<PAGE> 1
MUNICIPAL PARTNERS FUND INC.
November 21, 1995
To Our Shareholders:
We are pleased to supply this quarterly report to shareholders of Municipal
Partners Fund Inc. for the period ending September 30, 1995. Fixed-income
securities achieved favorable returns for the third quarter sparked by a 25
basis point reduction in the federal funds rate by the Federal Reserve at the
beginning of July. While expectations of further cuts by the Fed never
materialized, mixed economic signals kept investor hopes alive and resulted in
higher bond prices for the quarter. Municipal bonds achieved positive returns
during the three-month period, supported by continued buying from property and
casualty insurance companies and the reemergence of the individual investor.
The Fund participated in this year's rally as evidenced by its net asset value
(NAV) return of 3.49% for the third quarter and 21.60% return for the nine
months ended September 30, 1995 (assuming the reinvestment of monthly dividends
in additional shares of the Fund). The Fund had a closing NAV and market price
per share of $13.40 and $11.25, respectively. The Fund paid a regular monthly
common stock dividend of $0.065 per share during the quarter.
The tax-exempt market rally began with an influx of cash from July 1 redemptions
and coupon payments. Investors used those funds to take advantage of the most
attractive municipal yields versus Treasuries in almost a year. The market's
momentum was sustained in August as renewed interest in municipals by individual
investors, previously deterred by the higher returns in the stock market and
concerns over flat tax, propelled the short and intermediate area of the yield
curve. September's strong early gains eroded by month-end due to signs of an
economic rebound. Added weight was placed on the market by political rhetoric
suggesting that the U.S. government would default on its debt unless both the
President and Congress agreed on a balanced budget plan by mid-November. (U.S.
Treasury Secretary Rubin arranged financing so that the government did not
default). These factors led investors and traders to sell municipals and lock in
quarter-end profits.
As we approach year-end, concern about tax reform is likely to keep long
maturity municipal bonds undervalued relative to Treasuries. Municipal bond new
issue supply for the first nine months of 1995 was 18% below the similar period
last year. Although an increase in the new issue supply is expected during the
fourth quarter, we expect demand to keep pace with supply.
At September 30, 1995, the Fund's portfolio consisted of 39 issues in 22
different states with an average maturity of 16.8 years and an average coupon of
6.55%. Sector weightings emphasize housing, healthcare and industrial
development bonds.
You may have read in the press that Bayerische Vereinsbank AG has been having
conversations with Oppenheimer Group, Inc., which could lead to the acquisition
of that entity by this major German financial institution. Oppenheimer Group,
Inc. is the parent of Advantage Advisers, Inc., the Fund's investment manager.
Advantage Advisers believes that, in the event of such an acquisition, Advantage
Advisers, Inc. will only be enhanced by the addition of the global resources
added by this large institution.
<PAGE> 2
MUNICIPAL PARTNERS FUND INC.
Finally, we thank you for your support and confidence. We invite you to call
with any questions or comments at 1-800-725-6666 or (212) 783-1301. In addition,
a recorded periodic update that reviews the municipal debt market and contains
specific information regarding the Fund and its portfolio, including top ten
holdings and portfolio diversification, is available by calling 1-800-421-4777.
Cordially,
/s/ MARK C. BIDERMAN /s/ MICHAEL S. HYLAND
- -------------------- ---------------------
Mark C. Biderman Michael S. Hyland
Chairman of the Board President
<PAGE> 3
MUNICIPAL PARTNERS FUND INC.
