<PAGE>
Managed Municipals
Portfolio II Inc.
Semi-Annual Report
February 29, 2000
[GRAPHIC]
<PAGE>
[LOGO OF MANAGED MUNICIPALS PORTFOLIO II INC.]
Dear Shareholder:
We are pleased to provide the semi-annual report for the Managed Municipals
Portfolio II Inc. ("Portfolio") for the period ended February 29, 2000. Over the
six months covered by this report, the Portfolio distributed income dividends
totaling $0.30 per share. The table below shows the annualized distribution rate
and six-month total return based on the Portfolio's February 29, 2000 net asset
value ("NAV") per share and its New York Stock Exchange ("NYSE") closing price.1
Price Annualized Six-Month
Per Share Distribution Rate2 Total Return
--------- ------------------ ------------
$10.92 (NAV) 5.49% (0.25)%
$9.50 (NYSE) 6.31% (2.55)%
In comparison, general closed-end municipal bond funds posted an average
total return based on NAV of negative 0.58% for the same time period, as
reported by Lipper, Inc. (Lipper, Inc. is a nationally recognized
- ----------
1 The NAV is calculated by taking the closing value of all securities held by
the Portfolio (plus cash) from total liabilities and dividing the result
(total net assets) by the total number of shares outstanding. The NAV
fluctuates with the changes in the market price of the securities in which the
Portfolio had invested. However, the price at which the investors buys or
sells shares of the Portfolio is at market (NYSE) price as determined by
supply and demand.
2 Total returns are based on changes in net asset value ("NAV") and the market
value, respectively. Total returns assume the reinvestment of all dividends
and/or capital gains distributions in additional shares. Annualized
distribution rate is the Portfolio's current monthly income dividend rate,
annualized, and then divided by the NAV or the market value noted in this
report. The annualized distribution rate assumes a current monthly income
dividend rate of $0.050 for twelve months. This rate is as of March 30, 2000
and is subject to change. The important difference between a total return and
an annualized distribution rate is that the total return takes into
consideration a number of factors including the fluctuation of the NAV or the
market value during the period reported. The NAV fluctuation includes the
effects of unrealized appreciation or depreciation in the Portfolio.
Accordingly, since an annualized distribution rate only reflects the current
monthly income dividend rate annualized, it should not be used as the sole
indicator to judge the return you receive from your Portfolio investment. Past
performance is not indicative of future results.
1
<PAGE>
organization that reports on mutual fund total return performance and
calculates fund rankings. Peer averages are based on universes of funds with
similar investment objectives. Lipper peer group averages include reinvested
dividends and capital gains, if any, and exclude sales charges.)
Special Shareholder Notice
We are pleased to report that we have continued our effort of reducing the
Portfolio's shares' discount to NAV. This program, which commenced on July 27,
1999, is believed to be an opportunity to take advantage of market price
fluctuations with the objective of offering long-term value to the Portfolio's
shareholders. The Portfolio intends to continue to purchase shares of its stock
in the open market at such times, prices and amounts deemed advisable and
subsequently retire them.
This repurchase program has added liquidity to the market for the benefit
of investors who wish to sell their shares, while also seeking to benefit
current shareholders by increasing the Portfolio's shares' NAV. Since the
inception of the program, the Portfolio has repurchased and retired 765,500
shares with an average buyback price of $9.42. As of February 29, 2000, this
repurchase program has increased the Portfolio's shares' NAV by over $0.1130 per
share and accounted for approximately 1.00% of the Portfolio's shares' total
return when measured by NAV.
Municipal Bond Market Update
In our view, bond yields are high enough to adequately reflect the risk of
slightly higher inflation. The period covered by this report was marked by
continued robust U.S. economic growth, historically low inflation and low
unemployment.
