<PAGE>
Managed Municipals
Portfolio II Inc.
Annual Report
August 31, 1999
[LOGO OF SMITH BARNEY]
<PAGE>
[MANAGED MUNICIPALS LOGO]
Managed Municipals
Portfolio II Inc.
August 31, 1999
Dear Shareholder:
We are pleased to provide the annual report for the Managed Municipal
Portfolio II Inc. ("Fund") for the year ended August 31, 1999. Over the
year covered by this report, the Fund distributed income dividends totaling
$0.54 per share. The table below shows the annualized distribution rate and
twelve-month total return based on the Fund's August 31, 1999 net asset
value ("NAV") per share and its New York Stock Exchange ("NYSE") closing
price:
Price Annualized Twelve-Month
Per Share Distribution Rate* Total Return
------------- ------------------ ------------
$11.30 (NAV) 5.31% (3.29)%
$10.063 (NYSE) 5.96% (0.59)%
In comparison, general closed-end municipal bond funds posted an average
total return on NAV of a negative 0.64% for the same time period, as
reported by Lipper, Inc. (Lipper is a major fund-tracking organization.)
Municipal Bond Market Update
We believe that the municipal bond market is approaching a temporary
bottom. The Federal Reserve Board ("Fed") has implemented two monetary
policy adjustments -- a 25 basis point increase in June and a 25 basis
point increase in August -- and we believe these actions should remain
unchanged for the foreseeable future. We also believe that fixed income
markets are returning to "normal" in the aftermath of forced liquidations
by major hedge funds and negatively impacted global markets in late 1998.
* This distribution assumes a current monthly income dividend rate of $0.05
per share for twelve months.
1
<PAGE>
In our opinion, long U.S. Treasury yields are quite attractive and
municipal bonds are trading at roughly 95%-96% of governments. This
comparison helps to substantiate the fact that municipal securities are
trading at low valuations relative to governments since, under normal
market conditions, municipal securities have historically yielded roughly
85% of similar maturity Treasuries.
As a result of last year's crisis (and ensuing credit crunch), the spread
between the yields on municipal securities and Treasuries widened. The
robust state of the U.S. economy contributed to the second-highest
municipal securities issuance volume in history in 1998. The ability of the
market to absorb such high volume indicates the steady demand for
tax-exempt investments and reflects overall investor confidence.
The recent upward pressure on municipal yields appears to result largely
from two factors: 1) the lack of demand for municipal bonds by the
traditional institutional sectors that have supported the municipal market;
and 2) additional pressures resulting from the pre-Y2K avalanche of issues
in the taxable market, which has attracted institutional investors who
would otherwise buy municipals.
Yields have rebounded sharply, up near three quarters of 1% since the
beginning of 1999. The slope of the municipal yield curve has remained
extremely steep, with 20-year municipals yielding roughly 120 basis points
more than one-year paper. (The yield curve measures the difference between
short- and long-term rates.) In the U.S. Treasury market, the difference
between one-year and 30-year bond yields is only 80 basis points.
Investment Strategy
As of August 31, 1999, 89.9% of the Fund's holdings were rated investment
grade** (BBB/Baa and higher) by either Standard & Poor's Ratings Group or
Moody's Investors Service Inc., with 48.7% of the Fund 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
Group, or that have an equivalent rating by any nationally recognized
statistical rating organization, or determined by the manager to be
equivalent quality.
2
<PAGE>
We maintain a positive outlook on municipal securities. Additionally, we
believe that buying bonds with relatively longer maturities (20 to 30
years) and lower coupons (5% and a bit lower) will enable us to be more
aggressively positioned for a possible drop in long-term interest rates
later this year.
Until recently, our investment strategy had been focused primarily on
buying high-grade, short-maturity bonds in anticipation of the ensuing
increase in interest rates. Currently, with recent interest rate increases
behind us, we are aggressive buyers of longer, high-grade discount bonds.
We believe that investor sentiment has weakened and the market has taken on
a negative psychology.
The Fund has initiated a program whereby it may repurchase shares of its
common stock in the open market. It is the Fund's intention to repurchase
shares of its stock at such times, prices and amounts deemed advisable.
There can be no assurance that the Board of Directors will continue this
program.
Municipal Bond Market Outlook
Our outlook for the municipal bond market is optimistic. We think that the
actions of the Fed were preemptively conservative. It is our opinion that
inflation should remain in check, at least in the near term. A possible
easing of economic activity as a result of Y2K ramifications could prove
positive for fixed income markets.
Looking ahead, we believe that the U.S. economy should remain strong in the
coming months with muted inflationary pressures. Recent economic conditions
have created opportunities for municipal securities to catch up with
Treasuries, and we continue to see good value at the long end of the
market.
