Managed Municipals
Portfolio II Inc.
Quarterly Report
Novermber 30, 1999
[GRAPHIC]
Managed Municipals
Portfolio II Inc.
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November 30, 1999
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Dear Shareholder:
We are pleased to provide the quarterly report for the Managed Municipals
Portfolio II Inc. ("Fund") for the period ended November 30, 1999. Over the
three months covered by this report, the Fund distributed income dividends
totaling $0.15 per share. The table below shows the annualized distribution rate
and three-month total return based on the Fund's November 30, 1999 net asset
value ("NAV") per share and its New York Stock Exchange ("NYSE") closing price.1
Price Annualized Three-Month
Per Share Distribution Rate2 Total Return
- ------------ ------------------ ------------
$11.06 (NAV) 5.42% (0.57)%
$9.125 (NYSE) 6.58% (7.88)%
Special Shareholder Notice
In an effort to reduce the Fund's discount to NAV, the Board of Directors
authorized a stock repurchase program. The Fund intends to purchase shares of
its stock in the open market at such times, prices and amounts deemed advisable.
As of November 30, 1999, the Fund repurchased 268,400 shares in the open
market with an average buy back price of $9.65.
The Board of Directors believes that this share repurchase program is an
opportunity to take advantage of market price fluctuations with the objective of
offering long-term value to the Fund's shareholders. There can be no assurance
that the Board of Directors will continue this program.
- ---------
1 The NAV is calculated by taking the closing value of all securities held by
the Fund, plus all other assets less total liabilities and dividing the result
(total net assets) by the total number of shares outstanding. The NAV
fluctuates with changes in the market price of the securities in which the
Fund has invested. However, the price at which the investor buys or sells
shares of the Fund is its market (NYSE) price as determined by supply and
demand.
2 The distribution rate assumes a current monthly income dividend rate of $0.05
per share for twelve months.
1
Bond Market Update
In our view, bond yields are high enough to adequately reflect the risk of
slightly higher inflation. Indeed, we think that bond yields may be near their
peak.
The period covered by this report was marked by continued strong U.S.
economic growth, historically low inflation and low unemployment. Diminishing
liquidity in the bond market was precipitated by the global financial crisis
that reached its climax in October 1998. Meanwhile, the Federal Reserve Board
("Fed") reversed its prior three short-term interest rate movements with 25-
basis-point (100 basis points are equal to one percent) increases implemented on
June 30, August 24 and November 16, 1999, respectively.
In our view, performance in the bond market has been a direct result of Fed
monetary policy actions. While presumably aimed at stock market exuberance, it
is the bond market that has born the brunt of any correction on fears of further
Fed interest rate increases. We believe the current lack of inflationary data
defies a historically tight labor market and reinforces the influence of
technology and the power of global pricing constraints.
The latest rate hikes by the Fed resolve a major uncertainty that had been
weighing on the bond market. The policy statement that accompanied the move
indicated that the Fed is likely to keep monetary policy steady for now. In the
meantime, with the prospects of Fed action diminished, we believe investors can
focus on the bond market's fundamentals. We further expect that such
fundamentals are positive.
In particular, we anticipate new bond issuance should be light in the coming
weeks, especially from the U.S. Treasury and inflation should probably remain
calm despite the recent jump in oil prices. In our opinion the recent upturn in
yields is being driven by worries about the latest rise in oil prices and the
growing expectation that the Fed may tighten monetary policy again in 2000. We
think that such a move would not be detrimental to the bond market, particularly
as the U.S. Treasury continues to pay down debt and inflation remains tame.
Given the higher yields and tighter conditions that already prevail in many
sectors of the bond market, the Fed's recent actions may be enough to slow the
economy without causing higher inflation. We believe that one positive
development is that the economy's "soft landing" is likely to be at a higher
annual growth rate that was previously thought possible due to the possible
emergence of a new economy where technological advances can spur growth without
causing any inflationary pressures.