- -----------------------------------
STATEMENT OF INVESTMENTS
September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT MOODY'S/S&P VALUE
(000) LONG-TERM INVESTMENTS -- 149.0% CREDIT RATING (NOTE 2)
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
ALABAMA -- 9.7%
Courtland, Alabama Industrial Development Board Solid Waste
Disposal Revenue (Champion International Corporation
$ 1,225 Project), Series A, 7.00%, 11/01/22........................ Baa1/BBB $ 1,272,395
Courtland, Alabama Industrial Development Board Solid Waste
Disposal Revenue (Champion International Corporation
6,395 Project), Series A, 6.375%, 3/01/29........................ Baa1/BBB 6,226,620
------------
7,499,015
------------
ALASKA -- 1.1%
Valdez, Alaska Marine Terminal Revenue Refunding (BP
900 Pipelines Inc. Project), 5.65%, 12/01/28................... A1/AA- 835,353
------------
COLORADO -- 7.7%
Colorado Health Facilities Authority Hospital Revenue (P/SL
3,555 Healthcare System Project), Series A, 6.875%, 2/15/23...... Baa1/BBB+ 3,978,329
Colorado Health Facilities Authority Hospital Revenue
(Rocky Mountain Adventist Healthcare Project), 6.625%,
2,000 2/01/22.................................................... Baa/BBB 1,939,280
------------
5,917,609
------------
GEORGIA -- 7.2%
Savannah, Georgia Hospital Authority Revenue Refunding &
5,500 Improvement (Candler Hospital), 7.00%, 1/01/23............. Baa/BBB+ 5,558,795
------------
ILLINOIS -- 7.6%
Illinois State Sales Tax Revenue, Series V, 6.375%,
3,000 6/15/20.................................................... A1/AAA 3,061,650
Regional Transportation Authority of Illinois, Series A,
2,900 FGIC, 5.85%, 6/01/23....................................... Aaa/AAA 2,833,648
------------
5,895,298
------------
MAINE -- 3.5%
Maine State Housing Authority Mortgage Purchase, Series
525 A-4, 6.375%, 11/15/12...................................... A1/AA- 529,394
Maine State Housing Authority Mortgage Purchase, Series
2,110 A-2, 6.65%, 11/15/25....................................... A1/AA- 2,135,299
------------
2,664,693
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 1
<PAGE> 4
MUNICIPAL PARTNERS FUND INC.
- -----------------------------------
STATEMENT OF INVESTMENTS (continued)
September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT MOODY'S/S&P VALUE
(000) LONG-TERM INVESTMENTS (CONTINUED) CREDIT RATING (NOTE 2)
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MARYLAND -- 6.6%
Maryland State Community Development Administration,
Department of Housing and Community Development
$ 1,300 (Multi-Family Housing), Series E, 6.85%, 5/15/25........... Aa/NR $ 1,342,432
Northeast Maryland Waste Disposal Authority, Solid Waste
Revenue (Montgomery County Resource Recovery Project),
3,750 Series A, 6.30%, 7/01/16................................... A/NR 3,776,625
------------
5,119,057
------------
MINNESOTA -- 4.6%
Minnesota State Housing Finance Agency Single-Family
3,550 Mortgage, Series H, 6.50%, 1/01/26......................... Aa/AA+ 3,578,933
------------
NEBRASKA -- 7.9%
Nebraska Higher Education Loan Program Inc., Revenue,
6,000 Sub-Series A-6, 6.45%, 6/01/18............................. A/NR 6,114,360
------------
NEVADA -- 13.3%
Clark County, Nevada Passenger Facility Revenue (Macarran
4,850 International Airport), MBIA, 5.75%, 7/01/23............... Aaa/AAA 4,562,056
Nevada Housing Division, Single-Family Program, Series B-2,
4,410 6.40%, 10/01/25............................................ Aa/NR 4,369,252
Nevada Housing Division, Single-Family Program, Series B-2,
1,300 6.95%, 10/01/26............................................ Aa/NR 1,347,021
------------
10,278,329
------------
NEW HAMPSHIRE -- 1.0%
New Hampshire State Housing Finance Authority,
710 Single-Family Residential, Series A, 6.80%, 7/01/15........ Aa/A+ 733,828
------------
NEW JERSEY -- 13.1%
New Jersey Economic Development Authority, Pollution
Control Revenue (Public Service Electric and Gas Co.
5,150 Project), MBIA, 6.40%, 5/01/32............................. Aaa/AAA 5,354,352
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 2
<PAGE> 5
MUNICIPAL PARTNERS FUND INC.
- -----------------------------------
STATEMENT OF INVESTMENTS (continued)
September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT MOODY'S/S&P VALUE
(000) LONG-TERM INVESTMENTS (CONTINUED) CREDIT RATING (NOTE 2)
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
NEW JERSEY -- 13.1% (CONTINUED)
New Jersey Economic Development Authority, Water Facilities
Revenue (New Jersey American Water Co. Project), FGIC,
$ 4,450 6.875%, 11/01/34........................................... Aaa/AAA $ 4,731,996
------------
10,086,348
------------
NEW YORK -- 7.9%
New York State Energy Research & Development Authority
Facilities Revenue (Con Edison Company of New York, Inc.