With long-term municipal bond yields in the 5.75% range and inflation under
control, "real," inflation-adjusted yields on longer intermediate- and
long-term municipals are quite competitive. Following the Fed's August 24,
1999 short-term interest rate increase of 0.25%, we do not anticipate
further policy change for the remainder of 1999 amid optimism that the Fed
has acted sufficiently to curb inflationary pressures. As always, we will
be monitoring these events closely.
3
<PAGE>
In closing, thank you for investing in the Managed Municipal 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
September 23, 1999
4
<PAGE>
- --------------------------------------------------------------------------------
Take Advantage of the Fund's Dividend Reinvestment Plan!
Did you know that Fund investors who reinvest their dividends are taking
advantage of one of the most effective wealth-building tools available today?
Systematic investments put time to work for you through the strength of
compounding.
As an investor in the Fund, you can participate in its Dividend Reinvestment
Plan ("Plan"), a convenient, simple and efficient way to reinvest your
dividends and capital gains, if any, in additional shares of the Fund. Below
is a short summary of how the Plan works.
Plan Summary
If you are a Plan participant who has not elected to receive your dividends in
the form of a cash payment, then your dividend and capital gain distributions
will be reinvested automatically in additional shares of the Fund.
The number of common stock shares in the Fund you will receive in lieu of a
cash dividend is determined in the following manner. If the market price of
the common stock is equal to or exceeds the net asset value per share ("NAV")
on the determination date, you will be issued shares by the Fund at a price
reflecting the NAV, or 95% of the market price, whichever is greater.
If the market price is less than the NAV at the time of valuation (the close
of business on the determination date), or if the Fund declares a dividend or
capital gains distribution payable only in cash, the Plan Agent (First Data
Investor Services Group, Inc.) will buy common stock for your account in the
open market.
If the Plan Agent begins to purchase additional shares in the open market and
the market price of the shares subsequently rises above the previously
determined NAV before the purchases are completed, the Plan Agent will attempt
to terminate purchases and have the Fund issue the remaining dividend or
distribution in shares at the greater of the previously determined NAV or 95%
of the market price. In that case, the number of Fund shares you receive 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.
Restated Plan Adopted
A more complete description of the current Plan appears beginning on page 26.
The description is based on a restated version of the Plan, which was recently
adopted to reflect current practices of the Plan Agent and for the purpose of
standardizing the terms among all closed-end Mutual Funds managed by SSB Citi
Fund Management LLC, formerly known as SSBC Fund Management Inc.
To find out more detailed information about the Plan and about how you can
participate, please call First Data Investor Services Group, Inc. at (800)
331-1710.
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5
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
====================================================================================
<S> <C> <C>
Alaska -- 2.4%
$ 2,895,000 A2* Alaska Industrial Development & Export
Authority Revolving Fund,
Series A, 6.500% due 4/1/14 (b) $ 3,036,131
- ------------------------------------------------------------------------------------
California -- 9.5%
2,500,000 Baa3* California Educational Facilities Authority
Revenue, (Pooled College & University
Projects), Series A, 5.625% due 7/1/23 2,362,500
5,105,000 AAA Los Angeles County, CA Metropolitan
Transportation Authority, Sales Tax Revenue,
First Tier, Series A, MBIA-Insured,
5.250% due 7/1/18 4,932,706
1,465,000 AA Metropolitan Water District, Southern
California Waterworks, Series A,
5.000% due 7/1/16 1,393,581
2,200,000 AAA Roseville, CA Water Utility Revenue, COP,
FGIC-Insured, 5.200% due 12/1/18 2,112,000
1,000,000 AAA San Jose, CA Redevelopment Agency, Tax
Allocation, (Merged Area Redevelopment
Project), MBIA-Insured, 5.250% due 8/1/16 980,000
- ------------------------------------------------------------------------------------
11,780,787
- ------------------------------------------------------------------------------------
Colorado -- 17.0%
1,000,000 Aaa* Arapahoe County, CO Capital Improvement
Trust Fund, E-470 Public Highway Authority
Revenue, (Pre-Refunded-- Escrowed with
U.S. government securities to 8/31/05
Call @ 103), 7.000% due 8/31/26 1,143,750
1,000,000 A- Aspen, CO Sales Tax Revenue,
5.400% due 11/1/99 960,000
Colorado Health Facilities Authority Revenue:
1,000,000 AA Series A, 5.000% due 12/1/28 852,500
1,000,000 A Series B, Remarketed 7/8/98,
5.350% due 8/1/15 952,500
4,000,000 BBB+ Colorado Springs, CO Airport Revenue,
Series A, 7.000% due 1/1/22 (b) 4,235,000
30,000,000 Aaa* Dawson Ridge, CO Metropolitan District No. 1,
Series A, (Escrowed to maturity with
REFCO Strips), zero coupon bond to yield
6.650% due 10/1/22 6,525,000
</TABLE>
See Notes to
6 Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1999 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
====================================================================================
Colorado -- 17.0% (continued)
<S> <C> <C> <C>
Denver, CO City & County Airport Revenue,
Series C:
$ 2,785,000 Aaa* Partially escrowed to maturity with
U.S. government securities,
6.125% due 11/15/25 (b) $ 2,990,394
3,465,000 BBB+ 6.125% due 11/15/25 (b) 3,555,956
- ------------------------------------------------------------------------------------
21,215,100
- ------------------------------------------------------------------------------------
Florida -- 5.1%
500,000 AAA Broward County, FL Airport System Revenue,
Passenger Facility Convertible Lien, Series H-2,
AMBAC-Insured, 4.750% due 10/1/23 430,000
1,500,000 BBB- Martin County, FL IDA, (Indiantown
Cogeneration Project), Series A,
7.875% due 12/15/25 (b) 1,543,125
4,000,000 NR Tampa, FL Revenue, (Florida Aquarium Inc.