2
Investment Strategy
The Fund seeks as high a level of current income exempt from Federal income
taxes as is consistent with the preservation of principal.3
The Fund focused on transportation bonds (13.7%), hospital bonds (11.8%) and
housing bonds (9.5%). At the end of November, the Fund's weighted average
maturity was approximately 16.2 years. As of November 30, 1999, 86.3% of the
Fund's holdings were rated investment grade4 by either Standard & Poor's Ratings
Service or Moody's Investors Service Inc., with 44.2% of the Fund's holdings
invested in AAA/Aaa bonds, the highest possible rating.
The slope of the municipal yield curve has remained extremely steep,
reflecting individual investors' aversion to market risk. In our opinion, the
"extra" slope resulting from risk aversion makes longer municipals a
particularly attractive fixed-income alternative.
Our strategy going forward is three-fold:
. We are lengthening maturities in the portfolio to take advantage of
the inexpensive valuations of municipal bonds relative to U.S.
Treasuries.
. We are focusing on investing in very high grade issues.
. We are investing in discount paper for the first time since the
fall of 1998, as this is where we believe we can obtain the best
values.
Our goal in the Fund is to sell off some of our intermediate-term maturities
that were defensive and stretch out longer on the yield curve to lock in today's
higher rates. (The yield curve is the graphical depiction of the relationship
between the yield on bonds of the same credit quality but different maturities.)
- -----------
3 A portion of the income from the Fund may be subject to the Alternative
Minimum Tax ("AMT").
4 Investment-grade bonds are those rated Aaa, Aa, A and Baa by Moody's
Investors Service, Inc. or AAA, AA, A and BBB by Standard & Poor's Ratings
Service, or that have an equivalent rating by any nationally recognized
statistical rating organization, are determined by the manager to be of
equivalent quality.
3
Municipal Bond Market Outlook
The yield on the 30-year Treasury bond has stayed within a narrow 40 basis
point trading range since the beginning of June, currently trading just above
6%, while select long-term municipal bonds are yielding approximately 95%-100%
of long-term U.S. Treasury bonds. Under typical market conditions, municipal
bonds yield roughly 85% of similar-maturity U.S. Treasury bonds. We do not
expect long-term rates to move appreciably higher. Municipal bond yields have
moved up relative to U.S. Treasury yields because institutional demand has
virtually disappeared. With long-term municipal yields close to 6% and the yield
curve steep, extending maturity may be a prudent strategy.
A number of factors make us optimistic about the municipal market. Yields are
at their highest levels since early 1999, new issue supply is likely to be
modest in the period ahead and recent narrowing of spreads in the taxable market
has made alternatives less attractive.
The municipal bond market is providing some intriguing opportunities as a
result of reticent dealers and year-end tax swapping. In our opinion, investors
who have been waiting on the sidelines out of fears related to Y2K should move
some cash into these sectors now. We have also observed an increased dominance
of retail investors in the municipal bond market.
Thank you for investing in the Managed Municipals Portfolio II Inc. We look
forward to continuing to help you pursue your financial goals in the new
century.
Sincerely,
/s/ Heath B. McLendon /s/ Joseph P. Deane
Heath B. McLendon Joseph P. Deane
Chairman Vice President and
Investment Officer
December 13, 1999
4
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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, PFPC Global Fund Services
("Plan Agent"), formerly known as 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 24.
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.
To find out more detailed information about the Plan and about how you can
participate, please call PFPC Global Fund Services at (800) 331-1710.
