<PAGE>
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Managed Municipals
Portfolio II Inc.
Quarterly Report
November 30, 1997
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<PAGE>
[LOGO]
Managed Municipals
Portfolio II Inc.
November 30, 1997
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Dear Shareholder:
We are pleased to provide the first quarter report for the Managed
Municipals Portfolio II Inc. ("Portfolio") for the three months ended November
30, 1997. Over the three months covered by this report, the Portfolio
distributed income dividends totaling $0.17 per share. The table below shows the
annualized distribution rate and three-month total return based on the
Portfolio's November 30, 1997 net asset value ("NAV") per share and its New York
Stock Exchange ("NYSE") closing price:
<TABLE>
<CAPTION>
Price Annualized Three-month
Per Share Distribution Rate* Total Return
--------- ------------------ ------------
<S> <C> <C>
$12.36 (NAV) 5.44% 3.21%
$11.50 (NYSE) 5.84% (0.17)%
</TABLE>
In comparison, general closed-end municipal bond funds posted an average
total return based on NAV of 2.71% for the same time period, as reported by
Lipper Analytical Services, Inc. ("Lipper"). (Lipper is a major independent
fund-tracking organization.)
Municipal Bond Market Update
The municipal bond market is in the midst of a powerful rally that began in
early spring. Yet municipal bonds have not rallied quite as much as government
bonds because this fall has seen a prolific issuance of refunding issues. All of
this simply means that municipals are very attractive on an after-tax basis
compared to government bonds at this time. We have, therefore, been fully
invested with an emphasis on high-quality issues because of the little yield
pick-up available from lower-rated issues. We tend to be value-oriented
investors. Quality in our view is coming at a small premium over Baa and
lower-rated credits.
- ----------
* This distribution assumes monthly dividends at the current rate of $0.056
per share for twelve months.
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1
<PAGE>
The powerful rally in municipals has created some very interesting
investment opportunities. The long maturities in our marketplace are priced
almost even with maturities that are considerably shorter. If we can maintain
our coupon income yet take much less interest rate risk, we are delighted to do
so. As long as the yield curve stays this "flat," we will continue to maintain a
high grade profile, and also to seek to lessen our interest rate volatility in
today's lower interest-rate environment. We have been waiting for this market
opportunity for a while. Consistent with one of our key investment strategies
after large rallies, we tend to shorten up maturities a lot; after large
declines, we usually become more aggressive.
Portfolio's Investment Strategy
As of November 30, 1997, approximately 82% of the Portfolio's holdings were
rated investment grade by either Standard & Poor's Ratings Service or Moody's
Investors Service, Inc., with roughly 50% of the Portfolio invested in AAA/Aaa
bonds, the highest possible rating. (Investment-grade bonds are those rated Aaa,
Aa, A and Baa by Moody's Investors Service, Inc. or AAA, AA, A and BBB by
Standard & Poor's Ratings Service, or have an equivalent rating by any
nationally recognized statistical rating organization, or determined by the
manager to be of equivalent quality.) The Portfolio's largest holdings are
concentrated in transportation bonds (about 15%), hospital bonds (roughly 14%)
and water and sewer bonds (approximately 11%).
Municipal Bond Market Outlook
The fundamental outlook for bonds is quite good. The U.S. economy continues
to produce healthy results without fanning the flames of inflation. And while
inflation remains extremely low, with economic uncertainty prevalent in
Southeast Asia, we expect it to stay that way for the next several quarters.
Federal Reserve Board monetary policy appears to be on hold for the moment, and
tax-exempt bonds are in decent supply and are attractively priced. All of those
factors should add up to a municipal bond investor-friendly climate over the
next quarter or two. While we remain committed to our conservative investment
strategy, discipline will continue to be the main determinant of your
Portfolio's maturity structure.
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2
<PAGE>
In closing, thank you for investing in the Managed Municipals Portfolio II
Inc. We look forward to continuing to help you pursue your financial goals.
Sincerely,
/s/ Heath B. McLendon /s/ Joseph P. Deane
Heath B. McLendon Joseph P. Deane
Chairman Vice President and
Investment Officer
December 19, 1997
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3
<PAGE>
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Schedule of Investments
November 30, 1997 (unaudited)
================================================================================
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==========================================================================================
Alaska -- 2.0%
<C> <C> <S> <C>
$ 2,895,000 A2* Alaska Industrial Development & Export
Authority, Series A, 6.500% due 4/1/14 (a) $ 3,050,606
- ------------------------------------------------------------------------------------------
California -- 9.9%
500,000 VMIG-1* California Pollution Control Financing
Authority, PCR, (Shell Oil Co. Project B),
3.700% due 10/1/11 (b) 500,000
5,105,000 AAA Los Angeles, CA Metropolitan Transportation
Authority, Sales Tax Revenue, Series A,
MBIA-Insured, 5.250% due 7/1/18 5,092,238
Los Angeles, CA Public Works Finance Authority
Revenue, Series A:
1,000,000 AAA Multiple Capital Facilities, (Project V),
AMBAC-Insured, 5.125% due 6/1/17 983,750
1,500,000 AA Regal Park & Open Space District,
5.000% due 10/1/16 1,462,500
Metropolitan Water District, Southern California
Water Works:
1,465,000 AA Series A, 5.000% due 7/1/16 1,435,700
2,500,000 AAA Series B, MBIA-Insured, 4.750% due 7/1/21 2,315,625
2,200,000 AAA Roseville, CA Water Utility Revenue, COP,
FGIC-Insured, 5.200% due 12/1/18 2,180,750
1,000,000 AAA San Jose, CA Redevelopment Agency,
(Tax Revenue Project), MBIA-Insured,
5.250% due 8/1/16 1,002,500
- ------------------------------------------------------------------------------------------
14,973,063
- ------------------------------------------------------------------------------------------
Colorado -- 17.0%
1,000,000 Aaa* Arapahoe County, CO Capital Improvement
Transportation Fund, Highway Revenue,
(Pre-Refunded-- Escrowed with
U.S government securities to 8/31/05
Call @ 103), 7.000% due 8/31/26 (c) 1,180,000
4,000,000 BBB+ Colorado Springs, CO Airport Revenue,
Series A, 7.000% due 1/1/22 (a)(c) 4,360,000
30,000,000 Aaa* Dawson Ridge, CO Metropolitan District No. 1,
Series A, (Escrowed to Maturity with
REFCO Strips), zero coupon due 10/1/22 7,762,500
Denver, CO Airport Revenue, Series C:
3,465,000 Baa1* 6.125% due 11/15/25 (a)(d) 3,594,937
2,785,000 NR Partially Escrowed to Maturity with
U.S. government securities,
6.125% due 11/15/25 (a)(c)(d) 3,056,537
</TABLE>
See Notes to
Financial Statements.