On February 2, 2000, the Federal Reserve Board ("Fed") raised interest
rates for a fourth time in less than eight months, seeking to help reduce
inflationary pressures and slow down the nation's rapidly growing economy.3
Perhaps more significant than the Fed's recent policy decisions was its
accompanying statement that rapid growth could foster inflationary imbalances
that might undermine the economy's record economic expansion. We believe that
this vigilance may hint at a slightly more aggressive approach by the Fed in the
months ahead. However, 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.
- ----------
3 On Tuesday, March 21, 2000 after this letter was written, the Fed raised
interest rates 0.25%.
2
<PAGE>
Also, we think performance in the bond market during the period has been a
direct result of Fed decisions. While presumably aimed at the bull market in
stocks, the bond market has been negatively impacted on fears of further Fed
rate increases. We believe the current lack of inflationary data defies a
historically tight labor market and shows the incredible influence of technology
and the power of global pricing constraints.
The bond market had a tough time in 1999. Tax-loss selling and asset
allocation shifts out of municipal securities precipitated massive outflows in
the fourth quarter, prompting bond funds to sell their municipal bond holdings.
This drove yields even higher and sent the net asset values of many funds lower,
accelerating outflows and leaving bond dealers reluctant to hold municipal
securities. Additionally, the bond market has suffered in recent months from
uncertainty over the outlook for future Fed monetary policy, given the rise of
the stock market and the higher consumer demand at the end of 1999. Also, we
have noted that supply in the new-issue market is down substantially from last
year.
These factors, in addition to the considerable momentum going into 2000,
may mean that there is less financial restraint in the economy than previously
believed. The pace of demand is surpassing even the rosiest assessments of the
economy's speed limit, threatening to bring inflation back and underscoring the
need for Fed vigilance and restraint.
Under "normal" market conditions, municipal investors pay for the tax- free
income benefits by getting a lower return. Today, however, investors are saving
on taxes without sacrificing returns. It is possible to buy double- and
triple-A-rated bonds yielding nearly 100% or more of similar maturity U.S.
Treasury bonds, well above the historical average of roughly 80%. We think these
yields represent extraordinarily good value for municipal securities.
Investment Strategy
The Portfolio seeks as high a level of current income exempt from federal
income taxes as is consistent with the preservation of principal.4
The Portfolio focused on transportation bonds (15.1%), hospital bonds
(10.7%) and education bonds (8.9%). At the end of February, the Portfolio's
weighted average maturity was approximately 21.0 years. As of February 29, 2000,
approximately 84.1% of the Portfolio's holdings
- ----------
4 A portion of the income from the Portfolio may be subject to the Alternative
Minimum Tax ("AMT").
3
<PAGE>
were rated investment grade5 by either Standard & Poor's Ratings Group
or Moody's Investors Service, Inc., with about 43.2% of the Portfolio
invested in AAA/Aaa bonds, the highest possible rating.
While no guarantees can be made, our belief that municipal securities are
undervalued has led us to rebalance the Portfolio to capitalize on what we
believe will be a future bullish trend. In general, this means buying bonds
carrying maturities of 20 years or longer, with solid credit ratings and trading
below fair market value in price. We are targeting, among others, general
obligation bonds and high-grade revenue credits such as water, sewer and
toll-road bonds.
Our investment strategy for the Portfolio has been 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 gone up to
higher levels, 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
Portfolio.
The Portfolio's investment strategy going forward will be 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 high-grade issues
. We are investing in discount paper as this is where we believe we
can obtain the best value
Our aim 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.) We see
the best opportunity for reward potential right now at the long end of the
curve.
Municipal Bond Market Outlook
We think the U.S. economy should remain stable this year, as low
unemployment and strong consumer confidence will likely support demand
- ----------
5 Investment-grade bonds are those rated Aaa, Aa, A and Baa by Moody's Investors
Service Inc. or AAA, AA, A and BBB by Standard & Poor's Ratings Group, or that
have an equivalent rating by any nationally recognized statistical rating
organization or are determined by the manager to be of equivalent quality.