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5
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Schedule of Investments
November 30, 1999 (unaudited)
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<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
=========================================================================================
<S> <C> <C> <C>
Alaska -- 2.5%
$ 2,895,000 A2* Alaska Industrial Development & Export
Authority Revolving Fund, Series A,
6.500% due 4/1/14 (b) $ 3,018,038
-----------------------------------------------------------------------------------------
California -- 8.3%
2,500,000 Baa3* California Educational Facilities Authority
Revenue, (Pooled College & University
Projects), Series A, 5.625% due 7/1/23 2,293,750
2,000,000 A2* California Health Facilities Cedar Sinai
Medical Center, Series A,
6.250% due 12/1/34 1,970,000
2,000,000 AAA California Statewide Communities
Development Authority, COP,
FSA-Insured, 5.500% due 8/15/31 1,870,000
2,000,000 AAA Los Angeles County, CA Metropolitan
Transportation Authority, Sales Tax
Revenue First Tier, Series A,
MBIA-Insured, 5.250% due 7/1/18 1,892,500
2,200,000 AAA Roseville, CA Water Utility Revenue, COP,
FGIC-Insured, 5.200% due 12/1/18 2,068,000
- ------------------------------------------------------------------------------------------
10,094,250
- ------------------------------------------------------------------------------------------
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 1,136,250
1,000,000 A- Aspen, CO Sales Tax Revenue,
5.400% due 11/1/19 936,250
Colorado Health Facilities Authority Revenue:
1,000,000 AA Series A, 5.000% due 12/1/28 813,750
1,000,000 A Series B, Remarketed 7/8/98,
5.350% due 8/1/15 931,250
4,000,000 BBB+ Colorado Springs, CO Airport Revenue,
Series A, 7.000% due 1/1/22 (b) 4,190,000
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 6,375,000
</TABLE>
See Notes to
Financial Statements.
6
- --------------------------------------------------------------------------------
Schedule of Investment
November 30, 1999 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
=========================================================================================
<S> <C> <C> <C>
Colorado -- 17.0% (continued)
Denver, CO City & County Airport Revenue,
Series C:
$ 3,465,000 Baa1* 6.125% due 11/15/25 (b) $ 2,962,543
2,785,000 Aaa* Partially escrowed to maturity with
U.S. government securities,
6.125% due 11/15/25 (b) 3,430,350
- -----------------------------------------------------------------------------------------
20,775,393
- -----------------------------------------------------------------------------------------
Florida -- 4.9%
1,500,000 BBB- Martin County, FL IDA, (Indiantown
Cogeneration Project), Series A,
7.875% due 12/15/25 (b) 1,550,625
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) 4,370,000
- -----------------------------------------------------------------------------------------
5,920,625
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Georgia -- 0.7%
1,000,000 A3* Private Colleges & Universities Authority
Revenue (Mercer University Project),
Series A, 5.375% due 10/1/29 896,250
- -----------------------------------------------------------------------------------------
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 1,815,000
2,000,000 AAA Hawaii State GO, Series CP, FGIC-Insured,
5.000% due 10/1/16 1,822,500
- -----------------------------------------------------------------------------------------
3,637,500
- -----------------------------------------------------------------------------------------
Illinois -- 1.5%
1,000,000 Aaa* Illinois HFA, Memorial Health System,
MBIA-Insured, 5.250% due 10/1/18 923,750
1,000,000 Aaa* Kane County, IL GO, School District No. 129,
Aurora West Side, FGIC-Insured,
5.125% due 2/1/14 940,000
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1,863,750
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Iowa -- 1.3%
1,500,000 AA- Dawson, IA IDR, (Cargill Inc. Project),
6.500% due 7/15/12 1,567,500
- -----------------------------------------------------------------------------------------
</TABLE>
See Notes to
Financial Statements.
7
- --------------------------------------------------------------------------------
Schedule of Investments
November 30, 1999 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
=========================================================================================
<S> <C> <C> <C>
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 $ 828,750
- -----------------------------------------------------------------------------------------
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 1,239,375
- -----------------------------------------------------------------------------------------
2,119,375
- -----------------------------------------------------------------------------------------
Massachusetts -- 3.9%
1,000,000 Aaa* Massachusetts State College Building Authority
Revenue, Series 1, MBIA-Insured,
5.375% due 5/1/39 901,250
1,000,000 AAA Massachusetts State Health & Educational
Facilities Authority Revenue, Northeastern
University, Series I, MBIA-Insured,
5.000% due 10/1/29 855,000
1,000,000 AAA Massachusetts State HFA, Housing Development,
Series B, MBIA-Insured, 5.300% due 12/1/17 946,250
2,000,000 AAA Massachusetts State Turnpike Authority,
Metropolitan Highway Systems Revenue,
Sub. Series A, AMBAC-Insured,
4.750% due 1/1/34 1,610,000
510,000 AAA Massachusetts State Water Resource Authority,
MBIA-Insured, Series C, 5.250% due 12/1/20 469,200
- -----------------------------------------------------------------------------------------
4,781,700
- -----------------------------------------------------------------------------------------
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) 3,720,000
</TABLE>
See Notes to
Financial Statements.