Project), (Pre-Refunded -- Escrowed with
U.S. government securities to 5/1/02
Call @ 102), 7.750% due 5/1/27 (c) 4,405,000
- ------------------------------------------------------------------------------------
6,378,125
- ------------------------------------------------------------------------------------
Georgia -- 0.7%
1,000,000 A3* Private Colleges & Universities Authority
Revenue, (Mercer University Project),
Series A, 5.375% due 10/1/29 918,750
- ------------------------------------------------------------------------------------
Hawaii -- 3.0%
2,000,000 A Hawaii State Department of Budget & Finance,
Special Purpose Revenue, Kaiser Permanente,
Series A, 5.100% due 3/1/14 1,865,000
2,000,000 AAA Hawaii State GO, Series CP, FGIC-Insured,
5.000% due 10/1/16 1,870,000
- ------------------------------------------------------------------------------------
3,735,000
- ------------------------------------------------------------------------------------
Illinois -- 2.6%
1,000,000 Aaa* Illinois HFA, Memorial Health System,
MBIA-Insured, 5.250% due 10/1/18 943,750
Kane County, IL GO, School District No. 129,
Aurora West Side, FGIC-Insured:
590,000 Aaa* 5.500% due 2/1/11 598,850
675,000 Aaa* 5.500% due 2/1/12 682,594
1,000,000 Aaa* 5.125% due 2/1/14 952,500
- ------------------------------------------------------------------------------------
3,177,694
- ------------------------------------------------------------------------------------
</TABLE>
See Notes to
7 Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1999 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
====================================================================================
<S> <C> <C> <C>
Iowa -- 1.3%
$ 1,500,000 AA- Dawson, IA IDR, (Cargill Inc. Project),
6.500% due 7/15/12 $1,576,875
- ------------------------------------------------------------------------------------
Louisiana -- 0.7%
1,000,000 AAA Louisiana Local Government Environment
Facilities, Community Development Authority
Revenue, Capital Projects & Equipment
Acquisition, AMBAC-Insured,
4.500% due 12/1/18 850,000
- ------------------------------------------------------------------------------------
Maine -- 0.2%
300,000 AAA Maine Governmental Facilities Authority,
Lease Rent Revenue, FSA Insured,
5.625% due 10/1/19 295,125
- ------------------------------------------------------------------------------------
Maryland -- 1.7%
4,000,000 NR Maryland State Energy Financing Administration,
Solid Waste Disposal Revenue,
(Hagerstown Recycling Project),
9.000% due 10/15/16 (b)(d) 880,000
1,500,000 A Maryland State Health & Higher Educational
Facilities Authority Revenue, Loyola College
Issue, 5.000% due 10/1/39 1,284,375
- ------------------------------------------------------------------------------------
2,164,375
- ------------------------------------------------------------------------------------
Massachusetts -- 3.9%
1,000,000 Aaa* Massachusetts State College Building Authority
Revenue, Series 1, MBIA-Insured,
5.375% due 5/1/39 928,750
1,000,000 AAA Massachusetts State Health & Educational
Facilities Authority Revenue, Northeastern
University, Series I, MBIA-Insured,
5.000% due 10/1/29 880,000
1,000,000 AAA Massachusetts State HFA, Housing Development,
Series B, MBIA-Insured, 5.300% due 12/1/17 968,750
2,000,000 AAA Massachusetts State Turnpike Authority,
Metropolitan Highway Systems Revenue,
Subseries A, AMBAC-Insured,
4.750% due 1/1/34 1,645,000
Massachusetts State Water Resource Authority,
510,000 AAA MBIA-Insured, Series C, 5.250% due 12/1/20 484,500
- ------------------------------------------------------------------------------------
4,907,000
- ------------------------------------------------------------------------------------
</TABLE>
See Notes to
8 Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1999 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
====================================================================================
<S> <C> <C> <C>
Michigan -- 7.8%
$ 4,000,000 NR Michigan State Strategic Fund Resource
Recovery, Limited Obligation Revenue,
Central Wayne Energy Recovery L.P.,
Series A, 7.000% due 7/1/27 (b) $3,855,000
5,600,000 NR Midland County, MI Economic Development
Corp., PCR, Limited Obligation,
Series B, 9.500% due 7/23/09 (b) 5,890,136
- ------------------------------------------------------------------------------------
9,745,136
- ------------------------------------------------------------------------------------
Minnesota -- 0.8%
1,000,000 AAA Minneapolis & Saint Paul, MN Community
Airport Revenue, Series A, FGIC-Insured,
5.125% due 1/1/25 930,000
- ------------------------------------------------------------------------------------
Missouri -- 0.8%
1,000,000 AAA Fenton, MO COP, (Capital Improvements
Project), MBIA-Insured, 5.125% due 9/1/17 945,000
- ------------------------------------------------------------------------------------
Montana -- 1.6%
2,000,000 NR Montana State Board of Investment Resource
Recovery Revenue, (Yellowstone Energy L.P.
