<PAGE>
Managed Municipals
Portfolio II Inc.
Quarterly Report
May 31, 1999
[GRAPHIC]
<PAGE>
[GRAPHIC]
Managed Municipals
Portfolio II Inc.
May 31, 1999
Dear Shareholder:
We are pleased to present the quarterly report for the Managed Municipals
Portfolio II Inc. ("Fund") for the period ended May 31, 1999. Over the nine
months covered by this report, the Fund distributed income dividends totaling
$0.39 per share. The table below shows the annualized distribution rate and
nine-month total return based on the Fund's May 31, 1999 net asset value ("NAV")
per share and its New York Stock Exchange ("NYSE") closing price.
Price Annualized Nine-Month
Per Share Distribution Rate* Total Return
------------- ------------------ ------------
$11.93 (NAV) 4.93% 0.61%
$10.25 (NYSE) 5.74% (0.23)%
In comparison, general closed-end municipal bond funds posted an average
total return on NAV of 0.87% for the same time period, as reported by Lipper
Inc. (Lipper is a major fund-tracking organization.)
Municipal Bond Market Update and Outlook
Through May 1999, the municipal bond market was less volatile compared
with U.S. Treasuries. In our opinion, municipal bonds, which are relatively
inexpensive, currently offer significant downside protection. In addition, new
issuance of municipal bonds has slowed down from 1998 levels. With inflation
relatively low, conditions are still favorable for municipal bonds.
- ----------
* This distribution assumes a current monthly income dividend rate of $0.049
per share for twelve months.
[GRAPHIC]
- ------------------------------------- 1 --------------------------------------
<PAGE>
In April, the Consumer Price Index ("CPI") increased 0.7% -- its largest
monthly increase in nine years. With global economic growth picking up,
inflationary fears surfaced. The Federal Reserve Board raised short-term rates
0.25% on June 30, 1999 and yields in the bond market went up.
Looking forward and as we near the end of the millennium and the onset of
Y2K, we believe that fixed income securities in the U.S. should experience solid
demand. That in turn should provide a positive environment for municipal bonds
for the remainder of 1999. We are positioning ourselves for modestly lower rates
over the next six months, and if there is no repeat of a higher CPI number, we
stand an excellent chance of seeing a modest decline in rates as we move toward
the fall.
Investment Strategy
The Managed Municipals Portfolio II seeks as high a level of current
income exempt from Federal income tax as is consistent with preservation of
principal.
Our investment strategy for the Fund is to seek to maximize our dividend
yield. In our view, the municipal bond market has provided us with excellent
opportunities during the reporting period. Since interest rates have risen, we
have been able to invest our excess cash at higher yields. In addition, we have
also been focusing on adding high-grade bonds to the Fund's portfolio.
(Currently the credit spread between AAA-rated and BBB-rated bonds are near
their narrowest spread levels ever.) At these narrow spread levels, we do not
think it makes sense to buy low-grade bonds and assume additional credit risk.
We have also concentrated on maintaining an average maturity of 19.2 years in
the Fund. Because our interest-rate forecast remains positive, we believe our
current investment strategy should allow us to maximize dividend yields going
forward.
[GRAPHIC]
- ------------------------------------- 2 --------------------------------------
<PAGE>
During the reporting period, we have pared down our exposure to paper
recycling facilities. Our goal will be to eliminate our holdings in that area
completely before 2000. As noted above, spreads between high-grade credits and
lower ones have never been more narrower. We will upgrade the portfolio at every
opportunity until these spreads widen out to more historic norms.
During the past nine months, the Fund focused on transportation bonds
(11.8%), general obligation bonds (11.3%) and education bonds (10.6%) because we
believe they offered good relative values. At the end of May, the Fund's
weighted average maturity was approximately 19.2 years. In addition, as of May
31, 1999, roughly 84% of the Fund's holdings were rated investment grade by
either Standard & Poor's Ratings Service or Moody's Investors Service, Inc.,
with approximately 44% of the Fund invested in AAA bonds, the highest rating.
At its June 2 meeting, the Board of Directors of the Fund authorized a
repurchase of shares when deemed appropriate. 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
July 9, 1999
[GRAPHIC]
- ------------------------------------- 3 --------------------------------------
<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 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.
