<PAGE>
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MANAGED MUNICIPALS
PORTFOLIO II INC.
Semi-Annual Report
February 28, 1994
[LOGO]
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The green cover has a golden picture of an eagle sitting on top of a shield
with
two warriors on either side.
<PAGE>
MANAGED MUNICIPALS
PORTFOLIO II INC.
APRIL 18, 1994
DEAR SHAREHOLDER:
We are pleased to provide you with the quarterly report for Managed
Municipals Portfolio II Inc. for the six months ended February 28, 1994.
Over the past six months the U.S. economy continued to grow, particularly
in
the powerful fourth quarter of 1993. The United States is clearly leading
the world out of recession based on a leaner and more competitive
industrial
foundation, and the lowest interest rates we've seen in a generation. We
expect that the economy will continue to experience steady, healthy
growth.
The Federal Reserve Board responded to economic conditions by keeping
the Federal funds rate (a sensitive indicator of the direction of interest
rates) at 3% for most of this time frame, until they were sure that the
economy was on a steady growth path. In early February, they raised the
Federal funds rate to 3.25% and subsequent raises have brought it to
3.75%.
We see these as just the first moves in a gradual rise in short-term rates
from the Fed. It should have a minimal effect on longer rates, but it
could
put pressure on funds that use leverage -- which we don't.
The total issuance of municipal bonds in 1993 was a record-breaking
$300
billion. It is highly unlikely that new issuance this year will even
approach $200 billion, which will make supply much more constrained.
Coupled
with the tax increase instituted by the Clinton Administration which is
likely to lead to higher demand for tax-exempt securities, you have a
marketplace that represents real value. We think that as the issuance of
municipal bonds wanes over the next year, tax-exempts will comfortably
outperform taxables and provide investors with an attractive investment
alternative.
PORTFOLIO STRATEGY
As we have described in the past, our investment goal is twofold: to
provide a competitive tax-exempt income stream, and to provide you with
the
best total return possible. Early in 1993, when the economy was weaker, we
invested the Portfolio primarily in long-term securities
CONTINUED
- ---------------------------------- 1
------------------------------
<PAGE>
and discount coupons to take advantage of falling interest rates.
(Discount
bonds generally carry a lower coupon rate than currently available in the
market and therefore sell below their redemption value. These bonds
generally appreciate faster as interest rates fall.) In the early fall,
when
the 30-year Treasury bond traded to the lowest interest rate level in the
past 25 years, we became very defensive for a number of reasons. We felt
the
market had priced in too much good news, and was quite vulnerable. We
reduced the Portfolio's average life, kept some cash on the sidelines, and
took a very conservative stance for the future. We also hedged the
Portfolio
against the decline in the price of bonds by selling short U.S. Treasury
index futures contracts. A futures contract (which is an agreement to sell
(or buy) a specific amount of a financial instrument at a particular price
on an agreed-upon date) is a tool used in declining markets to help
preserve
your investment capital. Preservation of capital is a critical element in
our total return philosophy of investing. We believe these actions saved
the
Portfolio a great deal of money when bond prices declined, and we will
continue this more cautious and conservative stance until we believe the
Federal Reserve has stopped raising short-term interest rates.
As of February 28, 1994, 85% of the Portfolio was rated investment
grade
(BBB/Baa and higher) by either Standard & Poor's Corporation or Moody's
Investors Service, Inc. (two nationally recognized bond rating
organizations). The majority of the Portfolio's assets were invested in
industrial development revenue bonds, transportation issues, and general
obligations.
IN THE NEWS . . .
SMART MONEY'S April issue contained an article about the municipal
market and five of its top municipal fund portfolio managers entitled
"Local
Heroes." We are proud that Joe Deane, the portfolio manager of Managed
Municipals Portfolio II Inc., is profiled in this article.
The stock price of the Portfolio is reported in most daily newspapers
in
the listings for securities traded on the New York Stock Exchange under
the
abbreviation "MgdMuII." Its stock symbol is "MTU." The weekly closing
price
as well as the net asset value per share are reported in BARRON'S and the
Monday edition of THE WALL STREET JOURNAL. If you have any questions or
comments about your investment in the Portfolio, please contact The
Shareholder Services Group, Inc. at (800) 331-1710. We look forward to
reporting to you in May in the next quarterly report.