Project), 7.000% due 12/31/19 (b) 1,990,000
- ------------------------------------------------------------------------------------
Nevada -- 4.0%
4,650,000 Baa2* Clark County, NV IDR, Southwest Gas Corp.,
Series B, 7.500% due 9/1/32 (b) 4,981,313
- ------------------------------------------------------------------------------------
New Jersey -- 0.6%
780,000 AAA Essex County, NJ Improvement Authority
Revenue, Utility System, Orange Franchise,
Series A, MBIA-Insured, 5.375% due 7/1/18 763,425
- ------------------------------------------------------------------------------------
New Mexico -- 0.9%
1,095,000 AAA New Mexico Mortgage Financing Authority,
Single-Family Mortages, Series D-3,
5.625% due 9/1/28 1,074,469
- ------------------------------------------------------------------------------------
New York -- 5.8%
2,000,000 A- Long Island Power Authority, Electric
System Revenue, Series A,
5.500% due 12/1/29 1,915,000
1,000,000 AA New York, NY Transitional Finance Authority
Revenue, Future Tax Secured,
Series B, 4.750% due 11/1/17 891,250
</TABLE>
9 See Notes to
Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1999 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
====================================================================================
<S> <C> <C> <C>
New York -- 5.8% (continued)
$ 1,135,000 AAA New York State Dormitory Authority Revenue:
Barnard College, AMBAC-Insured,
5.250% due 7/1/16 $1,105,206
1,000,000 AAA City University System, Series A, FGIC-Insured,
5.000% due 7/1/16 938,750
1,500,000 AAA Mental Health Services Facilities, Series D,
FSA-Insured, 5.125% due 8/15/17 1,408,125
1,000,000 AAA Municipal Health Facility Improvement Program,
Series A, FSA-Insured, 5.500% due 5/15/16 998,750
- ------------------------------------------------------------------------------------
7,257,081
- ------------------------------------------------------------------------------------
North Carolina -- 1.3%
1,500,000 A3* Coastal Regional Solid Waste Management
Disposal Authority, Solid Waste Disposal
Revenue, 6.500% due 6/1/08 1,610,625
- ------------------------------------------------------------------------------------
Ohio -- 3.3%
1,000,000 AAA Cuyahoga County, OH Hospital Revenue,
AMBAC-Insured, 5.500% due 1/15/30 963,750
1,990,000 AAA Lucas County, OH Hospital Revenue,
Promedia Healthcare Obligation Group,
AMBAC-Insured, 5.375% due 11/15/29 1,890,500
1,220,000 AAA Ohio State Higher Educational Facility
Commission Revenue, University of Dayton,
AMBAC-Insured, 5.350% due 12/1/17 1,212,375
- ------------------------------------------------------------------------------------
4,066,625
- ------------------------------------------------------------------------------------
South Carolina -- 4.5%
500,000 AAA Lexington County, SC Health Services District,
Hospital Revenue, FSA-Insured,
5.250% due 11/1/17 478,750
2,120,000 A3* Myrtle Beach, SC COP, (Myrtle Beach
Convention Center Project),
6.875% due 7/1/07 2,300,200
3,000,000 Aaa* South Carolina Transportation Infrastructure
Bank Revenue, Series A, AMBAC-Insured,
5.250% due 10/10/21 2,842,500
- ------------------------------------------------------------------------------------
5,621,450
- ------------------------------------------------------------------------------------
Texas -- 9.4%
1,000,000 Aaa* Arlington, TX ISD, PSFG, 5.000% due 2/15/24 897,500
1,000,000 Aaa* Azle, TX ISD, PSFG, Series C,
5.000% due 2/15/22 902,500
</TABLE>
See Notes to
10 Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1999 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
====================================================================================
<S> <C> <C> <C>
Texas -- 9.4% (continued)
$ 2,000,000 Baa1* Brazos River Authority, TX PCR,
Utility Electric Co., Series C,
5.550% due 6/1/30 $ 1,777,500
Burleson, TX ISD, GO, PSFG:
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) 1,192,800
435,000 Aaa* 6.750% due 8/1/24 470,888
1,000,000 AA Harris County, TX GO, Toll Road Sub. Lien,
5.125% due 8/15/17 948,750
1,000,000 AA Harris County, TX Health Facilities
Development Corp., Hospital Revenue,
(Texas Childrens Hospital Project), Series A,
5.250% due 10/1/19 928,750
1,830,000 AAA Texas State GO, Water Development, Series D,
5.000% due 8/1/16 1,727,063
1,500,000 AAA Texas Water Development Board Revenue,