- --------------------------------------------------------------------------------
[GRAPHIC]
- ------------------------------------- 4 --------------------------------------
<PAGE>
Schedule of Investments
May 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
============================================================================================
<S> <C> <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) $ 3,086,794
100,000 A-1+ Valdez Alaska Marine Terminal Revenue,
(Exxon Pipeline Company Project),
3.350% due 10/1/25 (f) 100,000
- --------------------------------------------------------------------------------------------
3,186,794
- --------------------------------------------------------------------------------------------
California -- 10.7%
2,500,000 Baa3* California Educational Facilities Authority
Revenue, (Pooled College & University
Projects), Series A, 5.625% due 7/1/23 2,478,125
1,000,000 AAA California Health Facilities Finance Authority
Revenue, Kaiser Permanente, Series A,
FSA-Insured, 5.500% due 6/1/22 1,038,750
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 5,162,431
1,000,000 AAA Los Angeles County, CA Public Works
Financing Authority Lease Revenue,
(Multiple Capital Facilities Project V),
AMBAC-Insured, 5.125% due 6/1/17 1,000,000
1,465,000 AA Metropolitan Water District, Southern
California Waterworks, Series A,
5.000% due 7/1/16 1,452,181
2,200,000 AAA Roseville, CA Water Utility Revenue, COP,
FGIC-Insured, 5.200% due 12/1/18 2,208,250
1,000,000 AAA San Jose, CA Redevelopment Agency, Tax
Allocation (Merged Area Redevelopment
Project), MBIA-Insured, 5.250% due 8/1/16 1,016,250
- --------------------------------------------------------------------------------------------
14,355,987
- --------------------------------------------------------------------------------------------
Colorado -- 15.7%
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 1,173,750
1,000,000 A Colorado Health Facilities Authority Revenue,
Series B, Remarketed 7/8/98,
5.350% due 8/1/15 1,006,250
</TABLE>
See Notes to
[GRAPHIC] Financial Statements.
- ------------------------------------- 5 --------------------------------------
<PAGE>
Schedule of Investments
May 31, 1999 (unaudited) (continued)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
============================================================================================
<S> <C> <C> <C>
Colorado -- 15.7% (continued)
$ 4,000,000 BBB+ Colorado Springs, CO Airport Revenue,
Series A, 7.000% due 1/1/22 (b) $ 4,310,000
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 7,875,000
Denver, CO City & County Airport Revenue,
Series C:
3,465,000 BBB+ 6.125% due 11/15/25 (b) 3,633,919
2,785,000 BBB+ Partially Escrowed to maturity with
U.S. government securities,
6.125% due 11/15/25 (b)(d) 3,032,169
- --------------------------------------------------------------------------------------------
21,031,088
- --------------------------------------------------------------------------------------------
Florida -- 5.2%
1,000,000 AAA Broward County, FL Airport System Revenue,
Passenger Facility Convertible Lien,
Series H-2, AMBAC-Insured,
4.750% due 10/1/23 928,750
1,500,000 BBB- Martin County, FL IDA, (Indiantown
Cogeneration Project), Series A,
7.875% due 12/15/25 (b) 1,567,500
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 (d) 4,485,000
- --------------------------------------------------------------------------------------------
6,981,250
- --------------------------------------------------------------------------------------------
Georgia -- 0.7%
1,000,000 A3* Private Colleges & Universities Authority
Revenue, (Mercer University Project),
Series A, 5.375% due 10/1/29 982,500
- --------------------------------------------------------------------------------------------
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 1,952,500
2,000,000 AAA Hawaii State GO, Series CP, FGIC-Insured,
5.000% due 10/1/16 1,967,500
- --------------------------------------------------------------------------------------------
3,920,000
- --------------------------------------------------------------------------------------------
</TABLE>
See Notes to
[GRAPHIC] Financial Statements.