8
- --------------------------------------------------------------------------------
Schedule of Investments
November 30, 1999 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
=========================================================================================
<S> <C> <C> <C>
Michigan -- 7.8% (continued)
$ 5,600,000 NR Midland County, MI Economic Development
Corp., PCR, Limited Obligation,
Series B, 9.500% due 7/23/09 (b) $5,824,840
- -----------------------------------------------------------------------------------------
9,544,840
- -----------------------------------------------------------------------------------------
Minnesota -- 0.7%
1,000,000 AAA Minneapolis & Saint Paul, MN Community
Airport Revenue, Series A, FGIC-Insured,
5.125% due 1/1/25 893,750
- -----------------------------------------------------------------------------------------
Missouri -- 0.8%
1,000,000 AAA Fenton, MO COP, (Capital Improvements Project),
MBIA-Insured, 5.125% due 9/1/17 921,250
- -----------------------------------------------------------------------------------------
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) 1,930,000
- -----------------------------------------------------------------------------------------
Nevada -- 6.0%
4,650,000 Baa2* Clark County, NV IDR, Southwest Gas Corp.,
Series B, 7.500% due 9/1/32 (b) 4,923,188
2,500,000 AAA Las Vegas New Convention & Visitors
Authority Revenue, AMBAC-Insured,
5.750% due 7/1/18 2,434,375
- -----------------------------------------------------------------------------------------
7,357,563
- -----------------------------------------------------------------------------------------
New Mexico -- 0.9%
1,095,000 AAA New Mexico Mortgage Financing Authority,
Single-Family Mortgages, Series D-3,
5.625% due 9/1/28 1,041,618
- -----------------------------------------------------------------------------------------
New York -- 5.4%
2,000,000 A- Long Island Power Authority, Electric System
Revenue, Series A, 5.500% due 12/1/29 1,835,000
2,000,000 AAA Nassau Health Care Corp., NY Health System
Revenue, Nassau County Guaranteed,
FSA-Insured, 5.500% due 8/1/19 1,912,500
1,000,000 AA New York, NY Transitional Finance Authority
Revenue, Future Tax Secured, Series B,
4.750% due 11/1/17 868,750
1,135,000 AAA New York State Dormitory Authority Revenue:
Barnard College, AMBAC-Insured,
5.250% due 7/1/16 1,082,506
</TABLE>
See Notes to
Financial Statements.