State Revolving Fund, Sr. Lien, Series B,
5.000% due 7/15/15 1,421,250
1,520,000 AAA West Texas Municipal Power Agency Revenue,
MBIA-Insured, 5.000% due 2/15/16 1,419,300
- ------------------------------------------------------------------------------------
11,686,301
- ------------------------------------------------------------------------------------
Virgin Islands -- 0.8%
1,000,000 BBB- Virgin Islands Public Finance Authority Revenue,
Sr. Lien, Series A, 5.500% due 10/1/22 950,000
- ------------------------------------------------------------------------------------
Virginia -- 6.8%
2,000,000 AAA Riverside, VA Regional Jail Facility Revenue,
MBIA-Insured, 6.000% due 7/1/25 2,080,000
Virginia State Housing Development Authority:
Commonwealth Mortgage Revenue:
1,000,000 AAA Series D, Subseries D-2, Remarketed 1/4/96,
MBIA-Insured, 5.600% due 7/1/12 1,015,000
1,245,000 AA+ Series D, Subseries D-3, Remarketed 5/30/96,
5.700% due 7/1/09 1,266,788
2,970,000 AA+ Series F, Subseries F-1, Remarketed 9/12/95,
6.400% due 7/1/17 3,092,512
925,000 AA+ Multi-Family Housing Revenue, Series K,
5.900% due 11/1/11 949,280
- ------------------------------------------------------------------------------------
8,403,580
- ------------------------------------------------------------------------------------
</TABLE>
11 See Notes to
Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Investments
August 31, 1999 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
====================================================================================
<S> <C> <C>
Wisconsin -- 3.5%
Wisconsin Housing & Economic Development
Authority, Series A:
$ 2,000,000 AA Home Ownership Revenue,
6.450% due 3/1/17 $ 2,067,500
1,370,000 AA- Housing Revenue, 5.650% due 11/1/23 1,328,900
1,000,000 AAA Wisconsin State Health & Educational Facilities
Authority Revenue, (Medical College of
Wisconsin Project), MBIA-Insured,
5.400% due 12/1/16 977,500
- ------------------------------------------------------------------------------------
4,373,900
- ------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost -- $126,356,272**) $124,433,867
- ------------------------------------------------------------------------------------
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service with the exception of
those identified by an asterisk (*), which are rated by Moody's Investor's
Service, Inc.
(b) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Pre-Refunded bonds escrowed by U.S. government securities and bonds
escrowed to maturity with U.S. government securities are considered by the
investment adviser to be triple-A rated even if issuer has not applied for
new ratings.
(d) Security in default.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 13 and 14 for definitions of ratings and certain security
descriptions.
- --------------------------------------------------------------------------------
Summary of Investments by Combined Ratings
August 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Percent of
Moody's and/or Standard & Poor's Total Investments
- --------------------------------------------------------------------------------
Aaa AAA 48.7%
Aa AA 13.7
A A 11.9
Baa BBB 15.6
NR NR 10.1
------
100.0%
======
- --------------------------------------------------------------------------------
See Notes to
12 Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
BOND RATINGS
(unaudited)
- --------------------------------------------------------------------------------
The definitions of the applicable rating symbols are set forth below:
Standard & Poor's Ratings Service ("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 rated "AAA" have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay
principal is extremely strong.
AA -- Bonds 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 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 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 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 Investors Service, Inc. ("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 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 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 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 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.