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4
<PAGE>
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Schedule of Investments
November 30, 1997 (unaudited) (continued)
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<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==========================================================================================
Colorado -- 17.0% (continued)
<C> <C> <S> <C>
E-470 Public Highway Authority, Colorado
Revenue, Series A, MBIA-Insured:
$ 2,000,000 AAA 5.000% due 9/1/15 $ 1,967,500
4,000,000 AAA 5.000% due 9/1/21 3,855,000
- ------------------------------------------------------------------------------------------
25,776,474
- ------------------------------------------------------------------------------------------
District of Columbia -- 0.6%
1,000,000 AAA District of Columbia Revenue, American
Association for the Advancement of Science,
AMBAC-Insured, 5.125% due 1/1/27 965,000
- ------------------------------------------------------------------------------------------
Florida -- 4.2%
1,500,000 BBB- Martin County, FL IDA, Indiantown
Cogeneration, Series A, 7.875% due 12/15/25 (a) 1,741,875
4,000,000 NR Tampa, FL Revenue Bonds, (Florida
Aquarium Inc. Project), (Pre-Refunded to
5/1/02 Call @ 102), 7.750% due 5/1/27 (c)(d) 4,600,000
- ------------------------------------------------------------------------------------------
6,341,875
- ------------------------------------------------------------------------------------------
Georgia -- 0.2%
300,000 VMIG-1* Burke County, GA Development Authority PCR,
(Georgia Power Co. Plant),
3.850% due 4/1/32 (b) 300,000
- ------------------------------------------------------------------------------------------
Hawaii -- 1.3%
2,000,000 AAA Hawaii State GO, Series CP, FGIC-Insured,
5.000% due 10/1/16 1,950,000
- ------------------------------------------------------------------------------------------
Illinois -- 0.6%
1,000,000 Aaa* Illinois Health Facilities Authority, Memorial
Health System, MBIA-Insured,
5.250% due 10/1/18 978,750
- ------------------------------------------------------------------------------------------
Indiana -- 1.0%
1,500,000 AAA Indiana Health Facilities Financing Authority,
Hospital Revenue, Sisters of St. Francis Health,
Series A, MBIA-Insured, 5.375% due 11/1/27 1,475,625
- ------------------------------------------------------------------------------------------
Iowa -- 1.1%
1,500,000 AA- Dawson, IA IDR, (Cargill Inc. Project),
6.500% due 7/15/12 1,627,500
- ------------------------------------------------------------------------------------------
Maryland -- 0.8%
4,000,000 NR Maryland State Energy Financing Administration,
Solid Waste Disposal Revenue, (Hagerstown
Recycling Project), 9.000% due 10/15/16 (a)(e) 1,240,000
- ------------------------------------------------------------------------------------------
</TABLE>
See Notes to
Financial Statements.
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5
<PAGE>
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Schedule of Investments
November 30, 1997 (unaudited) (continued)
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<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==========================================================================================
Massachusetts -- 5.4%
<C> <C> <S> <C>
$ 1,000,000 AAA Massachusetts Bay Transportation Authority,
Series B, FSA-Insured, 5.250% due 3/1/26 $ 983,750
4,000,000 NR Massachusetts Solid Waste Disposal Revenue,
Massachusetts Recycling Association,
Series A, 9.000% due 8/1/16 (a)(e) 1,500,000
350,000 AA- Massachusetts State Port Authority Revenue,
Series A, 5.000% due 7/1/27 334,250
1,500,000 AAA Massachusetts State Turnpike Authority,
Metropolitan Highway System Revenue, Sub-
Series B, MBIA-Insured, 5.125% due 1/1/37 1,440,000
Massachusetts State Water Resource Authority,
MBIA-Insured:
1,000,000 AAA Series B, 5.000% due 12/1/25 953,750
1,000,000 AAA Series C, 5.250% due 12/1/20 998,750
2,000,000 AAA Series D, 5.000% due 8/1/24 1,935,000
- ------------------------------------------------------------------------------------------
8,145,500
- ------------------------------------------------------------------------------------------
Michigan -- 6.0%
1,500,000 AA- Michigan State Building Authority Revenue
Facilities Program, Series II, 4.750%
due 10/15/13 1,428,750
1,500,000 AAA Michigan State Hospital Finance Authority
Revenue, Detroit Medical Group A,
AMBAC-Insured, 5.250% due 8/15/27 1,462,500
5,600,000 NR Midland County, MI Economic Development
Corp., PCR, Limited Obligation,
Series B, 9.500% due 7/23/09 (a)(d) 6,230,000
- ------------------------------------------------------------------------------------------
9,121,250
- ------------------------------------------------------------------------------------------
Missouri -- 0.7%
1,000,000 AAA Fenton, MO COP, (Capital Improvements Project),
MBIA-Insured, 5.125% due 9/1/17 998,750
- ------------------------------------------------------------------------------------------
Montana -- 1.3%
2,000,000 NR Montana State Board of Investments
Resource Recovery, (Yellowstone Energy
Project), 7.000% due 12/31/19 (a) 1,967,500
- ------------------------------------------------------------------------------------------
Nevada -- 3.4%
4,650,000 Baa2* Clark County, NV IDR, Southwest
Gas Corp., 7.500% due 9/1/32 (a)(d) 5,178,937
- ------------------------------------------------------------------------------------------
</TABLE>
See Notes to
Financial Statements.