3,200 Project), 6.00%, 3/15/28................................... A1/A+ 3,154,848
Port Authority of New York & New Jersey Construction,
950 Ninety-Sixth Series, FGIC, 6.60%, 10/01/23................. Aaa/AAA 998,840
The City of New York, General Obligation Bonds, Series D,
2,000 6.00%, 8/01/11............................................. Baa1/BBB+ 1,948,020
------------
6,101,708
------------
OHIO -- 2.2%
Ohio State Water Development Authority Solid Waste Disposal
Revenue (North Star BHP Steel-Cargill Inc.), 6.30%,
1,700 9/1/20..................................................... Aa3/AA- 1,701,292
------------
PENNSYLVANIA -- 14.9%
Monroeville Hospital Authority Hospital Revenue (Forbes
6,095 Health System), 7.00%, 10/01/13............................ Baa1/BBB+ 6,175,942
Philadelphia, Pennsylvania Hospitals & Higher Education
Facilities Authority Hospital Revenue (Graduate Health
4,250 System Obligated Group), Series A & B, 7.25%, 7/01/18...... Baa1/BBB+ 4,419,362
Philadelphia, Pennsylvania Hospitals & Higher Education
Facilities Authority Revenue (Graduate Health System
1,000 Obligated Group), Series B, 6.25%, 7/01/18................. Baa1/BBB+ 925,780
------------
11,521,084
------------
RHODE ISLAND -- 6.8%
Rhode Island Housing & Mortgage Finance Corporation,
2,100 Homeownership Opportunity, Series 5, 6.40%, 4/01/24........ Aa/AA+ 2,067,513
Rhode Island Housing & Mortgage Finance Corporation,
3,115 Homeownership Opportunity, Series 7B, 6.80%, 10/01/25...... Aa/AA+ 3,174,901
------------
5,242,414
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 3
<PAGE> 6
MUNICIPAL PARTNERS FUND INC.
- -----------------------------------
STATEMENT OF INVESTMENTS (continued)
September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT MOODY'S/S&P VALUE
(000) LONG-TERM INVESTMENTS (CONTINUED) CREDIT RATING (NOTE 2)
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
SOUTH DAKOTA -- 6.5%
South Dakota Housing Development Authority, Homeowner
$ 4,955 Mortgage, Series D, 6.85%, 5/01/26......................... Aa1/AA+ $ 5,062,672
------------
TENNESSEE -- 4.6%
The Industrial Development Board of Humphreys County,
Tennessee (E.I. duPont de Nemours and Company Project),
3,400 6.70%, 5/01/24............................................. Aa3/AA- 3,527,602
------------
TEXAS -- 15.6%
Lower Neches Valley Authority, Texas Industrial Development
Corporation (Mobil Oil Refining Corporate Project),
6,000 6.40%, 3/01/30............................................. Aa2/AA 6,067,380
Richardson, Texas Hospital Authority Hospital Revenue
Refunding and Improvement (Richardson Medical Center),
3,000 6.75%, 12/01/23............................................ Baa/BBB- 2,882,940
365 Texas State Veterans Housing Assistance, 6.80%, 12/01/23... Aa/AA 373,829
West Side Calhoun County, Texas Navigation District Solid
Waste Disposal Revenue (Union Carbide Chemicals),
2,750 6.40%, 5/01/23............................................. Baa2/BBB 2,687,135
------------
12,011,284
------------
VIRGINIA -- 1.2%
Virginia State Housing Development Authority, Commonwealth
955 Mortgage, Subseries B-5, 6.30%, 1/01/27.................... Aa1/AA+ 933,207
------------
WASHINGTON -- 2.6%
Public Utility District No. 1 of Snohomish County,
Washington Generation System Revenue, Series B, 5.80%,
600 1/01/24.................................................... A1/A+ 567,354
Washington State Housing Finance Commission, Single-Family
1,460 Mortgage Revenue Refunding, 6.15%, 1/01/26................. NR/AAA 1,403,717
------------
1,971,071
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 4
<PAGE> 7
MUNICIPAL PARTNERS FUND INC.