13
<PAGE>
- --------------------------------------------------------------------------------
Short-Term Security Ratings
(unaudited)
- --------------------------------------------------------------------------------
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
(unaudited)
- --------------------------------------------------------------------------------
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
14
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
August 31, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost-- $126,356,272) $124,433,867
Interest receivable 1,785,880
Receivable for securities sold 1,421,859
- --------------------------------------------------------------------------------
Total Assets 127,641,606
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 295,208
Payable to bank 276,694
Dividends payable 230,905
Investment advisory fees payable 81,066
Administration fees payable 22,833
Accrued expenses 121,193
- --------------------------------------------------------------------------------
Total Liabilities 1,027,899
- --------------------------------------------------------------------------------
Total Net Assets $126,613,707
- --------------------------------------------------------------------------------
NET ASSETS:
Par value of capital shares $ 11,235
Capital paid in excess of par value 134,234,852
Treasury stock (Note 7) (268,562)
Undistributed net investment income 93,868
Accumulated net realized loss
from security transactions and futures contracts (5,535,281)
Net unrealized depreciation of investments (1,922,405)
- --------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $11.30 a share on 11,234,706 shares of $0.001
par value outstanding; 500,000,000 shares authorized) $126,613,707
- --------------------------------------------------------------------------------
See Notes to
15 Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
August 31, 1999
- -------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 7,690,766
- -------------------------------------------------------------------------------------
<S> <C>
EXPENSES:
Investment advisory fees (Note 3) 952,756
Administration fees (Note 3) 272,216
Shareholder communications 114,975
Audit and legal 53,998
Directors' fees 41,974
Shareholder and system servicing fees 19,477
Pricing service fees 9,125
Registration fees 7,855
Custody 6,805
Other 8,534
- -------------------------------------------------------------------------------------
Total Expenses 1,487,715
Less: Investment advisory and administration fee waivers (Note 3) (88,977)
- -------------------------------------------------------------------------------------
Net Expenses 1,398,738
- -------------------------------------------------------------------------------------
Net Investment Income 6,292,028
- -------------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
AND FUTURES CONTRACTS (NOTES 4 AND 5):
Realized Loss From:
Security transactions (excluding short-term securities) (4,440,784)
Futures contracts (110,875)
- -------------------------------------------------------------------------------------
Net Realized Loss (4,551,659)
- -------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation (Depreciation)
of Investments:
Beginning of year 5,088,271
End of year (1,922,405)
- -------------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (7,010,676)
- -------------------------------------------------------------------------------------
Net Loss on Investments and Futures Contracts (11,562,335)
- -------------------------------------------------------------------------------------
Decrease in Net Assets From Operations $ (5,270,307)
- -------------------------------------------------------------------------------------
</TABLE>
See Notes to
16 Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
August 31, 1999 August 31, 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 6,292,028 $ 6,195,714
Net realized gain (loss) (4,551,659) 1,007,582
Increase in net unrealized
appreciation (depreciation) (7,010,676) 4,890,299
- -------------------------------------------------------------------------------------
Increase (Decrease)
in Net Assets From Operations (5,270,307) 12,093,595
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM (NOTE 2):
Net investment income (6,088,436) (6,479,500)
Net realized gains (1,988,543) (1,901,590)
- -------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (8,076,979) (8,381,090)
- -------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Treasury stock acquired (268,562) --
- -------------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (268,562) --
- -------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (13,615,848) 3,712,505
NET ASSETS:
Beginning of year 140,229,555 136,517,050
- -------------------------------------------------------------------------------------
End of year* $126,613,707 $140,229,555
=====================================================================================
* Includes undistributed (overdistributed)
net investment income of: $93,868 $(106,481)
=====================================================================================
</TABLE>
See Notes to
17 Financial Statements.
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 management investment 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 asked 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, 1999,
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.
18
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
(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
SSB Citi Fund Management LLC ("SSBC"), formerly known as SSBC Fund
Management Inc., a subsidiary of Salomon Smith Barney Holdings Inc. ("SSBH"),
acts as investment adviser to the Fund. The Fund pays SSBC 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. For the year ended August
31, 1999, SSBC waived $69,402 of its investment advisory fee.
SSBC 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. For the year ended August 31, 1999, SSBC
waived $19,575 of its administration fee.
All officers and one Director of the Fund are employees of Salomon Smith
Barney Inc., another subsidiary of SSBH.
4. Investments
For the year ended August 31, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
- --------------------------------------------------------------------------------
Purchases $36,478,099
- --------------------------------------------------------------------------------
Sales 38,406,849
- --------------------------------------------------------------------------------
At August 31, 1999, aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
- --------------------------------------------------------------------------------
Gross unrealized appreciation $3,885,901
Gross unrealized depreciation (5,808,306)
- --------------------------------------------------------------------------------
Net unrealized depreciation $(1,922,405)
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
(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 August 31, 1999, 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
At August 31, 1999, the Fund had 500,000,000 shares of common stock
authorized with a par value of $0.001.
On July 27, 1999, the Fund commenced a share repurchase plan. As of August
31, 1999, repurchased shares totaled 27,200.
8. Capital Loss Carryforward
At August 31, 1999, the Fund had, for Federal income tax purposes, $972,645
of unused capital loss carryforwards available to offset future capital gains
expiring August 31, 2007. To the extent that these carryforward losses are used
to offset capital gains, it is probable that the gains so offset will not be
distributed.