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6
<PAGE>
================================================================================
Schedule of Investments
November 30, 1997 (unaudited) (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==========================================================================================
New Jersey -- 1.5%
<C> <C> <S> <C>
$ 780,000 AAA Essex County, NJ Improvement Authority
Revenue, Utility System (Orange Franchise),
Series A, MBIA-Insured,
5.375% due 7/1/18 $ 787,800
1,500,000 BB Union County, NJ Utilities Authority,
Solid Waste Revenue, Series A,
7.200% due 6/15/14 (a) 1,509,375
- ------------------------------------------------------------------------------------------
2,297,175
- ------------------------------------------------------------------------------------------
New York -- 7.4%
New York City Municipal Water Finance
Authority, Water and Sewer Systems Revenue:
1,850,000 A2* Series A, 5.125% due 6/15/17 1,810,688
3,700,000 VMIG-1* Series G, FGIC-Insured,
3.900% due 6/15/24 (b) 3,700,000
New York State Dormitory Authority Revenue:
1,135,000 AAA Barnard College, AMBAC-Insured,
5.250% due 7/1/16 1,132,163
1,500,000 AAA Mental Health Services Facilities,
FSA-Insured, 5.125% due 8/15/17 1,466,250
1,000,000 AAA Montefiore Medical Center,
AMBAC/FHA-Insured, 5.250% due 2/1/15 1,001,250
1,000,000 AAA Municipal Health Facility Improvement,
Series A, FSA-Insured, 5.500% due 5/15/16 1,013,750
1,000,000 AAA New York State Medical Care Facilities Finance
Agency Revenue, Series F, FGIC-Insured,
5.250% due 2/15/19 986,250
- ------------------------------------------------------------------------------------------
11,110,351
- ------------------------------------------------------------------------------------------
North Carolina -- 1.1%
1,500,000 A* Coastal Regional Solid Waste Management
Disposal Authority, North Carolina
Solid Waste Revenue, 6.500% due 6/1/08 1,608,750
- ------------------------------------------------------------------------------------------
Ohio -- 2.8%
3,025,000 AAA Cuyahoga County, OH Hospital Revenue,
Mertohealth System, Series A, MBIA-Insured,
5.125% due 2/15/16 2,975,844
1,220,000 AAA Ohio State Higher Educational Facility
Community Revenue, University of Dayton,
AMBAC-Insured, 5.350% due 12/1/17 1,236,775
- ------------------------------------------------------------------------------------------
4,212,619
- ------------------------------------------------------------------------------------------
</TABLE>
See Notes to
Financial Statements.
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<PAGE>
================================================================================
Schedule of Investments
November 30, 1997 (unaudited) (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==========================================================================================
Pennsylvania -- 2.3%
<C> <C> <S> <C>
$ 2,500,000 AAA Altoona, PA City Authority Water Revenue,
FGIC-Insured, 5.000% due 11/1/19 $ 2,431,250
1,000,000 Aaa* Montgomery County, PA Higher Education &
Health Authority Revenue, Holy Redeemer
Health, Series A, 5.250% due 10/1/17 988,750
- ------------------------------------------------------------------------------------------
3,420,000
- ------------------------------------------------------------------------------------------
Puerto Rico -- 0.7%
1,000,000 AAA Puerto Rico Commonwealth Infrastructure
Financing Authority, Series A,
AMBAC-Insured, 5.000% due 7/1/16 983,750
- ------------------------------------------------------------------------------------------
South Carolina -- 2.8%
2,000,000 AAA Lexington County, SC Health Services District,
Hospital Revenue, FSA-Insured,
5.125% due 11/1/17 1,982,500
2,120,000 A3* Myrtle Beach, SC COP, Myrtle Beach
Convention Center, 6.875% due 7/1/07 2,276,350
- ------------------------------------------------------------------------------------------
4,258,850
- ------------------------------------------------------------------------------------------
Texas -- 7.0%
1,000,000 Aaa* Azle, TX ISD, PSFG, Series C,
5.000% due 2/15/22 960,000
2,000,000 AAA Bexar County, TX Health Facility Development
Revenue (Baptist Health Systems), Series A,
MBIA-Insured, 5.250% due 11/15/27 1,955,000
Burleson, TX ISD, GO, PSFG:
435,000 Aaa* 6.750% due 8/1/24 484,481
1,065,000 NR Pre-Refunded-- Escrowed with U.S.
government securities to 8/1/06,
Call @ 100, 6.750% due 8/1/24 (c) 1,227,412
1,000,000 AA Harris County, TX (Toll Road Sub Lien),
5.125% due 8/15/17 985,000
1,500,000 AAA Leander, TX ISD, PSFG, 5.625% due 8/15/16 1,531,875
1,000,000 AAA Plano, TX Health Facilities Development Corp.