Sincerely,
Heath B. McLendon Joseph P. Deane
CHAIRMAN OF THE BOARD VICE PRESIDENT AND
INVESTMENT OFFICER
April 18, 1994
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<PAGE>
UNAUDITED FINANCIAL DATA
PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
NYSE NET ASSET DIVIDEND
CAPITAL GAINS
CLOSING PRICE VALUE PAID
DIVIDEND PAID
------------- --------- -------- -
- -------------
<S> <C> <C> <C>
<C>
September 30, 1993................. $12.500 $13.44 $0.061
- --
October 31, 1993................... 12.375 13.49 0.061
- --
November 30, 1993.................. 12.500 13.29 0.061
- --
December 31, 1993.................. 12.125 12.95 --
$0.59
January 31, 1994................... 12.375 12.95 0.061
- --
February 28, 1994.................. 12.000 12.71 0.061
- --
</TABLE>
DIVIDEND DATA*
FEBRUARY 28, 1994
<TABLE>
<CAPTION>
EQUIVALENT TAXABLE DISTRIBUTION
RATE
------------------------------------------
- ----------------
PER SHARE ANNUALIZED ASSUMING ASSUMING ASSUMING
ASSUMING
DIVIDEND DISTRIBUTION 28% FEDERAL 31% FEDERAL 36% FEDERAL
39.6% FEDERAL
DISTRIBUTION RATE** TAX BRACKET TAX BRACKET TAX BRACKET
TAX BRACKET
------------ ------------ ----------- ----------- -----------
- -------------
<S> <C> <C> <C> <C>
<C>
$0.061 5.76% 8.00% 8.35% 9.00%
9.54%
<FN>
- ------------
* Based on February 28, 1994 net asset value of $12.71 per share. Total
Distribution listed above during the six months ended February 28, 1994
represents 7.04% of the February 28, 1994 net asset value not annualized.
** Does not include capital gains dividend of $0.59 per share.
</TABLE>
Each registered shareholder is considered a participant in the Fund's Dividend
Reinvestment Plan, unless the shareholder elects to receive all dividends and
distributions in cash, or unless the shareholder's shares are registered in
the
name of a broker, bank or nominee (other than Smith Barney Shearson Inc.)
which
does not provide the service. Questions and correspondence concerning the
Dividend Reinvestment Plan should be directed to The Shareholder Services
Group,
Inc., P.O. Box 1376, Boston, Massachusetts 02104.
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<PAGE>
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
KEY TO INSURANCE ABBREVIATIONS
AMBAC -- American Municipal Bond Assurance Corporation
FGIC -- Federal Guaranty Insurance Corporation
MBIA -- Municipal Bond Investors Assurance
</TABLE>
<TABLE>
<CAPTION>
Market
Rating Value
Face Value Moody's S&P (Note 1)
<C> <S> <C> <C> <C>
- ---------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES -- 95.4%
ALASKA -- 4.3%
Alaska Industrial Development &
Exploration, Series A:
$ 3,000,000 6.375% due 4/1/08 A A- $
3,097,500
3,145,000 6.500% due 4/1/14 A A-
3,243,281
ARIZONA -- 2.7%
1,875,000 Arizona State, Power Authority
Resource Recovery, Hoover
Uprating,
(MBIA insured),
5.400% due 10/1/08 Aaa AAA
1,870,313
2,000,000 Greenlee County, Arizona,
Industrial Development
Authority, Pollution
Control Revenue,
5.450% due 6/1/09 A3 A
1,967,500
CALIFORNIA -- 8.9%
1,350,000 Foothill, California,
Transportation Zone Certificate,
Series A,
5.250% due 11/1/02 Baa1 NR
1,321,312
1,000,000 Moulton Niguel, California,
Water District Authority,
Consolidated, (MBIA insured),
5.300% due 9/1/08 Aaa AAA
990,000
2,230,000 Orange County, California, Water
District Authority, Certificates
of Participation,
5.500% due 8/15/10 Aa AA
2,193,762
</TABLE>
SEE NOTES TO
FINANCIAL STATEMENTS.