20
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share of capital stock outstanding throughout each year ended August 31,
except where noted:
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Net Asset Value,
Beginning of Year $12.48 $12.15 $11.98 $12.36 $12.15
- --------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(1) 0.56 0.55 0.63 0.66 0.69
Net realized and
unrealized gain (loss) (1.02) 0.53 0.48 (0.21) 0.32
- --------------------------------------------------------------------------------
Total Income (Loss)
From Operations (0.46) 1.08 1.11 0.45 1.01
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.54) (0.58) (0.66) (0.67) (0.68)
Net realized gains (0.18) (0.17) (0.28) (0.16) (0.12)
- --------------------------------------------------------------------------------
Total Distributions (0.72) (0.75) (0.94) (0.83) (0.80)
- --------------------------------------------------------------------------------
Net Asset Value, End of Year $11.30 $12.48 $12.15 $11.98 $12.36
- --------------------------------------------------------------------------------
Total Return, Based on
Market Value* (0.59)% (1.31)% 7.75% 7.35% 8.86%
- --------------------------------------------------------------------------------
Total Return, Based on
Net Asset Value* (3.29)% 9.57% 9.86% 4.01% 9.20%
- --------------------------------------------------------------------------------
Net Assets,
End of Year (millions) $127 $140 $137 $134 $139
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(1) 1.03% 1.10% 1.10% 1.09% 1.14%
Net investment income 4.62 4.46 5.23 5.31 5.80
- --------------------------------------------------------------------------------
Portfolio Turnover Rate 27% 66% 97% 63% 95%
- --------------------------------------------------------------------------------
Market Value, End of Year $10.063 $10.813 $11.688 $11.750 $11.625
- --------------------------------------------------------------------------------
(1) The investment adviser and administrator waived a part of their fees for
the year ended August 31, 1999. If such fees were not waived the per share
decrease on the net investment income and the annualized ratio of expenses
to average net assets would have been $0.01 and 1.09%, respectively.
* The total return assumes that dividends are reinvested in accordance with
the Fund's dividend reinvestment plan.
21
<PAGE>
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors of
Managed Municipals Portfolio II Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Managed Municipals Portfolio II Inc. as of
August 31, 1999, the related statement of operations for the year then ended,
the statements of changes in net assets for each of the years in the two-year
period then ended and financial highlights for each of the years in the
five-year period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1999, by correspondence with the custodian. As to securities
purchased or sold but not yet received or delivered, we performed other
appropriate auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Managed Municipals Portfolio II Inc. as of August 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended and financial highlights for each of
the years in the five-year period then ended, in conformity with generally
accepted accounting principles.
New York, New York
October 15, 1999
22
<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,
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
February 28,
1998 1,928,672 0.17 1,555,286 0.14 2,311,045 0.20 3,866,331 0.34
May 31,
1998 1,932,962 0.17 1,563,665 0.14 (4,226) (0.00) 1,559,439 0.14
August 31,
1998 1,999,290 0.18 1,617,024 0.14 849,996 0.08 2,467,020 0.22
November 30,
1998 1,919,936 0.17 1,605,790 0.14 (355,751) (0.02) 1,250,039 0.12
February 28,
1999 1,897,767 0.17 1,556,424 0.14 (1,135,437) (0.10) 420,987 0.04
May 31,
1999 1,916,457 0.17 1,545,491 0.14 (3,064,199) (0.28) (1,518,708) (0.14)
August 31,
1999 1,956,606 0.17 1,584,323 0.14 (7,006,948) (0.62) (5,422,625) (0.48)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
- --------------------------------------------------------------------------------
Financial Data (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For a share of capital stock outstanding throughout each period:
NYSE Net Dividend
Record Payable Closing Asset Dividend Reinvestment
Date Date Price Value Paid Price
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
12/22/97* 12/26/97 11.625 12.41 0.170 11.57
1/27/98 1/30/98 12.188 12.44 0.056 12.12
2/24/98 2/27/98 11.875 12.42 0.056 11.62
3/24/98 3/27/98 11.250 12.40 0.050 11.37
4/21/98 4/24/98 11.125 12.28 0.050 11.10
5/26/98 5/29/98 10.813 12.38 0.050 11.14
6/23/98 6/26/98 11.063 12.34 0.050 11.12
7/28/98 7/31/98 10.813 12.33 0.048 10.86
8/25/98 8/28/98 10.875 12.43 0.048 10.97
9/22/98 9/25/98 11.313 12.52 0.049 11.52
10/27/98 10/30/98 11.688 12.46 0.049 11.66
11/23/98 11/27/98 11.563 12.45 0.049 11.55
12/21/98* 12/24/98 11.250 12.28 0.177 11.24
1/26/99 1/29/99 11.125 12.32 0.049 11.10
2/23/99 2/26/99 10.875 12.25 0.049 10.93
3/23/99 3/26/99 10.563 12.15 0.049 10.67
4/27/99 4/30/99 10.375 12.12 0.049 10.41
5/25/99 5/28/99 10.188 11.96 0.049 10.40
6/22/99 6/25/99 10.563 11.61 0.050 10.51
7/27/99 7/30/99 9.875 11.60 0.050 9.98
8/24/99 8/27/99 9.875 11.25 0.050 10.00
- ------------------------------------------------------------------------------------
</TABLE>
+ As of record date.