4
<PAGE>
for goods. Moreover, we think that the Fed has engineered a good balance between
strong economic growth and an "acceptable" rate of inflation.
Regarding further Fed monetary policy tightenings, we think that such
future actions would not be detrimental to the bond market, particularly as the
U.S. Treasury continues to pay down debt and inflation appears to be under
control. We believe that any further Fed policy actions have already been
comfortably priced into the bond market. We also believe that the good news is
that the economy's "soft landing" is likely to be at a higher annual growth rate
than was previously thought possible due to the possible emergence of a "New
Economy," where technological advances can spur economic growth without
inflationary pressures because of higher productivity.
In our judgment, a number of influences remain favorable for the municipal
bond market. The new issue market is expected to decline this year, boosting
demand for bonds currently outstanding and enhancing interest for the roughly
$175 billion of new municipals expected in 2000. Fiscal trends are another major
positive. During past economic downturns, some municipal issuers facing
declining tax receipts were hard-pressed to repay their bond obligations. Today,
many state and local governments have budget surpluses. We believe these
surpluses indicate that investors will feel more comfortable holding municipals,
even in a downturn. Lastly, recent narrowing of spreads in the taxable market
has made alternatives less attractive. All of these trends help to explain why
we remain optimistic about the long-term prospects for the municipal bond
market.
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
March 16, 2000
5
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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 25.
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.
6
<PAGE>
Schedule of Investments
February 29, 2000 (unaudited)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
==========================================================================================
<S> <C> <C> <C>
Alaska -- 2.6%
$ 2,895,000 A2* Alaska Industrial Development & Export
Authority Revolving Fund, Series A,
6.500% due 4/1/14 (b) $ 3,003,563
- ------------------------------------------------------------------------------------------
Alabama -- 1.0%
1,270,000 AAA Jefferson County, AL Sewer Revenue, Capital
Improvements, FGIC-Insured, Series A,
5.375% due 2/1/36 (b) 1,117,600
- ------------------------------------------------------------------------------------------
California -- 3.6%
2,500,000 Baa3* California Educational Facilities Authority
Revenue, (Pooled College & University
Projects), Series A, 5.625% due 7/1/23 2,165,625
2,000,000 A2* California Health Facilities Cedar Sinai Medical
Center, Series A, 6.250% due 12/1/34 1,937,500
- ------------------------------------------------------------------------------------------
4,103,125
- ------------------------------------------------------------------------------------------
Colorado -- 17.9%
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 1,116,250
1,000,000 A- Aspen, CO Sales Tax Revenue,
5.400% due 11/1/19 928,750
Colorado Health Facilities Authority Revenue:
1,000,000 AA Series A, 5.000% due 12/1/28 786,250
1,000,000 A Series B, Remarketed 7/8/98,
5.350% due 8/1/15 871,250
4,000,000 BBB+ Colorado Springs, CO Airport Revenue,
Series A, 7.000% due 1/1/22 (b) 4,075,000
30,000,000 Aaa* Dawson Ridge, CO Metropolitan District No. 1,
Series A, (Escrowed to maturity with
REFCO Strips), zero coupon bond to
yield 5.213% due 10/1/22 6,375,000
Denver, CO City & County Airport Revenue,
Series C:
3,465,000 Baa1* 6.125% due 11/15/25 (b) 3,244,106
2,785,000 Aaa* Partially Escrowed to maturity with
U.S. government securities,
6.125% due 11/15/25 (b) 2,830,256
- ------------------------------------------------------------------------------------------
20,226,862
- ------------------------------------------------------------------------------------------
</TABLE>
See Notes to
Financial Statements.