Revenue, Texas Health Resources System,
Series C, MBIA-Insured,
5.250% due 2/15/26 977,500
1,000,000 AA Texas State Water Development,
5.250% due 8/1/28 995,000
</TABLE>
See Notes to
Financial Statements.
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<PAGE>
================================================================================
Schedule of Investments
November 30, 1997 (unaudited) (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==========================================================================================
Texas -- 7.0% (continued)
<C> <C> <S> <C>
$ 1,500,000 AAA Texas Water Development Board Revenue,
State Revolving Fund, Senior Lien-B,
5.000% due 7/15/15 $ 1,485,000
- ------------------------------------------------------------------------------------------
10,601,268
- ------------------------------------------------------------------------------------------
Utah -- 2.1%
3,400,000 A+ Intermountain Power Agency, Utah Power
Supply Refunding, Series D,
5.000% due 7/1/21 3,247,000
- ------------------------------------------------------------------------------------------
Virginia -- 8.6%
2,000,000 AAA Riverside, VA Regional Jail Facility,
Revenue Bonds, MBIA-Insured,
6.000% due 7/1/25 2,132,500
2,000,000 AA Virginia College Building Authority,
VA Educational Facilities Revenue,
(21st Century College Program),
5.125% due 8/1/11 2,035,000
Virginia State Housing Development Authority:
1,245,000 AA+ Commonwealth Mortgage, Series D,
5.700% due 7/1/09 1,307,250
1,000,000 AAA Mortgage Housing Revenue, MBIA-Insured,
5.600% due 7/1/12 1,055,000
4,210,000 AA+ Series F, 6.400% due 7/1/17 4,473,125
925,000 AA+ Series K, 5.900% due 11/1/11 971,250
1,000,000 AA Virginia State Transportation Board, Series A,
5.125% due 5/15/21 985,000
- ------------------------------------------------------------------------------------------
12,959,125
- ------------------------------------------------------------------------------------------
Washington -- 0.7%
1,000,000 AAA Washington State Public Power Supply System,
(Nuclear Project No. 2), Series A,
FSA-Insured, 5.125% due 7/1/11 1,001,250
- ------------------------------------------------------------------------------------------
West Virginia -- 1.3%
4,000,000 NR Marion County, WV Solid Waste,
(American Power Paper Recycling Project),
7.750% due 12/1/11 (a)(d)(e) 2,000,000
- ------------------------------------------------------------------------------------------
Wisconsin -- 6.2%
Wisconsin Housing & Economic Development
Authority, Series A:
2,000,000 AA Home Ownership Revenue, 6.450%
due 3/1/17 2,135,000
</TABLE>
See Notes to
Financial Statements.
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<PAGE>
================================================================================
Schedule of Investments
November 30, 1997 (unaudited) (continued)
================================================================================
<TABLE>
<CAPTION>
Face
Amount Ratings Security Value
==========================================================================================
Wisconsin -- 6.2% (continued)
<C> <C> <S> <C>
$ 1,370,000 A1* Housing Revenue, 5.650% due 11/1/23 $ 1,381,989
Wisconsin State Health & Educational
Facilities, MBIA-Insured:
Aurora Health Care:
2,000,000 AAA 5.250% due 8/15/17 1,980,000
1,000,000 AAA 5.250% due 8/15/23 986,250
2,000,000 AAA 5.250% due 8/15/27 1,945,000
1,000,000 AAA The Medical College of Wisconsin,
5.400% due 12/1/16 1,001,250
- ------------------------------------------------------------------------------------------
9,429,489
- ------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(COST-- $149,404,607**) $151,220,457
==========================================================================================
</TABLE>
(a) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(b) Variable rate obligation payable at par on demand on no more than seven
days notice.
(c) Pre-Refunded bond escrowed with U.S. government securities and bond
escrowed to maturity with U.S. government securities are considered by the
investment adviser to be triple-A rated even if the issuer has not applied
for new ratings.
(d) Security is segregated by Custodian for open purchase commitment.
(e) Security is in default.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 11 and 12 for definition of ratings and certain security
descriptions.
================================================================================
Summary of Investments by Combined Ratings
November 30, 1997 (unaudited)
================================================================================
<TABLE>
<CAPTION>
================================================================================
Percent of
Moody's and/or Standard & Poor's Total Investments
================================================================================
<S> <C> <C>
Aaa AAA 49.6%
Aa AA 13.3
A A 8.9
Baa BBB 9.8
Ba BB 1.0
VMIG-1 A-1 3.0
NR NR 14.4
-----
100.0%
=====
</TABLE>
================================================================================
See Notes to
Financial Statements.
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<PAGE>
================================================================================
Bond Ratings
================================================================================
All ratings are by Standard & Poor's Ratings Service ("Standard & Poor's"),
except those identified by an asterisk (*) are rated by Moody's Investors
Service, Inc. ("Moody's"). The definitions of the applicable rating symbols are
set forth below:
Standard & Poor's-- Ratings from "AA" to "BB" may be modified by the addition of
a plus (+) or minus (-) sign to show relative standings within the major rating
categories.