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (concluded)
September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT MOODY'S/S&P VALUE
(000) LONG-TERM INVESTMENTS (CONCLUDED) CREDIT RATING (NOTE 2)
------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
WEST VIRGINIA -- 3.4%
West Virginia State Water Development Authority, Loan
$ 2,445 Program II, Series A, 7.00%, 11/01/31...................... NR/BBB+ $ 2,544,120
------------
TOTAL LONG-TERM INVESTMENTS (cost $113,929,942)............ 114,898,072
------------
OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.9%.............. 2,244,218
------------
TOTAL NET ASSETS -- 151.9%................................. 117,142,290
------------
Par value of 800 shares of preferred stock at $50,000 per
share (Note 5) -- (51.9%).................................. (40,000,000)
------------
NET ASSETS APPLICABLE TO COMMON STOCK -- 100%
(equivalent to $13.40 per share on 5,757,094 common shares
outstanding)............................................... $ 77,142,290
------------
</TABLE>
- --------------------------------------------------------------------------------
The following abbreviations are used in portfolio descriptions:
FGIC -- Insured as to principal and interest by the Financial Guaranty
Insurance Company.
MBIA -- Insured as to principal and interest by the Municipal Bond Investors
Assurance Corporation.
NR -- Not rated by Moody's or S&P as indicated.
See accompanying notes to financial statements.
PAGE 5
<PAGE> 8
MUNICIPAL PARTNERS FUND INC.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995 (unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost -- $113,929,942)................................................. $114,898,072
Cash......................................................................................... 31,572
Interest receivable.......................................................................... 2,338,703
Unamortized organization expenses (Note 2)................................................... 32,966
Prepaid expenses............................................................................. 20,143
------------
Total assets......................................................................... 117,321,456
------------
LIABILITIES
Accrued management fee (Note 3).............................................................. 57,740
Accrued audit and tax return preparation fees................................................ 47,879
Accrued legal fee............................................................................ 18,352
Other accrued expenses....................................................................... 55,195
------------
Total liabilities.................................................................... 179,166
------------
NET ASSETS
Preferred Stock (Note 5)..................................................................... 40,000,000
Common Stock ($.001 par value, authorized 100,000,000; 5,757,094 shares outstanding)......... 5,757
Additional paid-in capital................................................................... 79,673,514
Undistributed net investment income.......................................................... 99,025
Accumulated realized loss on investments..................................................... (3,604,136)
Net unrealized appreciation on investments................................................... 968,130
------------
Net assets........................................................................... $117,142,290
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 6
<PAGE> 9
MUNICIPAL PARTNERS FUND INC.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Nine Months ended September 30, 1995 (unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
INCOME
Interest (includes net premium amortization of $31,702)................................ $ 5,570,335
OPERATING EXPENSES
Management fee (Note 3)..................................................... $512,312
Auction agent fee........................................................... 75,830
Audit and tax services...................................................... 56,839
Legal....................................................................... 29,918
Shareholder annual meeting.................................................. 23,186
Printing.................................................................... 20,221
Directors' fees and expenses (Note 3)....................................... 20,194
Custodian................................................................... 19,831
Transfer agent.............................................................. 15,951
Amortization of deferred organization expenses (Note 2)..................... 12,400
Listing fee................................................................. 12,094
Other....................................................................... 30,215
--------
Total operating expenses....................................................... 828,991
-----------
Net investment income...................................................................... 4,741,344
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net Realized Loss on Investments........................................................... (1,140,321)
Change in Net Unrealized Appreciation (Depreciation) on Investments........................ 11,799,488
-----------
Net realized loss and change in net unrealized appreciation (depreciation) on
investments............................................................................... 10,659,167
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS................................................. $15,400,511
-----------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 7
<PAGE> 10
MUNICIPAL PARTNERS FUND INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE NINE FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1995 DECEMBER 31,
(UNAUDITED) 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income........................................... $ 4,741,344 $ 6,335,477
Net realized loss on investments................................ (1,140,321) (1,839,397)
Change in net unrealized appreciation (depreciation) on investments .. 11,799,488 (15,695,582)
------------ ------------
Net increase (decrease) in net assets from operations........... 15,400,511 (11,199,502)
DIVIDENDS
To common shareholders from net investment income............... (3,471,528 (5,106,537)
To preferred shareholders from net investment income............ (1,256,002) (1,227,600)
------------ ------------
(4,727,530) (6,334,137)
CAPITAL SHARE TRANSACTIONS
Additional offering expenses (Note 1)........................... -- (6,419)
------------ ------------
-- (6,419)
------------ ------------
Total increase (decrease) in net assets......................... 10,672,981 (17,540,058)
NET ASSETS
Beginning of period............................................. 106,469,309 124,009,367
------------ ------------
End of period (includes undistributed net investment income of
$99,025 and $85,211, respectively)............................ $117,142,290 $106,469,309
------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 8
<PAGE> 11
MUNICIPAL PARTNERS FUND INC.