7
<PAGE>
Schedule of Investments
February 29, 2000 (unaudited) (continued)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
==========================================================================================
<S> <C> <C> <C>
Florida -- 5.1%
$ 1,500,000 BBB- Martin County, FL IDA, (Indiantown
Cogeneration Project), Series A,
7.875% due 12/15/25 (b) $1,500,000
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) 4,315,000
- ------------------------------------------------------------------------------------------
5,815,000
- ------------------------------------------------------------------------------------------
Georgia -- 3.5%
2,500,000 AAA Atlanta, GA Water & Wastewater Revenue,
Series A, FGIC Insured, 5.000% due 11/1/38 2,062,500
1,000,000 A3* Private Colleges & Universities Authority
Revenue (Mercer University Project),
Series A, 5.375% due 10/1/29 861,250
1,000,000 BBB Savannah, GA EDA Revenue, (College of
Art & Design Inc. Project), Series A,
6.900% due 10/1/29 996,250
- ------------------------------------------------------------------------------------------
3,920,000
- ------------------------------------------------------------------------------------------
Hawaii -- 3.1%
2,000,000 A Hawaii State Department of Budget & Finance,
Special Purpose Revenue, Kaiser Permanente,
Series A, 5.100% due 3/1/14 1,712,500
2,000,000 AAA Hawaii State GO, Series CP, FGIC-Insured,
5.000% due 10/1/16 1,815,000
- ------------------------------------------------------------------------------------------
3,527,500
- ------------------------------------------------------------------------------------------
Illinois -- 1.6%
1,000,000 Aaa* Illinois HFA, Memorial Health System,
MBIA-Insured, 5.250% due 10/1/18 906,250
1,000,000 Aaa* Kane County, IL GO, School District No. 129,
Aurora West Side, FGIC-Insured,
5.125% due 2/1/14 926,250
- ------------------------------------------------------------------------------------------
1,832,500
- ------------------------------------------------------------------------------------------
Iowa -- 1.4%
1,500,000 AA- Dawson, IA IDR, (Cargill Inc. Project),
6.500% due 7/15/12 1,548,750
- ------------------------------------------------------------------------------------------
</TABLE>
See Notes to
Financial Statements.
8
<PAGE>
Schedule of Investments
February 29, 2000 (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 $ 822,500
- ------------------------------------------------------------------------------------------
Maryland -- 1.4%
4,000,000 NR Maryland State Energy Financing
Administration, Solid Waste Disposal
Revenue, (Hagerstown Recycling Project),
9.000% due 10/15/16 (b)(d) 360,000
1,500,000 A Maryland State Health & Higher Educational
Facilities Authority Revenue, Loyola College
Issue, 5.000% due 10/1/39 1,218,750
- ------------------------------------------------------------------------------------------
1,578,750
- ------------------------------------------------------------------------------------------
Massachusetts -- 4.2%
1,000,000 Aaa* Massachusetts State College Building
Authority Revenue, Series 1, MBIA-Insured,
5.375% due 5/1/39 882,500
1,000,000 AAA Massachusetts State Health & Educational
Facilities Authority Revenue, Northeastern
University, Series I, MBIA-Insured,
5.000% due 10/1/29 837,500
1,000,000 AAA Massachusetts State HFA, Housing Development,
Series B, MBIA-Insured, 5.300% due 12/1/17 932,500
2,000,000 AAA Massachusetts State Turnpike Authority,
Metropolitan Highway System Revenue, Sub.
Series A, AMBAC-Insured, 4.750% due 1/1/34 1,582,500
510,000 AAA Massachusetts State Water Resource Authority,
MBIA-Insured, Series C, 5.250% due 12/1/20 460,913
- ------------------------------------------------------------------------------------------
4,695,913
- ------------------------------------------------------------------------------------------
Michigan -- 8.3%
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) 3,580,000
5,600,000 NR Midland County, MI Economic Development
Corp., PCR, Limited Obligation, Series B,
9.500% due 7/23/09 (b) 5,768,336
- ------------------------------------------------------------------------------------------
9,348,336
- ------------------------------------------------------------------------------------------
</TABLE>
See Notes to
Financial Statements.