AAA -- Bonds that are rated "AAA" have the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA -- Bonds that are rated "AA" have a very strong capacity to pay
interest and repay principal and differ from the highest rated
issue only in a small degree.
A -- Bonds that are rated "A" have a strong capacity to pay interest
and repay principal although they are somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions than bonds in higher rated categories.
BBB -- Bonds that are rated "BBB" are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for bonds
in this category than in higher rated categories.
BB -- Bonds that are rated "BB" have less near-term vulnerability to
default than other speculative issues. However, it faces major
ongoing uncertainties or exposure to adverse business, financial,
or economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments.
Moody's -- Numerical modifiers 1, 2 and 3 may be applied to each generic rating
from "Aa" to "Baa," where 1 is the highest and 3 is the lowest ranking within
its generic category.
Aaa -- Bonds that are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are
generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large
in "Aaa" securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in "Aaa"
securities.
A -- Bonds that are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate but elements may be present which suggest
a susceptibility to impairment some time in the future.
Baa -- Bonds that are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
NR -- Indicates that the bond is not rated by Standard & Poor's or
Moody's.
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11
<PAGE>
================================================================================
Short-Term Security Ratings
================================================================================
SP-1 -- Standard & Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issued determined
possess overwhelming safety characteristics are denoted with a
plus (+) sign.
A-1 -- Standard & Poor's highest commercial paper and variable-rate
demand obligation (VRDO) rating indicating that the degree of
safety regarding timely payment is either overwhelming or very
strong; those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+)sign.
A-2 -- Standard & Poor's second highest commercial paper and VRDO rating
indicating that the degree of safety regarding timely payment is
either overwhelming or very strong; those issues determined to
possess overwhelming safety characteristics are denoted with a
plus (+) sign.
VMIG-1 -- Moody's highest rating for issues having a demand feature --
VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to
the advent of the VMIG-1 rating.
================================================================================
Security Descriptions
================================================================================
ABAG -- Association of Bay Area Governments
AIG -- American International Guaranty
AMBAC -- AMBAC Indemnity Corporation
BAN -- Bond Anticipation Notes
BIG -- Bond Investors Guaranty
CGIC -- Capital Guaranty Insurance Company
CHFCLI -- California Health Facility
Construction Loan Insurance
COP -- Certificate of Participation
EDA -- Economic Development Authority
FAIRS -- Floating Adjustable Interest Rate Securities
FGIC -- Financial Guaranty Insurance Company
FHA -- Federal Housing Administration
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
FRTC -- Floating Rate Trust Certificates
FSA -- Financial Security Assurance
GIC -- Guaranteed Investment Contract
GNMA -- Government National Mortgage
Association
GO -- General Obligation
HDC -- Housing Development Corporation
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
IFA -- Industrial Finance Agency
INFLOS -- Inverse Floaters
ISD -- Independent School District
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
MVRICS -- Municipal Variable Rate Inverse Coupon Security
PCR -- Pollution Control Revenue
PSFG -- Permanent School Fund Guaranty
RAN -- Revenue Anticipation Notes
RIBS -- Residual Interest Bonds
RITES -- Residual Interest Tax-Exempt Securities
SYCC -- Structured Yield Curve Certificate
TAN -- Tax Anticipation Notes
TECP -- Tax Exempt Commercial Paper
TOB -- Tender Option Bonds
TRAN -- Tax and Revenue Anticipation
Notes
VA -- Veterans Administration
VRDD -- Variable Rate Daily Demand
VRWE -- Variable Rate Wednesday Demand
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12
<PAGE>
================================================================================
Statement of Assets and Liabilities
(unaudited)
================================================================================
<TABLE>
<CAPTION>
November 30, 1997
================================================================================
<S> <C>
ASSETS
Investments, at value (Cost-- $149,404,607) $ 151,220,457
Receivable for securities sold 1,949,080
Interest receivable 2,081,998
- -------------------------------------------------------------------------------
Total Assets 155,251,535
- -------------------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 15,612,207
Dividends payable 313,094
Payable to bank 236,840
Investment advisory fees payable 77,185
Administration fees payable 21,724
Accrued expenses 160,060
- -------------------------------------------------------------------------------
Total Liabilities 16,421,110
- -------------------------------------------------------------------------------
Total Net Assets $ 138,830,425
===============================================================================
NET ASSETS
Par value of capital shares $ 11,235
Capital paid in excess of par value 134,234,852
Overdistributed net investment income (250,355)
Accumulated net realized gain from security transactions 3,018,843
Net unrealized appreciation of investments 1,815,850
- -------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $12.36 a share on 11,234,706 shares of $0.001
par value outstanding; 500,000,000 shares authorized) $ 138,830,425
===============================================================================
</TABLE>
See Notes to
Financial Statements.