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<PAGE>
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Market
Rating Value
Face Value Moody's S&P (Note 1)
- ---------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
CALIFORNIA (CONTINUED)
$ 3,555,000 Pleasanton, California, Joint
Powers Filing, Series A,
5.600% due 9/2/00 Baa1 NR $
3,572,775
835,000 Redding, California, Joint
Powers Filing, Solid Waste and
Corporation Yard, Series A,
5.000% due 1/1/05 A BBB+
790,119
10,000,000 San Joaquin Hills, California,
Transportation Corridor Agency,
Toll Road Revenue, Senior Lien,
Zero Coupon due 1/1/20 NR NR
1,775,000
1,850,000 Torrance, California, (Little
Company of Mary Hospital),
6.875% due 7/1/15 NR A
2,016,500
COLORADO -- 10.6%
4,000,000 Colorado Springs, Colorado,
Airport Revenue, Series A,
7.000% due 1/1/22 NR BBB
4,250,000
30,000,000 Dawson Ridge, Colorado,
Metropolitan District #1,
Zero Coupon due 10/1/22 Aaa NR
4,687,500
6,250,000 Denver, Colorado, Airport
Revenue, Series C,
6.125% due 11/15/25 Baa1 BBB
6,148,438
CONNECTICUT -- 4.5%
6,000,000 Connecticut State, Resource
Recovery Project, (American Fuel
Company Project), Series A,
6.450% due 11/15/22 A2 A
6,405,000
FLORIDA -- 9.1%
4,000,000 Florida State Turnpike Authority
Revenue, Series A, (FGIC
insured),
5.500% due 7/1/10 Aaa AAA
4,005,000
</TABLE>
SEE NOTES TO
FINANCIAL STATEMENTS.
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<PAGE>
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Market
Rating Value
Face Value Moody's S&P (Note 1)
- ---------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
FLORIDA (CONTINUED)
$ 2,055,000 Hillsborough County, Florida,
Aviation Revenue, (Tampa
International Airport),
(FGIC insured),
5.375% due 10/1/08 Aaa AAA $
2,055,000
2,470,000 Hillsborough County, Florida,
Utilities Refunding Revenue,
(MBIA insured),
5.400% due 8/1/11 Aaa AAA
2,426,775
4,000,000 Tampa, Florida, Revenue Bonds,
(Aquarium Project),
7.750% due 5/1/27 NR NR
4,445,000
HAWAII -- 1.4%
2,000,000 Honolulu, Hawaii, City & County
Refunding, Series B,
5.500% due 10/1/11 Aa AA
2,022,500
IOWA -- 1.1%
1,500,000 Dawson City, Iowa, Industrial
Development Revenue, (Caraill
Inc., Project),
6.500% due 7/15/12 NR AA-
1,620,000
KENTUCKY -- 0.6%
1,000,000 Kentucky Economic Development,
Finance Authority, Hospital
Facilities Revenue, (MBIA
insured),
5.000% due 8/15/15 Aaa AAA
913,750
MAINE -- 3.5%
5,000,000 Maine Municipal Bond Bank,
Refunding Revenue, Series A,
5.500% due 11/1/09 Aa A+
4,950,000
MARYLAND -- 0.3%
500,000 Baltimore County, Maryland,
Mortgage Revenue, Finance
Housing Authority,
5.750% due 11/1/20 NR AAA
488,125
</TABLE>
SEE NOTES TO
FINANCIAL STATEMENTS.