9
<PAGE>
Schedule of Investments
February 29, 2000 (unaudited) (continued)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
==========================================================================================
Minnesota -- 0.8%
<S> <C> <C> <C>
$ 1,000,000 AAA Minneapolis & Saint Paul, MN Community
Airport Revenue, Series A, FGIC-Insured,
5.125% due 1/1/25 $ 877,500
- ------------------------------------------------------------------------------------------
Missouri -- 2.7%
1,000,000 AAA Fenton, MO COP, (Capital Improvements
Project), MBIA-Insured, 5.125% due 9/1/17 911,250
2,500,000 AAA Kansas City, MO Municipal Assistance Corp.,
Leasehold Revenue, H. Roe Bartle Convention
Center, Series A, MBIA-Insured,
5.000% due 4/15/20 2,175,000
- ------------------------------------------------------------------------------------------
3,086,250
- ------------------------------------------------------------------------------------------
Montana -- 1.7%
2,000,000 NR Montana State Board of Investment Resource
Recovery Revenue, (Yellowstone Energy L.P.
Project), 7.000% due 12/31/19 (b) 1,875,000
- ------------------------------------------------------------------------------------------
Nevada -- 4.3%
4,650,000 Baa2* Clark County, NV IDR, Southwest Gas Corp.,
Series B, 7.500% due 9/1/32 (b) 4,853,438
- ------------------------------------------------------------------------------------------
New Jersey -- 1.2%
1,500,000 AAA Middlesex County, NJ COP, MBIA-Insured,
5.000% due 2/15/19 1,310,625
- ------------------------------------------------------------------------------------------
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 1,025,194
- ------------------------------------------------------------------------------------------
New York -- 7.2%
1,000,000 AAA City University System, Series A, FGIC-Insured,
5.000% due 7/1/16 905,000
2,000,000 A- Long Island Power Authority, Electric System
Revenue, Series A, 5.500% due 12/1/29 1,780,000
2,000,000 AAA Nassau Health Care Corp., NY Health System
Revenue, Nassau County Guaranteed,
FSA-Insured, Series A, 5.500% due 8/1/19 1,870,000
1,000,000 AA New York, NY Transitional Finance Authority
Revenue, Future Tax Secured, Series B,
4.750% due 11/1/17 858,750
</TABLE>
See Notes to
Financial Statements.
10
<PAGE>
Schedule of Investments
February 29, 2000 (unaudited) (continued)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
=========================================================================================
<C> <C> <S> <C>
New York -- 7.2% (continued)
$ 3,000,000 AAA New York State Thruway Authority,
Highway & Bridge Transportation Fund,
FGIC Insured, Series A, 5.000% due 4/1/18 $2,666,250
- -----------------------------------------------------------------------------------------
8,080,000
- -----------------------------------------------------------------------------------------
North Carolina -- 1.4%
1,500,000 A3* Coastal Regional Solid Waste Management
Disposal Authority, Solid Waste Disposal
Revenue, 6.500% due 6/1/08 1,580,625
- -----------------------------------------------------------------------------------------
Ohio -- 3.4%
1,000,000 AAA Cuyahoga County, OH Hospital Revenue,
AMBAC-Insured, 5.500% due 1/15/30 915,000
1,990,000 AAA Lucas County, OH Hospital Revenue, Promedia
Healthcare Obligation Group, AMBAC
Insured, 5.375% due 11/15/29 1,776,075
1,220,000 AAA Ohio State Higher Educational Facility
Commission Revenue, University of Dayton,
AMBAC-Insured, 5.350% due 12/1/17 1,177,300
- -----------------------------------------------------------------------------------------
3,868,375
- -----------------------------------------------------------------------------------------
South Carolina -- 4.8%
500,000 AAA Lexington County, SC Health Services District,
Hospital Revenue, FSA-Insured, 5.250%
due 11/1/17 461,250
2,120,000 A3* Myrtle Beach, SC COP, (Myrtle Beach
Convention Center Project),
6.875% due 7/1/07 2,252,500
3,000,000 Aaa* South Carolina Transportation Infrastructure
Bank Revenue, Series A, AMBAC-Insured,
5.250% due 10/1/21 2,696,250
- -----------------------------------------------------------------------------------------
5,410,000
- -----------------------------------------------------------------------------------------
Texas -- 8.5%
1,000,000 Aaa* Azle, TX ISD, PSFG, Series C,
5.000% due 2/15/22 858,750
2,000,000 Baa1* Brazos River Authority, PCR, Utility Electric
Co., Series C, 5.550% due 6/1/30 1,667,500
435,000 Aaa* Burleson, TX ISD, GO, PSFG,
6.750% due 8/1/24 460,012
2,000,000 Baa1* Dallas-Fort Worth Texas International Airport
Facilities Revenue, American Airlines,
6.375% due 5/1/35 (b) 1,867,500
</TABLE>
See Notes to
Financial Statements.
