon Place, 78 Cannon Street | Marie Pillai | |
| London, England EC4N 6HL | George Putnam III | Kelley Hunt |
| Robert L. Reynolds | AML Compliance Officer |
| Marketing Services | Manoj P. Singh | |
| Putnam Retail Management | Mona K. Sutphen | Martin Lemaire |
| Limited Partnership | Jane E. Trust | Vice President and |
| 100 Federal Street | | Derivatives Risk Manager |
| Boston, MA 02110 | Officers | |
| Robert L. Reynolds | Denere P. Poulack |
| Custodian | President, The Putnam Funds | Assistant Vice President, |
| State Street Bank | | Assistant Clerk, and |
| and Trust Company | Kevin R. Blatchford | Assistant Treasurer |
| Vice President and | |
| Legal Counsel | Assistant Treasurer | Janet C. Smith |
| Ropes & Gray LLP | | Vice President, |
| | James F. Clark | Principal Financial Officer, |
| | Vice President and | Principal Accounting Officer, |
| | Chief Compliance Officer | and Assistant Treasurer |
| | |
| | | Stephen J. Tate |
| | | Vice President and |
| | | Chief Legal Officer |
Call 1-800-225-1581 Monday through Friday between 8:00 a.m. and 8:00 p.m. Eastern Time, or visit putnam.com or franklintempleton.com anytime for up-to-date information about the fund’s NAV.
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| Item 3. Audit Committee Financial Expert: |
| |
| Item 4. Principal Accountant Fees and Services: |
| |
| Item 6. Schedule of Investments: |
| |
| The registrant’s schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above. |
| |
| Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies: |
| |
| Item 8. Portfolio Managers of Closed-End Management Investment Companies |
| |
| (b) There have been no changes to the list of the registrant’s identified portfolio managers included in the registrant’s report on Form N-CSR for the most recent completed fiscal year. |
| |
| Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers: |
| | | | | |
| Registrant Purchase of Equity Securities | | |
| | | | | Maximum |
| | | | Total Number | Number (or |
| | | | of Shares | Approximate |
| | | | Purchased | Dollar Value) |
| | | | as Part | of Shares |
| | | | of Publicly | that May Yet Be |
| | Total Number | Average | Announced | Purchased |
| | of Shares | Price Paid | Plans or | under the Plans |
| Period | Purchased | per Share | Programs* | or Programs** |
| | | | |
|
|
| November 1 — November 30, 2023 | 141,252 | $5.79 | 141,252 | 4,545,570 |
| | | | | |
| December 1 — December 31, 2023 | 311,945 | $6.11 | 311,945 | 4,233,625 |
| | | | | |
| January 1 — January 31, 2024 | 189,010 | $6.15 | 189,010 | 4,044,615 |
| | | | | |
| February 1 — February 28, 2024 | 97,426 | $6.16 | 97,426 | 3,947,189 |
| | | | | |
| March 1 — March 31, 2024 | 299,763 | $6.13 | 299,763 | 3,647,426 |
| | | | | |
| April 1 — April 30, 2024 | 319,059 | $5.94 | 319,059 | 3,328,367 |
| | | | | |
| * | In October 2005, the Board of Trustees of the Putnam Funds initiated the closed-end fund share repurchase program, which, as subsequently amended, authorized the fund to repurchase of up to 10% of its fund’s outstanding common shares over the two-years ending October 5, 2007. The Trustees have subsequently renewed the program on an annual basis. The program renewed by the Board in September 2022, which was in effect between October 1, 2022 and September 30, 2023, allowed the fund to repurchase up to 4,877,463 of its shares. The program renewed by the Board in September 2023, which is in effect between October 1, 2023 and September 30, 2024, allows the fund to repurchase up to 4,715,012 of its shares. |
| ** | Information prior to October 1, 2023, is based on the total number of shares eligible for repurchase under the program, as amended through September 2022. Information from October 1, 2023 forward is based on the total number of shares eligible for repurchase under the program, as amended through September 2023. |
| |
| Item 10. Submission of Matters to a Vote of Security Holders: |
| |
| Item 11. Controls and Procedures: |
| |
| (a) The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. |
| |
| (b) Changes in internal control over financial reporting: Not applicable |
| |
| Item 12. Disclosures of Securities Lending Activities for Closed-End Investment Companies: |
| |
| Item 13. Recovery of Erroneously Awarded Compensation. |
| |
| 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, thereunto duly authorized. |
| |
| Putnam Managed Municipal Income Trust |
| |
| By (Signature and Title): |
| |
| /s/ Janet C. Smith
Janet C. Smith
Principal Accounting Officer
|
| |
| 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 (Signature and Title): |
| |
| /s/ Jonathan S. Horwitz
Jonathan S. Horwitz
Principal Executive Officer
|
| |
| By (Signature and Title): |
| |
| /s/ Janet C. Smith
Janet C. Smith
Principal Financial Officer
|