- ------------------------------ 6
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<PAGE>
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Market
Rating Value
Face Value Moody's S&P (Note 1)
- ---------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
MASSACHUSETTS -- 1.4%
$ 2,000,000 Commonwealth of Massachusetts,
Conservation Loan, Series D,
5.750% due 5/1/12 A A $
2,025,000
MICHIGAN -- 6.6%
5,600,000 Midland County, Michigan,
Economic Development
Corporation, Pollution Control
Revenue, LTD Obligation, Series
B,
9.500% due 7/23/09 NR NR
6,356,000
3,000,000 University of Michigan, Hospital
Revenue, Series A,
5.750% due 12/1/12 Aa AA
3,045,000
MINNESOTA -- 1.4%
2,000,000 St. Paul, Minnesota, Housing &
Redevelopment Authority, Sales
Tax Revenue, Civic Center
Project,
5.450% due 11/1/13 A A
1,950,000
MONTANA -- 1.4%
2,000,000 Montana State Board Investment
Resources Recovery, (Yellowstone
Energy Project),
7.000% due 12/31/19 NR NR
2,032,500
NEVADA -- 3.6%
4,650,000 Clark County, Nevada, Industrial
Development Revenue, (Southwest
Gas Corporation),
7.500% due 9/1/32 Ba2 BBB-
5,074,312
NEW JERSEY -- 1.1%
1,500,000 Union County, New Jersey,
Utilities Authority, Solid Waste
Revenue, Series A,
7.200% due 6/15/14 NR A-
1,625,625
</TABLE>
SEE NOTES TO
FINANCIAL STATEMENTS.
- ---------------------------------- 7
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<PAGE>
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Market
Rating Value
Face Value Moody's S&P (Note 1)
- ---------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
NEW YORK -- 4.8%
New York State Dormitory
Authority Revenue:
$ 1,880,000 (City University),
5.750% due 7/1/06 Baa1 BBB $
1,903,500
5,000,000 (State University Educational
Facilities), Series A,
5.500% due 5/15/06 Baa1 BBB+
4,975,000
NORTH CAROLINA -- 2.5%
2,000,000 Charlotte, North Carolina,
Certificates of Participation,
(Convention Facilities Project),
Series C, (AMBAC insured),
5.250% due 12/1/13 Aaa AAA
1,927,500
1,500,000 Coastal Regional Solid Waste
Management Disposal Authority,
North Carolina, Solid Waste
Revenue,
6.500% due 6/1/08 A BBB
1,576,875
OHIO -- 3.4%
1,000,000 Franklin County, Ohio, Tax &
Leasing Revenue, Convention
Facilities,
(MBIA insured),
5.850% due 12/1/19 Aaa AAA
1,027,500
3,800,000 Montgomery County, Ohio, General
Obligation,
5.300% due 9/1/07 Aa AA
3,776,250
PENNSYLVANIA -- 4.5%
3,000,000 Pennsylvania State, Certificates
of Participation, (AMBAC
insured),
5.250% due 7/1/11 Aaa AAA
2,861,250
3,500,000 Pennsylvania State, Economic
Development Financing Authority,
Recovery Revenue, (Northampton
Generating),
6.600% due 1/1/19 NR NR
3,504,375
</TABLE>
SEE NOTES TO
FINANCIAL STATEMENTS.
- ------------------------------ 8
- ------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Market
Rating Value
Face Value Moody's S&P (Note 1)
- ---------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES (CONTINUED)
RHODE ISLAND -- 6.3%
Rhode Island Housing & Mortgage
Finance Agency, Home Ownership
Revenue:
$ 850,000 5.850% due 4/1/13 Aa AA+ $
828,750
3,000,000 6.750% due 10/1/25 Aa AA+
3,142,500
5,250,000 Rhode Island State, Public
Buildings Authority,
(AMBAC insured),
5.250% due 2/1/09 Aaa AAA
5,066,250
SOUTH CAROLINA -- 4.5%
Myrtle Beach, South Carolina,
(Myrtle Beach Convention Center)
Certificates of Participation:
2,120,000 6.875% due 7/1/07 Baa1 BBB+
2,244,550
4,000,000 6.875% due 7/1/17 Baa1 BBB+
4,155,000
TEXAS -- 3.5%
5,000,000 Sam Rayburn, Texas, Municipal
Power Agency,
6.750% due 10/1/14 Baa BB
4,975,000
VIRGINIA -- 1.3%
500,000 University of Virginia, Series
B,
5.250% due 6/1/07 Aa AA+
500,000
1,265,000 Virginia State, Resource
Authority, Solid Waste Disposal,
Series B,
5.500% due 5/1/06 NR AA
1,291,881
WEST VIRGINIA -- 2.1%
3,000,000 Marion County, West Virginia,
Community Solid Waste Disposal
Facilities Revenue,
7.750% due 12/1/11 NR NR
2,981,250
- ---------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS AND NOTES
(COST $131,384,250)
$136,101,018
- ---------------------------------------------------------------------------
</TABLE>
SEE NOTES TO
FINANCIAL STATEMENTS.