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 1995 (unaudited)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Proceeds from sales of portfolio investments............................................. $ 23,601,087
Purchases of portfolio securities........................................................ (23,847,816)
Net sales of short-term investments...................................................... 400,000
------------
153,271
Net investment income.................................................................... 4,741,344
Amortization of net premium on investments............................................... 31,702
Amortization of organization expenses.................................................... 12,400
Net change in receivables/payables related to operations................................. (197,886)
------------
Net cash provided by operating activities............................................ 4,740,831
------------
CASH FLOWS USED BY FINANCING ACTIVITIES:
Common stock dividends paid.............................................................. (3,471,528)
Preferred stock dividends paid........................................................... (1,256,002)
------------
Net cash used by financing activities................................................ (4,727,530)
------------
Net increase in cash......................................................................... 13,301
Cash at beginning of period.................................................................. 18,271
------------
CASH AT END OF PERIOD........................................................................ $ 31,572
------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 9
<PAGE> 12
MUNICIPAL PARTNERS FUND INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(unaudited)
NOTE 1. ORGANIZATION AND COMMON STOCK OFFERING
Municipal Partners Fund Inc. (the "Fund") was incorporated in Maryland on
November 24, 1992 and is registered as a diversified, closed-end, management
investment company under the Investment Company Act of 1940, as amended. The
Board of Directors authorized 100 million shares of $.001 par value common
stock. The Fund may classify or reclassify any unissued shares of common stock
into one or more series of preferred stock (See Note 5).
The Fund had no transactions until January 15, 1993 when it sold 7,094 shares of
its common stock to Oppenheimer & Co., Inc. ("Oppenheimer") and Salomon Brothers
Asset Management Inc (the "Investment Adviser") for an aggregate purchase price
of $100,025. The Fund sold 5,750,000 shares of common stock in its initial
public offering and received proceeds of $80,620,751 after deducting offering
expenditures and underwriting commissions. Offering expenditures amounted to
$454,249 and have been charged to additional paid-in capital. Underwriting
commissions paid to underwriters, including Salomon Brothers Inc ("SBI") and
Oppenheimer, amounted to $5,175,000.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
SECURITIES VALUATION. Tax-exempt securities are valued by independent pricing
services which use prices provided by market-makers or estimates of market
values obtained from yield data relating to instruments or securities with
similar characteristics. Short-term investments having a maturity of 60 days or
less are valued at amortized cost which approximates market value. Securities
for which reliable quotations are not readily available are valued at fair value
as determined in good faith by, or under procedures established by, the Board of
Directors.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
recorded on the trade date. Realized gains and losses on sales of securities are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis. The Fund amortizes premiums and accretes discounts on securities
purchased using the effective interest method.
FEDERAL INCOME TAXES. The Fund has complied and intends to continue to comply
with the requirements of the Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies, and to distribute all of its
income and capital gains, if any, to its shareholders. Therefore, no federal
income tax or excise tax provision is required.
PAGE 10
<PAGE> 13
MUNICIPAL PARTNERS FUND INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)
DIVIDENDS AND DISTRIBUTIONS. The Fund declares and pays dividends and
distributions to common shareholders monthly from net investment income, net
realized short-term capital gains and other sources, if necessary. Long-term
capital gains, if any, in excess of loss carryovers are expected to be
distributed annually. Dividends and distributions to common shareholders are
recorded on the ex-dividend date. Dividends and distributions to preferred
shareholders are accrued on a weekly basis and are determined as described in
Note 5. The amount of dividends and distributions from net investment income and
net realized gains are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles.