9
Schedule of Investments
November 30, 1999 (unaudited) (continued)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
===========================================================================================
<S> <C> <C> <C>
New York -- 5.4% (continued)
$ 1,000,000 AAA City University System, Series A,
FGIC-Insured, 5.000% due 7/1/16 $ 922,500
- -------------------------------------------------------------------------------------------
6,621,256
- -------------------------------------------------------------------------------------------
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 1,597,500
- -------------------------------------------------------------------------------------------
Ohio -- 3.2%
1,000,000 AAA Cuyahoga County, OH Hospital Revenue,
AMBAC-Insured, 5.500% due 1/15/30 932,500
1,990,000 AAA Lucas County, OH Hospital Revenue,
Promedia Healthcare Obligation Group,
AMBAC-Insured, 5.375% due 11/15/29 1,825,825
1,220,000 AAA Ohio State Higher Educational Facility
Commission Revenue, University of Dayton,
AMBAC-Insured, 5.350% due 12/1/17 1,187,975
- -------------------------------------------------------------------------------------------
3,946,300
- -------------------------------------------------------------------------------------------
South Carolina -- 4.5%
500,000 AAA Lexington County, SC Health Services District,
Hospital Revenue, FSA-Insured,
5.250% due 11/1/17 468,750
2,120,000 A3* Myrtle Beach, SC COP, (Myrtle Beach
Convention Center Project),
6.875% due 7/1/07 2,281,650
3,000,000 Aaa* South Carolina Transportation Infrastructure
Bank Revenue, Series A, AMBAC-Insured,
5.250% due 10/1/21 2,763,750
- -------------------------------------------------------------------------------------------
5,514,150
- -------------------------------------------------------------------------------------------
Texas -- 11.3%
1,000,000 Aaa* Arlington, TX ISD, PSFG, 5.000% due 2/15/24 867,500
1,000,000 Aaa* Azle, TX ISD, PSFG, Series C,
5.000% due 2/15/22 875,000
2,000,000 Baa1* Brazos River Authority, TX PCR, Utility
Electric Co., Series C, 5.550% due 6/1/30 1,727,500
Burleson, TX ISD, GO, PSFG:
435,000 Aaa* 6.750% due 8/1/24 464,906
1,065,000 Aaa* Pre-Refunded-- Escrowed with
U.S. government securities to 8/1/06,
Call @ 100, 6.750% due 8/1/24 1,180,819
</TABLE>
See Notes to
Financial Statements.
10
Schedule of Investments
November 30, 1999 (unaudited) (continued)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
===========================================================================================
<S> <C> <C> <C>
Texas -- 11.3% (continued)
$ 2,000,000 Baa1* Dallas-Fort Worth Texas International Airport
Facilities Revenue, American Airlines,
6.375% due 5/1/35 (b) $ 1,932,500
1,000,000 AA Harris County, TX Health Facilities Development
Corp., Hospital Revenue, (Texas Childrens
Hospital Project), Series A, 5.250% due 10/1/19 895,000
2,000,000 AAA Lower Colorado River Authority of Texas
Revenue, Series A, AMBAC-Insured,
5.500% due 5/15/19 1,902,500
1,830,000 AA Texas State GO, Water Development, Series D,
5.000% due 8/1/16 1,679,025
1,000,000 AAA Texas Water Development Board Revenue,
State Revolving Fund, Sr. Lien, Series B,
5.000% due 7/15/19 887,500
1,520,000 AAA West Texas Municipal Power Agency Revenue,
MBIA-Insured, 5.000% due 2/15/16 1,383,200
- -------------------------------------------------------------------------------------------
13,795,450
- -------------------------------------------------------------------------------------------
Virgin Islands -- 0.7%
1,000,000 BBB- Virgin Islands Public Finance Authority Revenue,
Sr. Lien, Series A, 5.500% due 10/1/22 882,500
- -------------------------------------------------------------------------------------------
Virginia -- 6.8%
2,000,000 AAA Riverside, VA Regional Jail Facility Revenue,
MBIA-Insured, 6.000% due 7/1/25 2,035,000
Virginia State Housing Development Authority:
Commonwealth Mortgage Revenue:
1,000,000 AAA Series D, Sub. Series D-2, Remarketed 1/4/96,
MBIA-Insured, 5.600% due 7/1/12 1,003,750
1,245,000 AA+ Series D, Sub. Series D-3, Remarketed
5/30/96, 5.700% due 7/1/09 1,259,006
2,970,000 AA+ Series F, Sub. Series F-1, Remarketed
9/12/95, 6.400% due 7/1/17 3,055,388
925,000 AA+ Multi-Family Housing Revenue, Series K,
5.900% due 11/1/11 941,188
- -------------------------------------------------------------------------------------------
8,294,332
- -------------------------------------------------------------------------------------------
Wisconsin -- 3.5%
Wisconsin Housing & Economic Development
Authority, Series A:
2,000,000 Aa* Home Ownership Revenue,
6.450% due 3/1/17 2,047,500
1,370,000 AA- Housing Revenue, 5.650% due 11/1/23 1,298,075
</TABLE>
See Notes to
Financial Statements.