- ------------------------------------- 6 --------------------------------------
<PAGE>
Schedule of Investments
May 31, 1999 (unaudited) (continued)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
============================================================================================
<S> <C> <C> <C>
Illinois -- 3.2%
$ 1,000,000 Aaa* Illinois HFA, Memorial Health System,
MBIA-Insured, 5.250% due 10/1/18 $ 991,250
Kane County, IL GO, School District No. 129,
Aurora West Side, FGIC-Insured:
590,000 Aaa* 5.500% due 2/1/11 619,500
675,000 Aaa* 5.500% due 2/1/12 702,844
1,000,000 Aaa* 5.125% due 2/1/14 1,005,000
1,000,000 Aaa* 5.000% due 2/1/16 980,000
- --------------------------------------------------------------------------------------------
4,298,594
- --------------------------------------------------------------------------------------------
Iowa -- 1.2%
1,500,000 AA- Dawson, IA IDR, (Cargill Inc. Project),
6.500% due 7/15/12 1,605,000
- --------------------------------------------------------------------------------------------
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 12/1/18 917,500
- --------------------------------------------------------------------------------------------
Maryland -- 0.7%
4,000,000 NR Maryland State Energy Financing
Administration, Solid Waste Disposal
Revenue, (Hagerstown Recycling Project),
9.000% due 10/15/16 (b)(e) 880,000
- --------------------------------------------------------------------------------------------
Massachusetts -- 4.6%
1,000,000 AAA Massachusetts State Health & Educational
Facilities Authority Revenue, Northeastern
University, Series I, MBIA-Insured,
5.000% due 10/1/29 950,000
1,000,000 AAA Massachusetts State HFA, Housing
Development, Series B, MBIA-Insured,
5.300% due 12/1/17 1,008,750
1,335,778 NR Massachusetts State IFA, Solid Waste Disposal
Revenue, Sr. Lien, (Massachusetts Paper Co.
Project), 8.500% due 11/1/12 1,309,063
2,000,000 AAA Massachusetts State Turnpike Authority,
Metropolitan Highway Systems Revenue,
Subseries A, AMBAC-Insured,
4.750% due 1/1/34 1,812,500
</TABLE>
See Notes to
[GRAPHIC] Financial Statements.
- ------------------------------------- 7 --------------------------------------
<PAGE>
Schedule of Investments
May 31, 1999 (unaudited) (continued)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
============================================================================================
<S> <C> <C> <C>
Massachusetts -- 4.6% (continued)
Massachusetts State Water Resource Authority,
MBIA-Insured:
$ 490,000 AAA Pre-Refunded-- Escrowed with state
and local government securities to
12/1/04 Call @ 102, Series C,
5.250% due 12/1/20 $ 525,525
510,000 AAA Series C, 5.250% due 12/1/20 508,087
- --------------------------------------------------------------------------------------------
6,113,925
- --------------------------------------------------------------------------------------------
Michigan -- 7.4%
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) 4,010,000
5,600,000 NR Midland County, MI Economic Development
Corp., PCR, Limited Obligation, Series B,
9.500% due 7/23/09 (b) 5,953,024
- --------------------------------------------------------------------------------------------
9,963,024
- --------------------------------------------------------------------------------------------
Missouri -- 1.5%
1,000,000 AAA Fenton, MO COP (Capital Improvements
Project), MBIA-Insured, 5.125% due 9/1/17 995,000
1,000,000 AAA St. Louis, MO Board of Education, GO,
Missouri Direct Deposit Program, Series B,
FGIC-Insured, 5.000% due 4/1/16 985,000
- --------------------------------------------------------------------------------------------
1,980,000
- --------------------------------------------------------------------------------------------
Montana -- 1.5%
2,000,000 NR Montana State Board of Investment Resource
Recovery Revenue, (Yellowstone Energy L.P.
Project), 7.000% due 12/31/19 (b) 1,992,500
- --------------------------------------------------------------------------------------------
Nevada -- 3.8%
4,650,000 Baa2* Clark County, NV IDR, Southwest Gas Corp.,
Series B, 7.500% due 9/1/32 (b)(c) 5,074,313
- --------------------------------------------------------------------------------------------
New Jersey -- 1.3%
780,000 AAA Essex County, NJ Improvement Authority
Revenue, Utility System, Orange Franchise,
Series A, MBIA-Insured, 5.375% due 7/1/18 793,650
1,000,000 AAA Middlesex County, NJ COP, MBIA-Insured,
5.200% due 6/15/18 1,003,750
- --------------------------------------------------------------------------------------------
1,797,400
- --------------------------------------------------------------------------------------------
</TABLE>
See Notes to
[GRAPHIC] Financial Statements.