UNAMORTIZED ORGANIZATION EXPENSES. Organization expenses amounting to $89,271
were incurred in connection with the organization of the Fund. These costs have
been deferred and are being amortized ratably over a five-year period from
commencement of operations.
FUTURES CONTRACTS. The Fund's investment program includes the use of futures
contracts for hedging purposes. On futures contracts, the Fund may receive or
pay variation margin, which will be recorded as unrealized gain or loss until
the contract is closed. At such time, realized gain or loss may be recognized.
Such contracts involve elements of market risk in excess of amounts reported in
the financial statements. There were no open futures contracts as of September
30, 1995.
CASH FLOW INFORMATION. The Fund invests in securities and distributes
dividends from net investment income and net realized gains from investment
transactions. These activities are reported in the Statement of Changes in Net
Assets. Additional information on cash receipts and cash payments is presented
in the Statement of Cash Flows. Accounting practices that do not affect
reporting activities on a cash basis include carrying investments at value and
amortizing premium or accreting discount on debt obligations.
NOTE 3. MANAGEMENT AND ADVISORY FEES AND OTHER TRANSACTIONS
The Fund entered into a management agreement with Advantage Advisers, Inc. (the
"Investment Manager"), a subsidiary of Oppenheimer, pursuant to which the
Investment Manager, among other things, supervises the Fund's investment program
and monitors the performance of the Fund's service providers.
The Investment Manager and the fund entered into an investment advisory and
administration agreement with the Investment Adviser, an affiliate of SBI,
pursuant to which the Investment Adviser provides investment advisory and
administrative services to the Fund. The Investment Adviser is responsible for
the management of the Fund's portfolio in accordance with the Fund's investment
objectives and policies and for making decisions to buy, sell, or hold
particular securities and is responsible for day-to-day administration of the
Fund.
PAGE 11
<PAGE> 14
MUNICIPAL PARTNERS FUND INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)
The Fund pays the Investment Manager a monthly fee at an annual rate of .60% of
the Fund's average weekly net assets for its services, and the Investment
Manager pays the Investment Adviser a monthly fee at an annual rate of .36% of
the Fund's average weekly net assets for its services. For purposes of
calculating the fees, the liquidation value of any outstanding preferred stock
of the Fund is not deducted in determining the Fund's average weekly net assets.
Certain officers and/or directors of the Fund are also officers and/or directors
of the Investment Manager or the Investment Adviser.
The Fund pays each Director not affiliated with the Investment Manager or the
Investment Adviser a fee of $5,000 per year, a fee of $700 for attendance at
each board and audit committee meeting, $700 for participation in each
telephonic meeting and reimbursement for travel and out-of-pocket expenses for
each board and committee meeting attended.
NOTE 4. PORTFOLIO ACTIVITY
Purchases and sales of investment securities, other than short-term investments,
for the nine months ended September 30, 1995, aggregated $23,847,816 and
$23,601,087, respectively. At December 31, 1994, the Fund had a net capital loss
carryover of approximately $2,456,137 of which $525,751 will be available
through December 31, 2001 and $1,930,386 will be available through December 31,
2002 to offset future capital gains to the extent provided by federal income tax
regulations.
The federal income tax cost basis of the Fund's investments at September 30,
1995 was substantially the same as the cost basis for financial reporting. Gross
unrealized appreciation and depreciation amounted to $2,046,522 and $1,078,392,
respectively, resulting in net unrealized appreciation for federal income tax
purposes of $968,130.
NOTE 5. PREFERRED STOCK
On April 2, 1993, the Fund closed its public offering of 800 shares of $.001 par
value Auction Rate Preferred Stock ("Preferred Shares") at an offering price of
$50,000 per share. This resulted in a $38,958,495 increase in the Fund's net
assets after deducting offering costs and underwriting commissions. Offering
costs amounted to $341,505 and underwriting commissions paid to SBI and
Oppenheimer amounted to $700,000. The offering costs and underwriting
commissions incurred in connection with the Preferred Shares offering have been
charged to additional paid-in capital.