- ---------------------------------- 9
- ------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Rating Market
S&P Value
Face Value Moody's (Note 1)
- ---------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM TAX-EXEMPT INVESTMENTS -- 4.3%
CALIFORNIA -- 3.2%
$ 2,400,000 California Health Facilities,
Series B,
2.250% due 3/1/20+ VMIG-1 A-1+ $
2,400,000
1,200,000 California Pollution Control
Financing Project,
2.300% due 8/1/19+ P-1 NR
1,200,000
1,000,000 Irvine Ranch, California, Water
District Authority, Series B,
2.250% due 10/1/09+ NR A-1+
1,000,000
DISTRICT OF COLUMBIA -- 0.2%
200,000 District of Columbia, Refunding
Revenue, Series A-4,
2.400% due 10/1/07+ VMIG-1 A-1+
200,000
LOUISIANA -- 0.2%
300,000 West Baton Rouge Parish,
Louisiana, Revenue Bonds,
2.550% due 12/1/23+ P-1 A-1
300,000
NEW YORK -- 0.7%
1,000,000 New York City, New York,
Adjustable Rate, General
Obligation Bonds,
Sub-Series A-4,
2.250% due 8/1/22+ VMIG-1 A-1
1,000,000
TOTAL SHORT-TERM TAX-EXEMPT INVESTMENTS
(COST $6,100,000)
$6,100,000
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $137,484,250*) 99.7%
142,201,018
OTHER ASSETS AND LIABILITIES (NET) 0.3%
408,994
- ---------------------------------------------------------------------------
NET ASSETS 100.0%
$142,610,012
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<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate municipal bonds and notes are payable upon not more than one
business day's notice.
</TABLE>
SEE NOTES TO
FINANCIAL STATEMENTS.
- ------------------------------ 10
- ------------------------------
<PAGE>
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1994 (UNAUDITED) (CONTINUED)
SUMMARY OF MUNICIPAL BONDS BY COMBINED RATINGS
<TABLE>
<CAPTION>
STANDARD
& PERCENT OF
MOODY'S POOR'S MARKET VALUE
<S> <C> <C>
Aaa or AAA 19.9%
Aa AA 13.0
A A 20.8
Baa BBB 27.2
VMIG-1,
P-1 A-1 4.3
NR NR 14.8
------
100.0%
------
------
</TABLE>
SEE NOTES TO
FINANCIAL STATEMENTS.
- ---------------------------------- 11
- ------------------------------
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1994 (UNAUDITED)
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------
ASSETS:
Investments, at value (Cost $137,484,250) (Note 1)
See accompanying schedule
$142,201,018
Interest receivable
2,293,406
- ----------------------------------------------------------------------------
TOTAL ASSETS
144,494,424
- ----------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities purchased $913,381
Dividends payable 684,228
Investment advisory fee payable (Note 2) 77,365
Administration fee payable (Note 2) 22,104
Due to custodian 10,291
Custodian fees payable (Note 2) 7,000
Directors' fees and expenses payable (Note 2) 3,500
Transfer agent fees payable (Note 2) 1,400
Accrued expenses and other payables 165,143
- ----------------------------------------------------------------------------
TOTAL LIABILITIES
1,884,412
- ----------------------------------------------------------------------------
NET ASSETS
$142,610,012
- ----------------------------------------------------------------------------
NET ASSETS consist of:
Undistributed net investment income $
889,218
Accumulated net realized gain on investments sold
2,847,827
Unrealized appreciation of investments
4,716,768
Par value
11,217
Paid-in capital in excess of par value
134,144,982
- ----------------------------------------------------------------------------
TOTAL NET ASSETS
$142,610,012
- ----------------------------------------------------------------------------
NET ASSET VALUE per share
($142,610,012 DIVIDED BY 11,216,668 shares of
common stock outstanding)
$12.71
- ----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO
FINANCIAL STATEMENTS.