- ------------------------------------- 8 --------------------------------------
<PAGE>
Schedule of Investments
May 31, 1999 (unaudited) (continued)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
============================================================================================
<S> <C> <C> <C>
New York -- 6.4%
$ 2,000,000 A- Long Island Power Authority, NY Electric
System Revenue, Series A,
5.500% due 12/1/29 $ 2,025,000
1,000,000 AA New York, NY Transitional Finance Authority
Revenue, Future Tax Secured, Series B,
4.750% due 11/1/17 948,750
New York State Dormitory Authority Revenue:
1,135,000 AAA Barnard College, AMBAC-Insured,
5.250% due 7/1/16 1,149,187
1,000,000 AAA City University System, Series A,
FGIC-Insured, 5.000% due 7/1/16 986,250
1,500,000 AAA Mental Health Services Facilities, Series D,
FSA-Insured, 5.125% due 8/15/17 1,483,125
1,000,000 AAA Montefiore Medical Center,
AMBAC/FHA-Insured, 5.250% due 2/1/15 1,013,750
1,000,000 AAA Municipal Health Facility Improvement
Program, Series A, FSA-Insured,
5.500% due 5/15/16 1,031,250
- --------------------------------------------------------------------------------------------
8,637,312
- --------------------------------------------------------------------------------------------
North Carolina -- 1.2%
1,500,000 A3* Coastal Regional Solid Waste Management
Disposal Authority, NC Solid Waste
Disposal Revenue, 6.500% due 6/1/08 1,605,000
- --------------------------------------------------------------------------------------------
Ohio -- 0.9%
1,220,000 AAA Ohio State Higher Educational Facility
Commission Revenue, University of Dayton,
AMBAC-Insured, 5.350% due 12/1/17 1,253,550
- --------------------------------------------------------------------------------------------
Puerto Rico -- 0.7%
1,000,000 AAA Puerto Rico Commonwealth Infrastructure
Financing Authority, Series A,
AMBAC-Insured, 5.000% due 7/1/16 1,001,250
- --------------------------------------------------------------------------------------------
South Carolina -- 3.2%
2,000,000 AAA Lexington County, SC Health Services District,
Hospital Revenue, FSA-Insured,
5.250% due 11/1/17 2,005,000
2,120,000 A3* Myrtle Beach, SC COP, (Myrtle Beach
Convention Center Project),
6.875% due 7/1/07 2,339,950
- --------------------------------------------------------------------------------------------
4,344,950
- --------------------------------------------------------------------------------------------
</TABLE>
See Notes to
[GRAPHIC] Financial Statements.
- ------------------------------------- 9 --------------------------------------
<PAGE>
Schedule of Investments
May 31, 1999 (unaudited) (continued)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
============================================================================================
<S> <C> <C> <C>
Tennessee -- 0.7%
$ 1,000,000 AA Metropolitan Government of Nashville &
Davidson County, TN Electrical Revenue,
Series A, 5.125% due 5/15/15 $ 1,001,250
- --------------------------------------------------------------------------------------------
Texas -- 9.4%
1,000,000 Aaa* Arlington, TX ISD, PSFG,
5.000% due 2/15/24 957,500
1,000,000 Aaa* Azle, TX ISD, PSFG, Series C,
5.000% due 2/15/22 967,500
2,000,000 Baa1* Brazos River Authority, TX PCR,
Utility Electric Company, Series C,
5.550% due 6/1/30 1,907,500
Burleson, TX ISD, GO, PSFG:
435,000 Aaa* 6.750% due 8/1/24 489,375
1,065,000 NR Pre-Refunded-- Escrowed with U.S.
government securities to 8/1/06
Call @ 100, 6.750% due 8/1/24 (d) 1,222,087
300,000 A-1+ Guadalupe-Blanco River Authority,
TX PCR, (Central Power & Lighting
Company Project), 3.300% due 11/1/15 (f) 300,000
1,000,000 AA Harris County, TX GO, Toll Road Sub. Lien,
5.125% due 8/15/17 993,750
1,000,000 AA Harris County, TX Health Facilities
Development Corp., Hospital Revenue,
(Texas Childrens Hospital Project), Series A,
5.250% due 10/1/19 985,000
1,830,000 AAA Texas State GO, Water Development,
Series D, 5.000% due 8/1/16 1,813,988
1,500,000 AAA Texas Water Development Board Revenue,
State Revolving Fund, Sr. Lien, Series B,
5.000% due 7/15/15 1,483,125
1,520,000 AAA West Texas Municipal Power Agency Revenue,
MBIA-Insured, 5.000% due 2/15/16 1,491,500
- --------------------------------------------------------------------------------------------
12,611,325
- --------------------------------------------------------------------------------------------
Virgin Islands -- 0.7%
1,000,000 BBB- Virgin Islands Public Finance Authority
Revenue, Sr. Lien, Series A,
5.500% due 10/1/22 1,003,750
- --------------------------------------------------------------------------------------------
</TABLE>
See Notes to
[GRAPHIC] Financial Statements.