11
<PAGE>
Schedule of Investments
February 29, 2000 (unaudited) (continued)
<TABLE>
<CAPTION>
Face
Amount Rating(a) Security Value
=========================================================================================
<C> <C> <S> <C>
Texas -- 8.5% (continued)
$ 1,000,000 AA Harris County, TX Health Facilities
Development Corp., Hospital Revenue,
(Texas Childrens Hospital Project),
5.250% due 10/1/19 $ 870,000
1,830,000 AA Texas State GO, Water Development, Series D,
5.000% due 8/1/16 1,653,862
1,000,000 AAA Texas Water Development Board Revenue,
State Revolving Fund, Sr. Lien, Series B,
5.000% due 7/15/19 876,250
1,520,000 AAA West Texas Municipal Power Agency Revenue,
MBIA-Insured, 5.000% due 2/15/16 1,371,800
- -----------------------------------------------------------------------------------------
9,625,674
- -----------------------------------------------------------------------------------------
Virgin Islands -- 0.8%
1,000,000 BBB- Virgin Islands Public Finance Authority Revenue,
Sr. Lien, Series A, 5.500% due 10/1/22 862,500
- -----------------------------------------------------------------------------------------
Virginia -- 4.1%
Virginia State Housing Development Authority:
Commonwealth Mortgage Revenue:
1,245,000 AA+ Series D, Sub. Series D-3, Remarketed
5/30/96, 5.700% due 7/1/09 1,252,781
2,350,000 AA+ Series F, Sub. Series F-1, Remarketed
9/12/95, 6.400% due 7/1/17 2,402,875
925,000 AA+ Multi-Family Housing Revenue, Series K,
5.900% due 11/1/11 933,094
- -----------------------------------------------------------------------------------------
4,588,750
- -----------------------------------------------------------------------------------------
Wisconsin -- 3.8%
Wisconsin Housing EDA, Series A:
2,000,000 Aa* Home Ownership Revenue,
6.450% due 3/1/17 2,040,000
1,370,000 AA- Housing Revenue, 5.650% due 11/1/23 1,291,225
1,000,000 AAA Wisconsin State Health & Educational
Facilities Authority Revenue, (Medical
College of Wisconsin Project), MBIA-Insured,
5.400% due 12/1/16 950,000
- -----------------------------------------------------------------------------------------
4,281,225
- -----------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100%
(Cost-- $119,855,604**) $112,865,555
=========================================================================================
</TABLE>
See Notes to
Financial Statements.
12
<PAGE>
Schedule of Investments
February 29, 2000 (unaudited) (continued)
(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 14 and 15 for definitions of ratings and certain security
descriptions.
Summary of Investments by Combined Ratings
February 29, 2000 (unaudited)
Percent of
Moody's and/or Standard & Poor's Total Investments
Aaa AAA 43.2%
Aa AA 15.1
A A 8.8
Baa BBB 17.0
NR NR 15.9
------
100.0%
======
See Notes to
Financial Statements.
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.