- -------------------------------------[LOGO]-------------------------------------
13
<PAGE>
================================================================================
Statement of Operations
(unaudited)
================================================================================
<TABLE>
<CAPTION>
Three Months
Ended
11/30/97
================================================================================
<S> <C>
INVESTMENT INCOME:
Interest $ 1,867,638
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3) 235,144
Administration fees (Note 3) 67,184
Shareholder communications 50,041
Audit & legal 16,433
Directors' fees 11,235
Registration fees 10,561
Shareholder and system servicing fees 5,748
Custody 2,680
Pricing service fees 2,534
Other 6,339
- --------------------------------------------------------------------------------
Total Expenses 407,899
- --------------------------------------------------------------------------------
Net Investment Income 1,459,739
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 4):
Realized Gain From Security Transactions
(excluding short-term securities):
Proceeds from sales 40,345,716
Cost of securities sold 39,222,528
- --------------------------------------------------------------------------------
Net Realized Gain 1,123,188
- --------------------------------------------------------------------------------
Change in Net Unrealized Appreciation
of Investments:
Beginning of period 197,972
End of period 1,815,850
- --------------------------------------------------------------------------------
Increase in Net Unrealized Appreciation 1,617,878
- --------------------------------------------------------------------------------
Net Gain on Investments 2,741,066
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 4,200,805
================================================================================
</TABLE>
See Notes to
Financial Statements.
- -------------------------------------[LOGO]-------------------------------------
14
<PAGE>
================================================================================
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Three Months
Ended
11/30/97 Year Ended
(unaudited) 8/31/97
===============================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,459,739 $ 7,070,019
Net realized gain 1,123,188 2,550,959
Increase in net unrealized appreciation 1,617,878 2,730,988
- -------------------------------------------------------------------------------
Increase in Net Assets From Operations 4,200,805 12,351,966
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income (1,887,430) (7,353,773)
Net realized gains -- (3,125,168)
- -------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (1,887,430) (10,478,941)
- -------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Net asset value of shares issued
for reinvestment of dividends -- 214,541
- -------------------------------------------------------------------------------
Increase in Net Assets From
Fund Share Transactions -- 214,541
- -------------------------------------------------------------------------------
Increase in Net Assets 2,313,375 2,087,566
NET ASSETS:
Beginning of period 136,517,050 134,429,484
- -------------------------------------------------------------------------------
End of period* $ 138,830,425 $ 136,517,050
===============================================================================
* Includes undistributed (overdistributed)
net investment income of: $(250,355) $177,336
===============================================================================
</TABLE>
See Notes to
Financial Statements.
- -------------------------------------[LOGO]-------------------------------------
15
<PAGE>
================================================================================
Notes to Financial Statements
(unaudited)
================================================================================
1. Significant Accounting Policies
Managed Municipals Portfolio II Inc. ("Fund"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended, as a
non-diversified, closed-end investment management company.
The significant accounting policies consistently followed by the Fund are:
(a) security transactions are accounted for on trade date; (b) securities are
valued at the mean between bid and ask prices provided by an independent pricing
service that are based on transactions in municipal obligations, quotations from
municipal bond dealers, market transactions in comparable securities and various
relationships between securities; (c) securities maturing within 60 days are
valued at cost plus accreted discount, or minus amortized premium, which
approximates value; (d) gains or losses on the sale of securities are calculated
by using the specific identification method; (e) interest income, adjusted for
amortization of premium and accretion of original issue discount, is recorded on
an accrual basis; market discount is recognized upon the disposition of the
security; (f) dividends and distributions to shareholders are recorded on the
ex-dividend date; (g) the character of income and gains to be distributed are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. At August 31, 1997, reclassifications
were made to undistributed net investment income and accumulated net realized
gains to reflect permanent book/tax differences and income and gains available
for distributions under income tax regulations. Net investment income, net
realized gains and net assets were not affected by this change; (h) the Fund
intends to comply with the applicable provisions of the Internal Revenue Code of
1986, as amended, pertaining to regulated investment companies and to make
distributions of taxable income sufficient to relieve it from substantially all
Federal income and excise taxes; and (i) 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.
- -------------------------------------[LOGO]-------------------------------------
16
<PAGE>
================================================================================
Notes to Financial Statements
(unaudited) (continued)
================================================================================
2. Exempt-Interest Dividends and Other Distributions
The Fund intends to satisfy conditions that will enable interest from
municipal securities, which is exempt from regular Federal income tax and from
designated state income taxes, to retain such tax-exempt status when distributed
to the shareholders of the Fund.
Capital gains distributions, if any, are taxable to shareholders, and are
declared and paid at least annually.
3. Investment Advisory Agreement, Administration Agreement and Other
Transactions
Mutual Management Corp. ("MMC"), formerly known as Smith Barney Mutual
Funds Management Inc., a subsidiary of Salomon Smith Barney Holdings Inc.
("SSBH"), acts as investment adviser to the Fund. The Fund pays MMC an advisory
fee calculated at an annual rate of 0.70% of the average daily net assets of the
Fund. This fee is calculated daily and paid monthly.
MMC also acts as the Fund's administrator for which the Fund pays a fee
calculated at an annual rate of 0.20% of the average daily net assets. This fee
is calculated daily and paid monthly.
All officers and one Director of the Fund are employees of Smith Barney
Inc., another subsidiary of SSBH.