- ------------------------------------- 10 -------------------------------------
<PAGE>
Schedule of Investments
May 31, 1999 (unaudited) (continued)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
============================================================================================
<S> <C> <C> <C>
Virginia -- 8.3%
$ 2,000,000 AAA Riverside, VA Regional Jail Facility Revenue,
MBIA-Insured, 6.000% due 7/1/25 $ 2,170,000
2,000,000 AA Virginia College Building Authority,
VA Educational Facilities Revenue,
21st Century College Program,
5.125% due 8/1/11 2,072,500
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 1,040,000
1,245,000 AA+ Series D, Subseries D-3,
Remarketed 5/30/96,
5.700% due 7/1/09 1,294,800
3,415,000 AA+ Series F, Subseries F-1,
Remarketed 9/12/95,
6.400% due 7/1/17 3,602,825
925,000 AA+ Multi-Family Housing Revenue, Series K,
5.900% due 11/1/11 975,875
- --------------------------------------------------------------------------------------------
11,156,000
- --------------------------------------------------------------------------------------------
Washington -- 0.8%
1,000,000 AAA Washington State Public Power Supply System,
(Nuclear Project No. 2), Series A,
FSA-Insured, 5.125% due 7/1/11 1,027,500
- --------------------------------------------------------------------------------------------
West Virginia -- 0.7%
Marion County, WV County Commissioner,
Solid Waste Disposal Facilities Revenue,
Adirondack Recycling:
1,757,357 NR Series A, 8.000% due 12/1/25 (b)(e) 878,678
249,590 NR Series B, 10.000% due 12/1/25 (b)(e) 124,795
- --------------------------------------------------------------------------------------------
1,003,473
- --------------------------------------------------------------------------------------------
</TABLE>
See Notes to
[GRAPHIC] Financial Statements.
- ------------------------------------- 11 -------------------------------------
<PAGE>
Schedule of Investments
May 31, 1999 (unaudited) (continued)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
============================================================================================
<S> <C> <C> <C>
Wisconsin -- 3.4%
Wisconsin Housing & Economic Development
Authority, Series A:
$ 2,000,000 AA Home Ownership Revenue,
6.450% due 3/1/17 $ 2,102,500
1,370,000 AA- Housing Revenue, 5.650% due 11/1/23 1,380,275
1,000,000 AAA Wisconsin State Health & Educational Facilities
Authority Revenue, (Medical College of
Wisconsin Project), MBIA-Insured,
5.400% due 12/1/16 1,015,000
- --------------------------------------------------------------------------------------------
4,497,775
- --------------------------------------------------------------------------------------------
Total Investments -- 100%
------------
(Cost -- $131,297,625**) $134,223,010
------------
============================================================================================
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service, except those
identified by an asterisk (*) which are rated by Moody's Investors
Service, Inc.
(b) Income from this issue is considered a preference item for purposes of
calculating the alternative minimum tax.
(c) Security is segregated by Custodian for open purchase commitment.
(d) 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.
(e) Security is in default.
(f) Variable rate obligation payable at par at any time on no more than seven
days notice.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 14 and 15 for definitions of ratings and certain security
descriptions.
See Notes to
[GRAPHIC] Financial Statements.
- ------------------------------------- 12 -------------------------------------
<PAGE>
Summary of Investments by Combined Ratings
May 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
Percentage of
Moody's and/or Standard & Poor's Total Investments
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Aaa AAA 43.6%
Aa AA 13.7
A A 9.7
Baa BBB 17.1
P-1+ A-1+ 0.3
NR NR 15.6
-----
100.0%
=====
- --------------------------------------------------------------------------------
[GRAPHIC]
- ------------------------------------- 13 -------------------------------------
<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.