11
Schedule of Investments
November 30, 1999 (unaudited) (continued)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
=============================================================================================
<S> <C> <C> <C>
Wisconsin -- 3.5% (continued)
$ 1,000,000 AAA Wisconsin State Health & Educational Facilities
Authority Revenue, (Medical College of Wisconsin
Project), MBIA-Insured, 5.400% due 12/1/16 $ 958,750
- ---------------------------------------------------------------------------------------------
4,304,325
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-- 100%
(Cost-- $126,446,431**) $122,147,965
=============================================================================================
</TABLE>
(a) All ratings are by Standard & Poor's Ratings Service, except those
identified by an asterisk (*) 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) 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 is 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 of
descriptions.
Summary of Investments by Combined Ratings
November 30, 1999 (unaudited)
Percent of
Moody's and/or Standard & Poor's Total Investment
Aaa AAA 44.2%
Aa AA 11.8
A A 13.5
Baa BBB 16.8
NR NR 13.7
-----
100.0%
=====
See Notes to
Financial Statements.
12
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
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)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ABAG -- Association of Bay Area HFA -- Housing Finance Authority
Governments IDA -- Industrial Development
AIG -- American International Guaranty Authority
AMBAC -- AMBAC Indemnity Corporation IDB -- Industrial Development Board
BAN -- Bond Anticipation Notes IDR -- Industrial Development Revenue
BIG -- Bond Investors Guaranty IFA -- Industrial Finance Agency
CGIC -- Capital Guaranty Insurance INFLOS -- Inverse Floaters
Company ISD -- Independent School District
CHFCLI -- California Health Facility LOC -- Letter of Credit
Construction Loan Insurance MBIA -- Municipal Bond Investors
COP -- Certificate of Participation Assurance Corporation
EDA -- Economic Development MVRICS -- Municipal Variable Rate Inverse
Authority Coupon Security
FAIRS -- Floating Adjustable Interest PCR -- Pollution Control Revenue
Rate Securities PSFG -- Permanent School Fund
FGIC -- Financial Guaranty Insurance Guaranty
Company RAN -- Revenue Anticipation Notes
FHA -- Federal Housing Administration RIBS -- Residual Interest Bonds
FHLMC -- Federal Home Loan Mortgage RITES -- Residual Interest Tax-Exempt
Corporation Securities
FNMA -- Federal National Mortgage SYCC -- Structured Yield Curve
Association Certificate
FRTC -- Floating Rate Trust TAN -- Tax Anticipation Notes
Certificates TECP -- Tax Exempt Commercial Paper
FSA -- Financial Security Assurance TOB -- Tender Option Bonds
GIC -- Guaranteed Investment Contract TRAN -- Tax and Revenue Anticipation
GNMA -- Government National Mortgage Notes
Association VA -- Veterans Administration
GO -- General Obligation VRDD -- Variable Rate Daily Demand
HDC -- Housing Development VRWE -- Variable Rate Wednesday
Corporation Demand
</TABLE>
14
Statement of Assets and Liabilities
(unaudited)
November 30, 1999
================================================================================
ASSETS:
Investments, at value (Cost-- $126,446,431) $ 122,147,965
Interest receivable 2,157,358
- --------------------------------------------------------------------------------
Total Assets 124,305,323
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 2,447,151
Payable to bank 219,408
Dividends payable 190,392
Investment advisory fees payable 77,804
Administration fees payable 21,901
Accrued expenses 70,152
- --------------------------------------------------------------------------------
Total Liabilities 3,026,808
- --------------------------------------------------------------------------------
Total Net Assets $ 121,278,515
================================================================================
NET ASSETS:
Par value of capital shares $ 11,235
Capital paid in excess of par value 134,234,852
Treasury stock, at cost (Note 7) (2,595,668)
Overdistributed net investment income (26,247)
Accumulated net realized loss from security transactions (6,047,191)
Net unrealized depreciation of investments (4,298,466)
- --------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $11.06 a share on 11,234,706 shares of $0.001
par value outstanding; 500,000,000 shares authorized) $ 121,278,515
================================================================================
See Notes to
Financial Statements.