4. Investments
For the three months ended November 30, 1997, the aggregate cost of
purchases and proceeds from sales of investments (including maturities, but
excluding short-term securities) were as follows:
<TABLE>
================================================================================
<S> <C>
Purchases $47,444,736
- --------------------------------------------------------------------------------
Sales 40,345,716
================================================================================
</TABLE>
At November 30, 1997, aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
<TABLE>
================================================================================
<S> <C>
Gross unrealized appreciation $ 9,050,812
Gross unrealized depreciation (7,234,962)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 1,815,850
================================================================================
</TABLE>
- -------------------------------------[LOGO]-------------------------------------
17
<PAGE>
================================================================================
Notes to Financial Statements
(unaudited) (continued)
================================================================================
5. Futures Contracts
Initial margin deposits made upon entering into futures contracts are
recognized as assets. Securities equal to the initial margin amount are
segregated by the custodian in the name of the broker. Additional securities are
also segregated up to the current market value of the futures contracts. During
the period the futures contract is open, changes in the value of the contract
are recognized as unrealized gains or losses by "marking-to-market" on a daily
basis to reflect the market value of the contract at the end of each day's
trading. Variation margin payments are made or received and recognized as assets
due from or liabilities due to broker, depending upon whether unrealized gains
or losses are incurred. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the proceeds from (or cost of) the
closing transactions and the Fund's basis in the contract.
The Fund enters into such contracts to hedge a portion of its portfolio.
The Fund bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At November 30, 1997, the Fund had no open futures contracts.
6. Repurchase Agreements
The Fund purchases (and its custodian takes possession of) U.S. government
securities from banks and securities dealers subject to agreements to resell the
securities to the sellers at a future date (generally, the next business day) at
an agreed-upon higher repurchase price. The Fund requires continual maintenance
of the market value of the collateral in amounts at least equal to the
repurchase price.
7. Capital Shares
During the year ended August 31, 1997, capital stock transactions were as
follows:
<TABLE>
<CAPTION>
Shares Amount
================================================================================
<S> <C> <C>
Shares issued on reinvestment 18,038 $214,541
================================================================================
</TABLE>
- -------------------------------------[LOGO]-------------------------------------
18
<PAGE>
================================================================================
Financial Highlights
================================================================================
For a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
1997(1) 1997 1996 1995 1994 1993(2)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.15 $11.98 $12.36 $12.15 $13.37 $12.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.13 0.63 0.66 0.69 0.64 0.62
Net realized and
unrealized gain (loss) 0.25 0.48 (0.21) 0.32 (0.61) 1.34
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income From Operations 0.38 1.11 0.45 1.01 0.03 1.96
- ------------------------------------------------------------------------------------------------------------------------------------
Offering Costs Credited
(Charged) to Paid-In Capital -- -- -- -- 0.01 (0.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.17) (0.66) (0.67) (0.68) (0.67) (0.55)
Net realized gains -- (0.28) (0.16) (0.12) (0.59) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.17) (0.94) (0.83) (0.80) (1.26) (0.55)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $12.36 $12.15 $11.98 $12.36 $12.15 $13.37
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return, Based on
Market Value (0.17)%++ 7.75% 7.35% 8.86% 0.72% 9.97%++
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return, Based on
Net Asset Value* 3.21%++ 9.86% 4.01% 9.20% 0.48% 16.46%++
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (000s) $138,830 $136,517 $134,429 $138,649 $136,248 $149,970
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses 1.19%+ 1.10% 1.09% 1.14% 1.12% 1.10%+
Net investment income 4.25+ 5.23 5.31 5.80 5.08 5.21+
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 28% 97% 63% 95% 85% 163%
- ------------------------------------------------------------------------------------------------------------------------------------
Market Value, End of Period $11.500 $11.688 $11.750 $11.625 $11.500 $12.625
====================================================================================================================================
</TABLE>
(1) For the three months ended November 30, 1997 (unaudited).
(2) For the period from September 24, 1992 (commencement of operations) to
August 31, 1993.
* The total return is based on the Fund's net asset value at the beginning
and end of the period rather than the market value. Dividends are
reinvested in accordance with the Fund's dividend reinvestment plan.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
- -------------------------------------[LOGO]-------------------------------------
19
<PAGE>
================================================================================
Quarterly Results of Operations
(unaudited)
================================================================================
<TABLE>
<CAPTION>
Net Realized Net Increase
and Unrealized (Decrease) in
Investment Net Investment Gain (Loss) on Net Assets From
Income Income Investments Operations
- --------------------------------------------------------------------------------------------------------------------
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,
1995 $2,247,062 $0.20 $1,848,446 $0.17 $4,293,829 $0.38 $6,142,275 $0.55
February 29,
1996 2,168,432 0.19 1,762,535 0.16 356,980 0.03 2,119,515 0.19
May 31,
1996 2,248,001 0.20 1,874,744 0.16 (5,875,854) (0.52) (4,001,110) (0.36)
August 31,
1996 2,271,619 0.20 1,922,889 0.17 (1,101,944) (0.10) 820,945 0.07
November 30,
1996 2,227,411 0.20 1,879,304 0.17 5,753,327 0.51 7,632,631 0.68
February 28,
1997 2,180,922 0.19 1,839,607 0.16 (3,515,568) (0.31) (1,675,961) (0.15)
May 31,
1997 2,225,788 0.20 1,860,549 0.17 (1,006,118) (0.08) 854,431 0.09
August 31,