PAGE 12
<PAGE> 15
MUNICIPAL PARTNERS FUND INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
(unaudited)
The Preferred Shares have a liquidation preference of $50,000 per share plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared) and, subject to certain restrictions, are redeemable in whole or in
part.
Dividend rates generally reset every 28 days and are determined by auction
procedures. The dividend rates on the Preferred Shares during the nine months
ended September 30, 1995 ranged from 3.749% to 4.399%. The weighted average
dividend rate for the nine months ended September 30, 1995 was 4.141%. The Board
of Directors designated the dividend period commencing July 25, 1995 as a
Special Rate Period. Pursuant to this Special Rate Period, the dividend rate set
by the auction held on July 24, 1995 remained in effect through October 23,
1995. The dividend rate for this Special Rate Period was 3.875%. The Board of
Directors designated the dividend period commencing October 24, 1995 as a
Special Rate Period. Pursuant to this Special Rate Period, the dividend rate set
by the auction held on October 23, 1995 remains in effect through January 22,
1996 when the regular auction procedure resumes, subject to the Fund's ability
to designate any subsequent dividend period as a Special Rate Period. The
dividend rate for this Special Rate Period is 3.93%.
The Fund is subject to certain restrictions relating to the Preferred Shares.
The Fund may not declare dividends or make other distributions on shares of
common stock or purchase any such shares if, at the time of the declaration,
distribution or purchase, asset coverage with respect to the outstanding
Preferred Shares would be less than 200%. The Preferred Shares are also subject
to mandatory redemption at $50,000 per share plus any accumulated or unpaid
dividends, whether or not declared, if certain requirements relating to the
composition of the assets and liabilities of the Fund as set forth in its
Articles Supplementary are not satisfied.
The Preferred Shares, which are entitled to one vote per share, generally vote
with the common shares but vote separately as a class to elect two directors and
on certain matters affecting the rights of the Preferred Shares.
NOTE 6. COMMON STOCK DIVIDENDS SUBSEQUENT TO SEPTEMBER 30, 1995
On October 2 and November 1, 1995, the Board of Directors of the Fund declared a
common share dividend from net investment income, each in the amount of $.065
per share, payable on October 31 and November 30, 1995 to shareholders of record
on October 12 and November 13, 1995, respectively.
PAGE 13
<PAGE> 16
MUNICIPAL PARTNERS FUND INC.
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT THE PERIOD:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED PERIOD ENDED
1995 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1994 1993(A)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income...................................... $ .82 $ 1.10 $ .87
Net realized gain (loss) on securities and change in net
unrealized appreciation (depreciation)................... 1.85 (3.04) .73
------------- ----------- ------------
Total from investment operations....................... 2.67 (1.94) 1.60
Dividends to common shareholders from net investment
income................................................... (.60) (.89) (.71)
Dividends to preferred shareholders from net investment
income................................................... (.22) (.21) (.14)
Offering costs on issuance of common and preferred
shares................................................... -- -- (.26)
------------- ----------- ------------
Net increase (decrease) in net asset value............. 1.85 (3.04) .49
Net asset value, beginning of period....................... 11.55 14.59 14.10
------------- ----------- ------------
Net asset value, end of period............................. $13.40 $11.55 $14.59
------------- ----------- ------------
Per share market value, end of period...................... $11.25 $9.875 $13.75
Total investment return based on market price per
share(c)................................................. 20.10% (22.57%) 2.31%(b)
Ratios to average net assets of common shareholders(d):
Operating expenses..................................... 1.50%(e) 1.49% 1.30%(e)
Net investment income before preferred stock
dividends............................................ 8.57%(e) 8.67% 6.57%(e)
Preferred stock dividends.............................. 2.27%(e) 1.68% 1.31%(e)
Net investment income available to common
shareholders......................................... 6.30%(e) 6.99% 5.26%(e)
Net assets of common shareholders, end of period....... $77,142,290 $66,469,309 $ 84,009,367
Preferred stock outstanding, end of period............. $40,000,000 $40,000,000 $ 40,000,000
Portfolio turnover rate................................ 21% 17% 100%
</TABLE>
- --------------------------------------------------------------------------------
(a) For the period from commencement of investment operations on January 29,
1993 through December 31, 1993.