15
Statement of Operations
(unaudited)
Three Months Ended
November 30, 1999
================================================================================
INVESTMENT INCOME:
Interest $ 1,886,025
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3) 215,925
Administration fees (Note 3) 61,693
Shareholder communications 28,665
Audit and legal 13,465
Shareholder and system servicing fees 10,465
Pricing service fees 4,855
Registration fees 2,275
Directors' fees 1,958
Custody 1,542
Other 2,126
- --------------------------------------------------------------------------------
Total Expenses 342,969
- --------------------------------------------------------------------------------
Net Investment Income 1,543,056
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 4):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 12,507,174
Cost of securities sold 13,019,084
- --------------------------------------------------------------------------------
Net Realized Loss (511,910)
- --------------------------------------------------------------------------------
Change in Net Unrealized Depreciation of Investments:
Beginning of period (1,922,405)
End of period (4,298,466)
- --------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (2,376,061)
- --------------------------------------------------------------------------------
Net Loss on Investments (2,887,971)
- --------------------------------------------------------------------------------
Decrease in Net Assets From Operations $ (1,344,915)
================================================================================
See Notes to
Financial Statements.
16
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Three Months Ended
November 30, 1999 Year Ended
(unaudited) August 31, 1999
=====================================================================================
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,543,056 $ 6,292,028
Net realized loss (511,910) (4,551,659)
Increase in net unrealized depreciation (2,376,061) (7,010,676)
- -------------------------------------------------------------------------------------
Decrease in Net Assets From Operations (1,344,915) (5,270,307)
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,663,171) (6,088,436)
Net realized gains -- (1,988,543)
- -------------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (1,663,171) (8,076,979)
- -------------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Treasury stock acquired (2,327,106) (268,562)
- -------------------------------------------------------------------------------------
Decrease in Net Assets From
Fund Share Transactions (2,327,106) (268,562)
- -------------------------------------------------------------------------------------
Decrease in Net Assets (5,335,192) (13,615,848)
NET ASSETS:
Beginning of period 126,613,707 140,229,555
- -------------------------------------------------------------------------------------
End of period* $ 121,278,515 $ 126,613,707
=====================================================================================
* Includes undistributed (overdistributed)
net investment income of: $ (26,247) $ 93,868
=====================================================================================
</TABLE>
See Notes to
Financial Statements.
17
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, 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
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
SSB Citi Fund Management LLC ("SSBC"), a subsidiary of Salomon Smith Barney
Holdings Inc. ("SSBH"), which, in turn, is a subsidiary of Citigroup Inc., 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.
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.
All officers and one Director of the Fund are employees of Salomon Smith
Barney Inc., another subsidiary of SSBH.
4. Investments
For the three months ended November 30, 1999, the aggregate cost of
purchases and proceeds from sales of investments (including maturities, but
excluding short-term securities) were as follows:
================================================================================
Purchases $12,996,085
- --------------------------------------------------------------------------------
Sales 12,507,174
================================================================================
At November 30, 1999, aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 3,077,211
Gross unrealized depreciation (7,375,677)
- --------------------------------------------------------------------------------
Net unrealized depreciation $(4,298,466)
================================================================================
19
Notes to Financial Statements
(unaudited) (continued)
5. Futures Contracts
Initial margin deposits made upon entering into futures contracts are
recognized as assets. Securities equal to the initial margin amount are
segregated by the custodian in the name of the broker. Additional securities are
also segregated up to the current market value of the futures contracts. During
the period the futures contract is open, changes in the value of the contract
are recognized as unrealized gains or losses by "marking-to-market" on a daily
basis to reflect the market value of the contract at the end of each day's
trading. Variation margin payments are made or received and recognized as assets
due from or liabilities due to broker, depending upon whether unrealized gains
or losses are incurred. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the proceeds from (or cost of) the
closing transactions and the Fund's basis in the contract.