1997 1,927,002 0.17 1,490,559 0.13 4,050,306 0.36 5,540,865 0.49
November 30,
1997 1,867,638 0.17 1,459,739 0.13 2,741,066 0.25 4,200,805 0.38
====================================================================================================================
</TABLE>
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20
<PAGE>
================================================================================
Financial Data
(unaudited)
================================================================================
For a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
NYSE Net Dividend
Record Payable Closing Asset Dividend Reinvestment
Date Date Price+ Value+ Paid Price
============================================================================================================
<S> <C> <C> <C> <C> <C>
9/26/95 9/29/95 $11.563 $12.34 $0.063 $11.61
10/24/95 10/27/95 11.750 12.51 0.063 11.83
11/20/95 11/24/95 11.625 12.60 0.063 11.85
12/26/95 12/29/95 12.000 12.72 0.063 12.19
12/26/95* 12/29/95 12.000 12.72 0.036 12.19
1/23/96 1/26/96 12.125 12.69 0.063 12.35
2/20/96 2/23/96 12.125 12.61 0.063 12.09
3/26/96 3/29/96 11.625 12.50 0.059 11.60
4/23/96 4/26/96 11.250 12.27 0.059 11.42
5/28/96 5/31/96 11.500 12.30 0.059 11.48
6/25/96 6/28/96 11.313 12.09 0.059 11.52
7/23/96 7/26/96 11.375 12.07 0.059 11.52
8/27/96* 8/30/96 11.688 12.09 0.120 11.69
9/24/96 9/27/96 11.625 12.09 0.059 11.66
10/22/96 10/25/96 11.500 12.20 0.059 11.63
11/25/96 11/29/96 11.438 12.49 0.059 11.50
12/23/96* 12/27/96 11.375 12.11 0.285++ 11.56
1/28/97 1/31/97 11.500 11.85 0.059 11.52
2/25/97 2/28/97 11.500 12.01 0.059 11.53
3/24/97 3/27/97 11.375 11.68 0.059 11.32
4/22/97 4/25/97 11.375 11.56 0.059 11.38
5/27/97 5/30/97 11.375 11.76 0.059 11.58
6/24/97 6/27/97 11.875 11.99 0.059 11.94
7/22/97 7/25/97 12.000 12.34 0.059 12.06
8/26/97 8/29/97 11.688 12.11 0.059 11.75
9/23/97 9/26/97 11.563 12.25 0.056 11.71
10/28/97 10/31/97 11.438 12.27 0.056 11.47
11/24/97 11/28/97 11.500 12.36 0.056 11.55
============================================================================================================
</TABLE>
+ As of record date.
++ Includes market discount.
* Capital gain distribution.
- -------------------------------------[LOGO]-------------------------------------
21
<PAGE>
================================================================================
Dividend Reinvestment Plan
(unaudited)
================================================================================
Under the Fund's Dividend Reinvestment Plan ("Plan"), a shareholder whose
shares of Common Stock are registered in his or her own name will have all
distributions from the Fund reinvested automatically by First Data Investor
Services Group, Inc. ("First Data") 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 Fund 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 First Data 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. Whenever
the market price of the Common Stock is equal to or exceeds the net asset value
per share on the date of valuation, Plan participants will be issued shares of
Common Stock at a price equal to the greater of (1) the net asset value per
share most recently determined or (2) 95% of the market price.
If the net asset value per share of Common Stock at the time of valuation
exceeds the market price of the Common Stock, or if the Fund declares a dividend
or capital gains distribution payable only in cash, First Data 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 First Data
has completed its purchases, and the market price exceeds the net asset value of
the Common Stock, First Data will attempt to terminate purchases in the open
market and cause the Fund to issue the remaining portion of the dividend or
distribution by issuing shares at a price equal to the greater of (a) net asset
value or (b) 95% of the then current market price. In this case, the number of
shares of Common Stock 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 First Data is
unable to stop open market purchases and cause the Fund to issue the remaining
shares, the average per share purchase price paid by First Data may exceed the
net asset value of the Common Stock, 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 net asset value. First Data will begin to
purchase Common Stock on the open market as soon as practicable after the
payment date of the
- -------------------------------------[LOGO]-------------------------------------
22
<PAGE>
================================================================================
Dividend Reinvestment Plan
(unaudited) (continued)
================================================================================
dividend or capital gains distribution, but in no event shall such purchases
continue later than 30 days after that date, except when necessary to comply
with applicable provisions of the Federal securities laws.
First Data 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 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 First Data in uncertificated form in the name of each Plan participant.
Plan participants are subject to no charge for reinvesting dividends and
capital gains distributions under the Plan. First Data'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 brokerage commissions 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 First Data, 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 First Data Investor Services Group, P.O. Box
1376, Boston, Massachusetts 02104 or by telephone at 1-800-331-1710.
----------------------------
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
shares of its common stock in the open market.
- -------------------------------------[LOGO]-------------------------------------
23
<PAGE>
Managed Municipals
Portfolio II Inc.
Directors Investment Adviser
Allan J. Bloostein Mutual Management Corp.
Martin Brody 388 Greenwich Street
Dwight B. Crane New York, New York 10013
Robert A. Frankel
William R. Hutchinson Transfer Agent
Heath B. McLendon, Chairman First Data Investor Services
Group, Inc.
Charles F. Barber, Emeritus P.O. Box 1376
Boston, Massachusetts 02104
Officers
Heath B. McLendon Custodian
President and PNC Bank, N.A.
Chief Executive Officer 17th and Chestnut Streets
Philadelphia, Pennsylvania 19103
Lewis E. Daidone
Senior Vice President
and Treasurer
Joseph P. Deane
Vice President and
Investment Officer
David Fare
Investment Officer
Thomas M. Reynolds
Controller
Christina T. Sydor
Secretary
- -------------------------------------[LOGO]-------------------------------------
24
<PAGE>
================================================================================
This report is intended only for shareholders of the
Managed Municipals Portfolio II Inc.
It is not a Prospectus, circular or representation
intended for use in the purchase or sale of shares of
the Fund or of any securities mentioned in this report.
FD0836 1/98
================================================================================