- ------------------------------ 12
- ------------------------------
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1994 (UNAUDITED)
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 4,377,932
- ----------------------------------------------------------------------------
EXPENSES:
Investment advisory fee (Note 2) $513,518
Administration fee (Note 2) 146,720
Legal and audit fees 28,735
Directors' fees and expenses (Note 2) 22,539
Transfer agent fees (Note 2) 21,385
Custodian fees (Note 2) 12,586
Other 91,141
- ----------------------------------------------------------------------------
TOTAL EXPENSES 836,624
- ----------------------------------------------------------------------------
NET INVESTMENT INCOME 3,541,308
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS
ON INVESTMENTS (Notes 1 and 3):
Net realized gain on:
Securities 1,227,907
Futures contracts 1,736,324
-----------
Net realized gain on investments during the
period 2,964,231
Net unrealized depreciation of investments
during the period (3,863,111)
- ----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS (898,880)
- ----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 2,642,428
- ----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO
FINANCIAL STATEMENTS.
- ---------------------------------- 13
- ------------------------------
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
2/28/94
PERIOD ENDED
(UNAUDITED) 8/31/93*
<S> <C>
<C>
- ----------------------------------------------------------------------------
Net investment income $
3,541,308 $ 6,893,295
Net realized gain on investments and futures contracts during the
period
2,964,231 6,501,430
Net unrealized appreciation/(depreciation) of investments during
the period
(3,863,111) 8,579,879
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations
2,642,428 21,974,604
Distributions to shareholders from:
Net investment income
(3,421,084) (6,124,301)
Net realized gain on investments
(6,617,834) --
Net increase in net assets from Portfolio share transactions
(Note 4) --
134,500,008
Offering costs charged to paid-in capital (Note 4) --
(443,817)
- ----------------------------------------------------------------------------
Net increase/(decrease) in net assets
(7,396,490) 149,906,494
NET ASSETS:
Beginning of period
150,006,502 100,008
- ----------------------------------------------------------------------------
End of period (including undistributed net investment income of
$889,218 and $768,994, respectively)
$142,610,012 $150,006,502
- ----------------------------------------------------------------------------
<FN>
* The Portfolio commenced operations on September 24, 1992.
</TABLE>
SEE NOTES TO
FINANCIAL STATEMENTS.
- ------------------------------ 14
- ------------------------------
<PAGE>
FINANCIAL HIGHLIGHTS
FOR A PORTFOLIO SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
2/28/94
PERIOD ENDED
(UNAUDITED)
8/31/93*
<S> <C>
<C>
- ----------------------------------------------------------------------------
Operating performance:
Net asset value, beginning of period $13.37
$12.00
- ----------------------------------------------------------------------------
Net investment income 0.32
0.62
Net realized and unrealized gain/(loss) on investments (0.08)
1.34
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations 0.24
1.96
- ----------------------------------------------------------------------------
Dividends from net investment income (0.31)
(0.55)
Distributions from net realized capital gains (0.59)
- --
Offering costs charged to paid-in capital --
(0.04)
- ----------------------------------------------------------------------------
Net asset value, end of period $12.71
$13.37
Market value, end of period $12.000
$12.625
- ----------------------------------------------------------------------------
Total investment return** (2.76)%
12.14%
- ----------------------------------------------------------------------------
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $142,610
$150,007
Ratio of operating expenses to average net assets 1.14%+
1.10%+
Ratio of net investment income to average net assets 4.83%+
5.21%+
Portfolio turnover rate 21%
163%
- ----------------------------------------------------------------------------
<FN>
* The Portfolio commenced operations on September 24, 1992.
** Total returns represent aggregate total returns based on market value for
the periods.
+ Annualized.
</TABLE>
SEE NOTES TO
FINANCIAL STATEMENTS.
- ---------------------------------- 15
- ------------------------------
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES.
Managed Municipals Portfolio II Inc. (the "Portfolio") was organized as a
corporation under the laws of the State of Maryland on July 23, 1992 and is
registered with the Securities and Exchange Commission as a non-diversified,
closed-end management investment company under the Investment Company Act of
1940, as amended. The policies described below are followed consistently by
the
Portfolio in the preparation of its financial statements in conformity with
generally accepted accounting principles.
PORTFOLIO VALUATION: Investments are valued by The Boston
Company
Advisors, Inc. ("Boston Advisors") after consultation with an independent
pricing service (the "Service") approved by the Portfolio's Board of
Directors.