[GRAPHIC]
- ------------------------------------- 14 -------------------------------------
<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
[GRAPHIC]
- ------------------------------------- 15 -------------------------------------
<PAGE>
Statement of Assets and Liabilities
(unaudited)
May 31, 1999
================================================================================
Assets:
Investments, at value (Cost -- $131,297,625) $ 134,223,010
Cash 9,538
Interest receivable 2,197,597
- --------------------------------------------------------------------------------
Total Assets 136,430,145
- --------------------------------------------------------------------------------
Liabilities:
Payable for securities purchased 1,974,279
Dividends payable 263,285
Investment advisory fees payable 75,377
Administration fees payable 21,207
Accrued expenses 106,672
- --------------------------------------------------------------------------------
Total Liabilities 2,440,820
- --------------------------------------------------------------------------------
Total Net Assets $ 133,989,325
================================================================================
Net Assets:
Par value of capital shares $ 11,235
Capital paid in excess of par value 134,234,852
Undistributed net investment income 197,219
Accumulated net realized loss from security transactions (3,379,366)
Net unrealized appreciation of investments 2,925,385
- --------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $11.93 a share on 11,234,706 shares of $0.001
par value outstanding; 500,000,000 shares authorized) $ 133,989,325
================================================================================
See Notes to
[GRAPHIC] Financial Statements.
- ------------------------------------- 16 -------------------------------------
<PAGE>
Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended
5/31/99
====================================================================================
<S> <C>
Investment Income:
Interest $ 5,734,160
- ------------------------------------------------------------------------------------
Expenses:
Investment advisory fees (Note 3) 716,326
Administration fees (Note 3) 204,665
Shareholder communications 85,050
Audit and legal 39,944
Shareholder and system servicing fees 31,050
Pricing service fees 14,407
Registration fees 6,750
Directors' fees 5,810
Custody 5,117
Other 6,313
- ------------------------------------------------------------------------------------
Total Expenses 1,115,432
Less: Investment advisory and administration fee waivers (Note 3) (88,977)
- ------------------------------------------------------------------------------------
Net Expenses 1,026,455
- ------------------------------------------------------------------------------------
Net Investment Income 4,707,705
- ------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investments
and Futures Contracts (Notes 4 and 5):
Realized Loss From:
Security transactions (excluding short-term securities) (2,281,626)
Futures contracts (110,875)
- ------------------------------------------------------------------------------------
Net Realized Loss (2,392,501)
- ------------------------------------------------------------------------------------
Change in Net Unrealized Appreciation of Investments:
Beginning of period 5,088,271
End of period 2,925,385
- ------------------------------------------------------------------------------------
Decrease in Net Unrealized Appreciation (2,162,886)
- ------------------------------------------------------------------------------------
Net Loss on Investments and Futures Contracts (4,555,387)
- ------------------------------------------------------------------------------------
Increase in Net Assets From Operations $ 152,318
====================================================================================
</TABLE>
See Notes to
[GRAPHIC] Financial Statements.
- ------------------------------------- 17 -------------------------------------
<PAGE>
Statements of Changes in Net Assets
Nine Months
Ended Year
5/31/99 Ended
(unaudited) 8/31/98
================================================================================
Operations:
Net investment income $ 4,707,705 $ 6,195,714
Net realized gain (loss) (2,392,501) 1,007,582
Increase (decrease) in net
unrealized appreciation (2,162,886) 4,890,299
- --------------------------------------------------------------------------------
Increase in Net Assets From Operations 152,318 12,093,595
- --------------------------------------------------------------------------------
Distributions To Shareholders
From (Note 2):
Net investment income (4,404,005) (6,479,500)
Net realized gains (1,988,543) (1,901,590)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (6,392,548) (8,381,090)
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets (6,240,230) 3,712,505
Net Assets:
Beginning of period 140,229,555 136,517,050
- --------------------------------------------------------------------------------
End of period* $ 133,989,325 $ 140,229,555
================================================================================
* Includes undistributed (overdistributed)
net investment income of: $ 197,219 $ (106,481)
================================================================================
See Notes to
[GRAPHIC] Financial Statements.
- ------------------------------------- 18 -------------------------------------
<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 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, 1998,
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.