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
15
<PAGE>
Statement of Assets and Liabilities
(unaudited)
February 29, 2000
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost-- $119,855,604) $ 112,865,555
Interest receivable 2,003,378
Receivable for securities sold 40,427
- --------------------------------------------------------------------------------
Total Assets 114,909,360
- --------------------------------------------------------------------------------
LIABILITIES:
Payable to bank 405,925
Dividends payable 168,863
Investment advisory fees payable 17,161
Administration fees payable 403
Accrued expenses 39,709
- --------------------------------------------------------------------------------
Total Liabilities 632,061
- --------------------------------------------------------------------------------
Total Net Assets $ 114,277,299
================================================================================
NET ASSETS:
Par value of capital shares $ 10,469
Capital paid in excess of par value 134,235,618
Treasury stock, at cost (Note 7) (7,229,437)
Undistributed net investment income 585,538
Accumulated net realized loss from security transactions (6,334,840)
Net unrealized depreciation of investments (6,990,049)
- --------------------------------------------------------------------------------
Total Net Assets
(Equivalent to $10.92 a share on 10,469,206 shares of $0.001
par value outstanding; 500,000,000 shares authorized) $ 114,277,299
================================================================================
See Notes to
Financial Statements.
16
<PAGE>
Statement of Operations
(unaudited)
Six Months Ended
February 29, 2000
================================================================================
INVESTMENT INCOME:
Interest $ 4,344,974
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 3) 418,439
Administration fees (Note 3) 119,554
Shareholder communications 57,330
Audit and legal 26,925
Directors' fees 20,930
Shareholder and system servicing fees 9,712
Pricing service fees 4,550
Registration fees 3,917
Custody 2,989
Other 4,254
- --------------------------------------------------------------------------------
Total Expenses 668,600
Less: Investment advisory and administration fee waivers (Note 3) (67,033)
- --------------------------------------------------------------------------------
Net Expenses 601,567
- --------------------------------------------------------------------------------
Net Investment Income 3,743,407
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 4):
Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales 30,699,397
Cost of securities sold 31,498,956
- --------------------------------------------------------------------------------
Net Realized Loss (799,559)
- --------------------------------------------------------------------------------
Change in Net Unrealized Depreciation of Investments:
Beginning of period (1,922,405)
End of period (6,990,049)
- --------------------------------------------------------------------------------
Increase in Net Unrealized Depreciation (5,067,644)
- --------------------------------------------------------------------------------
Net Loss on Investments (5,867,203)
- --------------------------------------------------------------------------------
Decrease in Net Assets From Operations $ (2,123,796)
================================================================================
See Notes to
Financial Statements.
17
<PAGE>
Statements of Changes in Net Assets
Six Months Ended
February 29, 2000 Year Ended
(unaudited) August 31, 1999
================================================================================
OPERATIONS:
Net investment income $ 3,743,407 $ 6,292,028
Net realized loss (799,559) (4,551,659)
Increase in net unrealized depreciation (5,067,644) (7,010,676)
- --------------------------------------------------------------------------------
Decrease in Net Assets From Operations (2,123,796) (5,270,307)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
Net investment income (3,251,737) (6,088,436)
Net realized gain -- (1,988,543)
- --------------------------------------------------------------------------------
Decrease in Net Assets From
Distributions to Shareholders (3,251,737) (8,076,979)
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS (NOTE 7):
Treasury stock acquired (6,960,875) (268,562)
- --------------------------------------------------------------------------------
Decrease in Net Assets (12,336,408) (13,615,848)
NET ASSETS:
Beginning of period 126,613,707 140,229,555
- --------------------------------------------------------------------------------
End of period* $ 114,277,299 $ 126,613,707
================================================================================
* Includes undistributed
net investment income of: $ 585,538 $ 93,868
================================================================================
See Notes to
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, 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.