When, in the judgment of the Service, quoted bid prices for investments are
readily available and are representative of the bid side of the market, these
investments are valued at the mean between the quoted bid prices and asked
prices. Investments for which, in the judgment of the Service, no readily
obtainable market quotations are available, are carried at fair value as
determined by the Service, based on methods that include consideration of:
yields or prices of Municipal Obligations of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions. The Service may use electronic data processing techniques and/or a
matrix system to determine valuations. Short-term investments that mature in
fewer than 60 days are valued at amortized cost.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued
or
delayed-delivery basis may be settled a month or more after trade date.
Realized
gains and losses on investments sold are recorded on the basis of identified
cost. Interest income is recorded on the accrual basis.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the
Portfolio to make monthly distributions of its net investment income to
shareholders. Net realized capital gains, if any, will be distributed to
shareholders at least once a year. In addition, in order to avoid the
application of a 4% nondeductible excise tax on certain undistributed amounts
of
ordinary income and capital gains, the Portfolio may make an additional
distribution shortly before December 31 in each year of any undistributed
ordinary income or capital gains and expects to make any other distributions
as
are necessary to avoid the application of this tax. To the extent that net
realized capital gains can be offset by capital losses and loss
- ------------------------------ 16
------------------------------
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994 (UNAUDITED) (CONTINUED)
carryforwards, it is the policy of the Portfolio not to distribute such gains.
Income distributions and capital gain distributions are determined in
accordance
with income tax regulations which may differ from generally accepted
accounting
principles. These differences are primarily due to differing treatments of
income and gains on various investment securities held by the Portfolio,
timing
differences and differing characterization of distributions made by the
Portfolio as a whole.
FEDERAL INCOME TAXES: It is the policy of the Portfolio to qualify as a
regulated investment company, if such qualification is in the best interest of
its shareholders, by complying with the requirements of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies and by
distributing substantially all of its earnings to its shareholders. Therefore,
no Federal income tax provision is required.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER RELATED PARTY
TRANSACTIONS.
The Fund has entered into an investment advisory agreement (the "Advisory
Agreement") with Greenwich Street Advisors, a division of Mutual Management
Corp., which is controlled by Smith Barney Shearson Holdings Inc.
("Holdings").
Holdings is a wholly owned subsidiary of The Travelers Inc. Under the Advisory
Agreement, the Fund pays a monthly fee at the annual rate of 0.70% of the
value
of its average daily net assets.
The Boston Company Advisors, Inc. ("Boston Advisors"), an indirect wholly
owned subsidiary of Mellon Bank Corporation ("Mellon"), serves as the Fund's
administrator pursuant to an administration agreement (the "Administration
Agreement"). Under the Administration Agreement, the Fund pays a monthly fee
at
the annual rate of 0.20% of the value of the Fund's average daily net assets.
No officer, director, or employee of Smith Barney Shearson, Boston Advisors
or of any parent or subsidiary of those corporations receives any compensation
from the Portfolio for serving as a Director or officer of the Portfolio. The
Portfolio pays each Director, who is not an officer, director or employee of
Smith Barney Shearson, Boston Advisors or any of their affiliates, $5,000 per
annum plus $500 per meeting attended and reimburses each such Director for
travel and out-of-pocket expenses.
Boston Safe Deposit and Trust Company, an indirect wholly owned subsidiary
of
Mellon, serves as the Portfolio's custodian. The Shareholder Services Group,
Inc., a subsidiary of First Data Corporation, serves as the Portfolio's
transfer
agent.
- ---------------------------------- 17
------------------------------
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1994 (UNAUDITED) (CONTINUED)
3. SECURITIES TRANSACTIONS.
For the six months ended February 28, 1994, cost of purchases and proceeds
from sales of investment securities (excluding short-term investments)
aggregated $25,025,409 and $29,556,586, respectively.
At February 28, 1994, aggregate gross unrealized appreciation and
depreciation for all securities in which there was an excess of value over tax
cost amounted to $4,989,755 and $272,987, respectively.
4. PORTFOLIO SHARES.
At February 28, 1994, 500 million shares of common stock, with a par value
of
$.001 per share were authorized.