[GRAPHIC]
- ------------------------------------- 19 -------------------------------------
<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
SSBC Fund Management Inc. ("SSBC"), 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
nine months ended May 31, 1999, SSBC waived $69,204 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 nine months ended May 31, 1999,
SSBC waived $19,773 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 nine months ended May 31, 1999, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $23,143,703
- --------------------------------------------------------------------------------
Sales 22,657,962
================================================================================
At May 31, 1999, aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 7,347,626
Gross unrealized depreciation (4,422,241)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 2,925,385
================================================================================
[GRAPHIC]
- ------------------------------------- 20 -------------------------------------
<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 May 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.
[GRAPHIC]
- ------------------------------------- 21 -------------------------------------
<PAGE>
Financial Highlights
For a share of capital stock outstanding throughout each year ended August 31,
except where noted:
<TABLE>
<CAPTION>
1999(1) 1998 1997 1996 1995 1994
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $ 12.48 $ 12.15 $ 11.98 $ 12.36 $ 12.15 $ 13.37
- -----------------------------------------------------------------------------------------------------------
Income (Loss) From
Operations:
Net investment income(2) 0.42 0.55 0.63 0.66 0.69 0.64
Net realized and
unrealized gain (loss) (0.40) 0.53 0.48 (0.21) 0.32 (0.61)
- -----------------------------------------------------------------------------------------------------------
Total Income
From Operations 0.02 1.08 1.11 0.45 1.01 0.03
- -----------------------------------------------------------------------------------------------------------
Offering Costs Credited
(Charged) to
Paid-In Capital -- -- -- -- -- 0.01
- -----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.39) (0.58) (0.66) (0.67) (0.68) (0.67)
Net realized gains (0.18) (0.17) (0.28) (0.16) (0.12) (0.59)
- -----------------------------------------------------------------------------------------------------------
Total Distributions (0.57) (0.75) (0.94) (0.83) (0.80) (1.26)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $ 11.93 $ 12.48 $ 12.15 $ 11.98 $ 12.36 $ 12.15
- -----------------------------------------------------------------------------------------------------------
Total Return, Based on
Market Value* (0.23)%++ (1.31)% 7.75% 7.35% 8.86% 0.72%
- -----------------------------------------------------------------------------------------------------------
Total Return, Based on
Net Asset Value* 0.61%++ 9.57% 9.86% 4.01% 9.20% 0.48%
- -----------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $ 134 $ 140 $ 137 $ 134 $ 139 $ 136
- -----------------------------------------------------------------------------------------------------------
Ratios to Average
Net Assets:
Expenses(2) 1.00%+ 1.10% 1.10% 1.09% 1.14% 1.12%
Net investment income 4.60+ 4.46 5.23 5.31 5.80 5.08
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 17% 66% 97% 63% 95% 85%
- -----------------------------------------------------------------------------------------------------------
Market Value,
End of Period $ 10.250 $ 10.813 $ 11.688 $ 11.750 $ 11.625 $ 11.500
===========================================================================================================
</TABLE>
(1) For the nine months ended May 31, 1999 (unaudited).
(2) The investment adviser and administrator waived a part of their fees for
the nine months ended May 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.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
[GRAPHIC]
- ------------------------------------- 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)
=====================================================================================================================
</TABLE>
[GRAPHIC]
- ------------------------------------- 23 -------------------------------------
<PAGE>
Financial Data
(unaudited)
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
================================================================================
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
================================================================================
+ As of record date.
++ Includes market discount.
* Capital gain distribution.
[GRAPHIC]
- ------------------------------------- 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.
[GRAPHIC]
- ------------------------------------- 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
[GRAPHIC]
- ------------------------------------- 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 8030, Boston, Massachusetts 02266-8030 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.
[GRAPHIC]
- ------------------------------------- 27 -------------------------------------
<PAGE>
Managed Municipals
Portfolio II Inc.
Directors
Allan J. Bloostein
Martin Brody
Dwight B. Crane
Robert A. Frankel
William R. Hutchinson
Heath B. McLendon, Chairman
Charles F. Barber, Emeritus
Officers
Heath B. McLendon
President and
Chief Executive Officer
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
Investment Adviser
SSBC Fund Management Inc.
388 Greenwich Street
New York, New York 10013
Transfer Agent
First Data Investor Services
Group, Inc.
P.O. Box 8030
Boston, Massachusetts 02266-8030
Custodian
PNC Bank, N.A.
17th and Chestnut Streets
Philadelphia, Pennsylvania 19103
[GRAPHIC]
- ------------------------------------- 28 -------------------------------------
<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 the report.
FD0836 7/99