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
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. For the six months ended February 29,
2000, SSBC waived $52,137 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 six months ended February 29,
2000, SSBC waived $14,896 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 six months ended February 29, 2000, the aggregate cost of purchases
and proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
================================================================================
Purchases $24,785,359
- --------------------------------------------------------------------------------
Sales 30,699,397
================================================================================
At February 29, 2000, aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
================================================================================
Gross unrealized appreciation $ 2,100,290
- --------------------------------------------------------------------------------
Gross unrealized depreciation (9,090,339)
- --------------------------------------------------------------------------------
Net unrealized depreciation $(6,990,049)
================================================================================
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 February 29, 2000, 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 February 29, 2000, 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
February 29, 2000, repurchased shares totaled 765,500.
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.
21
<PAGE>
Financial Highlights
For a share of capital stock outstanding throughout each year ended August 31,
except where noted:
<TABLE>
<CAPTION>
2000(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) 0.35 0.56 0.55 0.63 0.66 0.69
Net realized and
unrealized gain (loss) (0.54) (1.02) 0.53 0.48 (0.21) 0.32
- -----------------------------------------------------------------------------------------
Total Income (Loss)
From Operations (0.19) (0.46) 1.08 1.11 0.45 1.01
- -----------------------------------------------------------------------------------------
Gains from Repurchase
of Treasury Stock 0.11 -- -- -- -- --
- -----------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.30) (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 (0.30) (0.72) (0.75) (0.94) (0.83) (0.80)
- -----------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.92 $11.30 $12.48 $12.15 $11.98 $12.36
- -----------------------------------------------------------------------------------------
Total Return, Based on
Market Value(3) (2.55)%++ (0.59)% (1.31)% 7.75% 7.35% 8.86%
- -----------------------------------------------------------------------------------------
Total Return, Based on
Net Asset Value(3) (0.25)%++ (3.29)% 9.57% 9.86% 4.01% 9.20%
- -----------------------------------------------------------------------------------------
Net Assets,
End of Period (millions) $114 $127 $140 $137 $134 $139
- -----------------------------------------------------------------------------------------
Ratios to Average Net Assets:
Expenses(2) 1.01%+ 1.03% 1.10% 1.10% 1.09% 1.14%
Net investment income 6.28+ 4.62 4.46 5.23 5.31 5.80
- -----------------------------------------------------------------------------------------
Portfolio Turnover Rate 21% 27% 66% 97% 63% 95%
- -----------------------------------------------------------------------------------------
Market Value, End of Period $9.500 $10.063 $10.813 $11.688 $11.750 $11.625
=========================================================================================
</TABLE>
(1) For the six months ended February 29, 2000 (unaudited).
(2) The investment adviser and administrator waived a portion of their fees for
the period ended February 29, 2000 and the year ended August 31, 1999. If
such fees were not waived, the per share decreases in net investment income
and the annualized ratios of expenses to average net assets would have been
as follows:
Per share decreases in Expense ratios
net investment income without fee waivers
---------------------- -------------------
2000 $0.01 1.12%+
1999 0.01 1.09
(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.
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,
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) (0.26) (1,344,915) (0.12)
February 29,
2000 2,458,949 0.23 2,200,351 0.21 (2,979,232) (0.28) (778,881) 0.07)
========================================================================================================
</TABLE>
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
==============================================================================
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
12/27/99 12/30/99 9.063 10.91 0.050 9.07
1/25/00 1/28/00 9.438 10.79 0.050 9.52
2/22/00 2/25/00 9.438 10.86 0.050 9.49
==============================================================================
+ As of record date.
* Capital gain distribution.
24
<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 PFPC Global 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
25
<PAGE>
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.
26
<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
SSB Citi Fund Management LLC
388 Greenwich Street
New York, New York 10013
Transfer Agent
PFPC Global Fund Services
P.O. Box 8030
Boston, Massachusetts 02266-8030
Custodian
PNC Bank
8800 Tinicom Blvd.
Philadelphia, Pennsylvania 19153
27
<PAGE>
(This page intentionally left blank.)
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.