Common stock transactions were as follows:
<TABLE>
<CAPTION>
Period Ended
8/31/93*
<S> <C> <C>
- --------------------------------------------------------------------
<CAPTION>
SHARES AMOUNT
<S> <C> <C>
- --------------------------------------------------------------------
INITIAL PUBLIC OFFERING (9/25/92) 10,500,000 $126,000,000
SUBSEQUENT OFFERING (10/7/92) 708,334 8,500,008
- --------------------------------------------------------------------
TOTAL INCREASE 11,208,334 $134,500,008+
- --------------------------------------------------------------------
<FN>
* The Portfolio commenced operations on September 24, 1992.
+ Before offering costs charged to paid-in capital of $443,817.
</TABLE>
- ------------------------------ 18
------------------------------
<PAGE>
ADDITIONAL INFORMATION
FEBRUARY 28, 1994
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
QUARTERLY RESULTS OF OPERATIONS
(UNAUDITED)
Net Realized and
Net Increase/
Unrealized Gain/
Decrease in Net
Investment Net Investment (Loss) on
Assets Resulting
Income Income Investments
From Operations
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
----------------------------------------------------------------------------
<CAPTION>
PER PER PER
PER
QUARTER ENDED TOTAL SHARE TOTAL SHARE TOTAL SHARE
TOTAL SHARE
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
----------------------------------------------------------------------------
NOVEMBER 30,
1992* $1,569,794 $.14 $1,322,744 $.12 $ 136,467 $.01 $
1,459,211 $.13
FEBRUARY 28,
1993 2,224,608 .20 1,853,650 .16 11,113,679 .99
12,967,329 1.15
MAY 31,
1993 2,293,737 .20 1,954,811 .17 (896,302) (.08)
1,058,509 .09
AUGUST 31,
1993 2,259,898 .20 1,762,090 .16 4,727,465 .42
6,489,555 .58
NOVEMBER 30,
1993 2,192,534 .20 1,765,112 .16 2,478,339 .22
4,243,451 .38
FEBRUARY 28,
1994 2,185,398 .19 1,776,196 .16 (3,377,219) (.30)
(1,601,023) (.14)
----------------------------------------------------------------------------
<FN>
* The Portfolio commenced operations on September 24, 1992.
</TABLE>
- ---------------------------------- 19
------------------------------
<PAGE>
MANAGED MUNICIPALS
PORTFOLIO II INC.
DIRECTORS
Charles F. Barber
Allan J. Bloostein
Robert E. Borgesen
Martin Brody
Dwight B. Crane
Heath B. McLendon
OFFICERS
Heath B. McLendon
CHAIRMAN OF THE BOARD AND
INVESTMENT OFFICER
Stephen J. Treadway
PRESIDENT
Richard P. Roelofs
EXECUTIVE VICE PRESIDENT
Joseph P. Deane
VICE PRESIDENT AND
INVESTMENT OFFICER
David Fare
INVESTMENT OFFICER
Vincent Nave
TREASURER
Francis J. McNamara, III
SECRETARY
INVESTMENT ADVISER
Greenwich Street Advisors
Two World Trade Center
New York, New York 10048
ADMINISTRATOR
The Boston Company Advisors, Inc.
One Boston Place
Boston, Massachusetts 02108
AUDITORS AND COUNSEL
Coopers & Lybrand
One Post Office Square
Boston, Massachusetts 02109
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
TRANSFER AGENT
The Shareholder Services Group, Inc.
Exchange Place
Boston, Massachusetts 02109
CUSTODIAN
Boston Safe Deposit and
Trust Company
One Boston Place
Boston, Massachusetts 02108
- ------------------------------ 20
------------------------------
<PAGE>
- ------------------------------------------------------------------------------
- --
THIS REPORT IS SENT TO THE SHAREHOLDERS OF THE
MANAGED MUNICIPALS PORTFOLIO II INC.
FOR THEIR INFORMATION. IT IS NOT A PROSPECTUS,
CIRCULAR OR REPRESENTATION INTENDED FOR USE IN THE
PURCHASE OR SALE OF SHARES OF THE PORTFOLIO OR OF ANY
SECURITIES MENTIONED IN THE REPORT.
- ------------------------------------------------------------------------------
- --