(b) Return calculated based on beginning of period price of $14.10 (initial
offering price of $15.00 less underwriting discount of $.90) and end of
period market value of $13.75 per share.
(c) Dividends are assumed, for purposes of this calculation, to be reinvested at
prices obtained under the Fund's dividend reinvestment plan. This
calculation is not annualized.
(d) Ratios calculated on the basis of income, expenses and preferred stock
dividends applicable to both common and preferred stock relative to the
average net assets of common shares.
(e) Annualized.
PAGE 14
<PAGE> 17
MUNICIPAL PARTNERS FUND INC.
- --------------------------------------------------------------------------------
SELECTED QUARTERLY FINANCIAL INFORMATION (unaudited)
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS:
<TABLE>
<CAPTION>
NET REALIZED GAIN
(LOSS) & CHANGE IN
NET UNREALIZED
NET INVESTMENT APPRECIATION
INCOME (DEPRECIATION)
-------------------- ---------------------
QUARTER ENDED* TOTAL PER SHARE TOTAL PER SHARE
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 31, 1993**............................................ $ 319 $ .06 $ (582) $ (.10)
June 30, 1993............................................... 1,509 .26 3,231 .56
September 30, 1993.......................................... 1,595 .28 2,624 .46
December 31, 1993........................................... 1,570 .27 (1,033) (.19)
March 31, 1994.............................................. 1,580 .27 (10,193) (1.77)
June 30, 1994............................................... 1,566 .27 (1,138) (.19)
September 30, 1994.......................................... 1,599 .28 (1,985) (.35)
December 31, 1994........................................... 1,590 .28 (4,219) (.73)
March 31, 1995.............................................. 1,585 .27 7,580 1.32
June 30, 1995............................................... 1,584 .28 1,601 .28
September 30, 1995.......................................... 1,572 .27 1,478 .25
</TABLE>
- --------------------------------------------------------------------------------
* Totals expressed in thousands of dollars except per share amounts.
** For the period from commencement of investment operations on January 29, 1993
through March 31, 1993.
See accompanying notes to financial statements.
PAGE 15
<PAGE> 18
MUNICIPAL PARTNERS FUND INC.
- -----------
DIRECTORS
CHARLES F. BARBER
Consultant; formerly Chairman,
ASARCO Incorporated
MARK C. BIDERMAN
Chairman of the Board; Managing Director,
Oppenheimer & Co., Inc.
Executive Vice President,
Advantage Advisers, Inc.
ALLAN C. HAMILTON
Consultant, formerly
Vice President and
Treasurer, Exxon Corp.
MICHAEL S. HYLAND
President; Managing Director,
Salomon Brothers Inc
President, Salomon Brothers
Asset Management Inc
ROBERT L. ROSEN
General Partner
R.L.R. Partners
- ---------
OFFICERS
MICHAEL S. HYLAND
President
MARYBETH WHYTE
Executive Vice President
ALAN M. MANDEL
Treasurer
LAURIE A. PITTI
Assistant Treasurer
TANA E. TSELEPIS
Secretary
ROBERT I. KLEINBERG
Assistant Secretary
- ---------------------------------------
MUNICIPAL PARTNERS FUND INC.
7 World Trade Center
New York, New York 10048
Telephone 1-800-SALOMON
INVESTMENT ADVISER
Salomon Brothers Asset Management Inc
7 World Trade Center
New York, New York 10048
INVESTMENT MANAGER
Advantage Advisers, Inc.
Oppenheimer Tower
World Financial Center
New York, New York 10281
AUCTION AGENT
Bankers Trust Company
4 Albany Street
New York, New York 10006
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
DIVIDEND DISBURSING AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
- --------------------------------------------------------------------------------
<PAGE> 19
<TABLE>
<S> <C>
STATE STREET BANK AND TRUST COMPANY ------------------
P.O. BOX 8200
BOSTON, MASSACHUSETTS 02266-8200 BULK RATE
U.S. POSTAGE
PAID
S. HACKENSACK, NJ
PERMIT NO.
750
------------------
</TABLE>
<PAGE> 20
----------------------------------------------------------------------
MUNICIPAL PARTNERS
FUND INC.
INTERIM REPORT
--------------------------------------
SEPTEMBER 30, 1995