++ Includes market discount.
* Capital gain distribution.
24
<PAGE>
- --------------------------------------------------------------------------------
Additional Shareholder Information
(unaudited)
- --------------------------------------------------------------------------------
On December 16, 1998, an annual meeting of the shareholders of the Fund was
held for the purpose of voting on the following matters:
1. To approve or disapprove for the Fund, the election of Robert A. Frankel
and Heath B. McLendon as Directors; and
2. To approve or disapprove the selection of KPMG Peat Marwick LLP as the
independent auditors for the current fiscal year of the Fund.
The results of the vote on Proposal 1 were as follows:
Shares % of Shares Voted % of
Directors Voted For Shares Voted Against Shares Voted
- -------------------------------------------------------------------------------
Robert A. Frankel 10,727,967.671 98.850% 164,894.000 1.150%
Heath B. McLendon 10,734,084.671 98.850 158,777.000 1.150
- -------------------------------------------------------------------------------
The results of the vote on Proposal 2 were as follows:
% of Votes % of Votes % of
Votes For Shares Voted Against Shares Voted Abstained Shares Voted
- --------------------------------------------------------------------------------
10,723,867.484 98.450% 56,832.187 0.520% 112,162.000 1.030%
- --------------------------------------------------------------------------------
The following Directors, representing the balance of the Board of
Directors, continue to serve as Directors: Allan J. Bloostein, Martin Brody,
Dwight B. Crane and William R. Hutchinson.
- --------------------------------------------------------------------------------
Tax Information
(Unaudited)
- --------------------------------------------------------------------------------
For Federal tax purposes the Fund hereby designates for the fiscal year ended
August 31, 1999:
. 100.00% of the dividends paid by the Fund from net investment income as
tax exempt for regular Federal income tax purposes.
25
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan
(unaudited)
- --------------------------------------------------------------------------------
Under the Fund's Dividend Reinvestment Plan ("Plan"), a shareholder whose
shares of common stock are registered in his own name will have all
distributions from the fund reinvested automatically by 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 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. When the
market price of the common stock is equal to or exceeds the net asset value per
share of the common stock on the determination date (generally, the record date
for the distribution), Plan participants will be issued shares of common stock
by the fund at a price equal to the greater of net asset value determined as
described below under "Net Asset Value" or 95% of the market price of the common
stock.
If the market price of the common stock is less than the net asset value of
the common stock at the time of valuation (which is the close of business on the
determination date), 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 AMEX or elsewhere, for the participants' accounts. If following
the commencement of the purchases and before First Data has completed its
purchases, the market price exceeds the net asset value of the common stock as
of the valuation time, 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 in shares at a price equal to the greater of (a) net asset value as
of the valuation time or (b) 95% of the then current market price. In this case,
the number of shares received by a Plan participant will be based on the
weighted average of prices paid for shares purchased in the open market and the
price at which the fund issues the remaining shares. To the extent 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 as of the valuation time, resulting in the
acquisition of fewer shares than if the dividend or capital gains distribution
had been paid in common stock issued by the Fund at such net asset value. First
Data will begin to purchase common stock on the open market as soon as
practicable after the determination date
26
<PAGE>
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan
(unaudited)(continued)
- --------------------------------------------------------------------------------
for the dividend or capital gains distribution, but in no event shall such
purchases continue later than 30 days after the payment date for such dividend
or distribution, or the record date for a succeeding dividend or distribution,
except when necessary to comply with applicable provisions of the federal
securities laws.
First Data maintains all shareholder accounts in the Plan and furnishes
written confirmation 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 the 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 any brokerage commissions actually incurred with respect
to any open market purchases made under the Plan.
Experience under the Plan may indicate that changes to it are desirable.
The Fund reserves the right to amend or terminate the Plan as applied to any
dividend or capital gains distribution paid subsequent to written notice of the
change sent to participants at least 30 days before the record date for the
dividend or capital gains distribution. The Plan also may be amended or
terminated by 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, Inc.,
P.O. Box 9699, Providence, RI 02940-9699 or by telephone at 1-800-451-2010.
----------------------------------------
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.
27
<PAGE>
Managed Municipals
Portfolio II Inc.
Directors Investment Adviser
Allan J. Bloostein SSB Citi Fund Management LLC
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 9699
Providence, RI 02940-9699
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
Paul A. Brook
Controller
Christina T. Sydor
Secretary
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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 the report.
FD0775 10/99