The Fund enters into such contracts to hedge a portion of its portfolio.
The Fund bears the market risk that arises from changes in the value of the
financial instruments and securities indices (futures contracts).
At November 30, 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 November 30, 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
November 30, 1999, repurchased shares totaled 268,400.
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
Financial Highlights
For a share of capital stock outstanding throughout each year ended August 31,
except where noted:
<TABLE>
<CAPTION>
1999(1) 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $11.30 $ 12.48 $ 12.15 $ 11.98 $ 12.36 $ 12.15
- --------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Operations:
Net investment income(2) 0.14 0.56 0.55 0.63 0.66 0.69
Net realized and
unrealized gain (loss) (0.23) (1.02) 0.53 0.48 (0.21) 0.32
- --------------------------------------------------------------------------------------------------------------------------
Total Income (Loss)
From Operations (0.09) (0.46) 1.08 1.11 0.45 1.01
- --------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.15) (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 (0.15) (0.72) (0.75) (0.94) (0.83) (0.80)
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $11.06 $ 11.30 $ 12.48 $ 12.15 $ 11.98 $ 12.36
- --------------------------------------------------------------------------------------------------------------------------
Total Return, Based on
Market Value(3) (7.88)%++ (0.59)% (1.31)% 7.75% 7.35% 8.86%
- --------------------------------------------------------------------------------------------------------------------------
Total Return, Based on
Net Asset Value(3) (0.57)%++ (3.29)% 9.57% 9.86% 4.01% 9.20%
- --------------------------------------------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $ 121 $ 127 $ 140 $ 137 $ 134 $ 139
- --------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 1.11%+ 1.03% 1.10% 1.10% 1.09% 1.14%
Net investment income 5.00+ 4.62 4.46 5.23 5.31 5.80
- --------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 10% 27% 66% 97% 63% 95%
- --------------------------------------------------------------------------------------------------------------------------
Market Value, End of Period $9.125 $10.063 $10.813 $11.688 $11.750 $11.625
==========================================================================================================================
</TABLE>
(1) For the three months ended November 30, 1999 (unaudited).
(2) The investment adviser and administrator waived a portion 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.
(3) 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.
21
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,
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)
November 30,
1999 1,886,025 0.17 1,543,056 0.14 (2,887,971) (0.23) (1,344,915) (0.09)
=================================================================================================================================
</TABLE>
22
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
================================================================================
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
9/21/99 9/24/99 9.625 11.22 0.050 9.69
10/26/99 10/29/99 9.438 10.88 0.050 9.56
11/22/99 11/26/99 9.563 11.08 0.050 9.26
================================================================================
+ As of record date.
* Capital gain distribution.
23
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 PFPCGlobal Fund Services
("PFPC"), formerly known as First Data Investor Services Group Inc., 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 PFPC 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, PFPC 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 PFPC has completed its purchases,
the market price exceeds the net asset value of the common stock as of the
valuation time, PFPC 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 PFPC is unable to stop
open market purchases and cause the Fund to issue the remaining shares, the
average per share purchase price paid by PFPC 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. PFPC will begin to
purchase common stock on
24
Dividend Reinvestment Plan
(unaudited) (continued)
the open market as soon as practicable after the determination date 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.
PFPC 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 PFPC 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. PFPC'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 PFPC, 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 PFPC Global Fund Services, P.O. Box 8030, Boston,
Massachusetts 02266-8030 or by telephone at 1-800-331-1710.
________________________________
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase
shares of its common stock in the open market.
25
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 PFPC Global Fund Services
P.O. Box 8030
Charles F. Barber, Emeritus Boston, Massachusetts 02266-8030
Officers Custodian
Heath B. McLendon PNC Bank, N.A.
President and 17th and Chestnut Streets
Chief Executive Officer 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
26
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[This page intentionally left blank]
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 1/00
