M U N I C I P A L P A R T N E R S F U N D I N C.
August 21, 1996
To Our Shareholders:
We are pleased to supply this semi-annual report to the shareholders of
Municipal Partners Fund Inc. (the "Fund") for the six months ended June 30,
1996. Strong bond market performance in June reversed April and May's losses,
enabling the fixed-income markets to post positive returns for the second
quarter. This was evidenced by the Fund's 0.95% net asset value return (assuming
the reinvestment of monthly dividends in additional shares of the Fund) for the
quarter. The Fund continued to pay a monthly common stock dividend of $0.065 per
share during the quarter. Based on the Fund's closing market price of $11.375 on
June 28, 1996, the Fund's current yield was 6.86%. On August 1, the Fund's
dividend was raised to $0.0665 per share payable on August 30, 1996 to
shareholders of record on August 13, 1996.
Municipal bonds outperformed taxable bonds for the quarter due to positive
supply and demand factors. Although tax-exempt returns for April and May were
negative, losses were tempered due to renewed interest in the municipal market
from individuals and continued support from insurance companies. Individual
investors were drawn to the municipal bond market when the stock market became
more volatile and long-term yields exceeded 6%. At the same time, continued
profitability from property and casualty insurance companies enabled them to
remain a significant purchaser of municipal bonds.
In June, the bond market overcame higher than anticipated job creation to record
its first monthly price increase since January of this year. Mixed signals
regarding the strength of the economy, modest inflation and a growing consensus
that the Federal Reserve would not imminently raise short-term interest rates
allowed bond prices to finish the quarter on a firm tone. Municipals received an
added boost as many investors armed with cash from June 1st coupon payments,
maturities and redemptions reinvested much of these proceeds into the municipal
bond market. Looking ahead, anticipated cash from municipal coupon payments,
maturities and redemptions, combined with an expected light new issue calendar
should enable the municipal bond market to continue its favorable technical
position.
As of June 30, 1996, the Fund's portfolio consisted of 48 issues in 28 different
states with an average maturity of 15.2 years and an average coupon of 6.38%.
Sector weightings emphasize housing, industrial development and healthcare.
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,
Mark C. Biderman Michael S. Hyland
Chairman of the Board President
<PAGE>
M U N I C I P A L P A R T N E R S F U N D I N C.
Statement of Investments
June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Moody's/S&P Value
(000) Long-Term Investments - 148.9% Credit Rating (Note 2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alabama - 7.2%
Alabama Special Care Facilities Financing Authority Revenue (Daughters of
$2,145 Charity-St. Vincents), 5.00%, 11/01/25.................................... Aa/AA $ 1,824,365
Courtland, Alabama Industrial Development Board Solid Waste Disposal
Revenue (Champion International Corporation Project), Series A,
1,225 7.00%, 11/01/22........................................................... Baa1/BBB 1,267,557
Courtland, Alabama Industrial Development Board Solid Waste Disposal
Revenue (Champion International Corporation Project), Series A,
2,500 6.50%, 9/01/25............................................................ Baa1/BBB 2,485,775
-----------
5,577,697
-----------
California - 3.9%
San Francisco, California Airport Revenue (San Francisco International
1,000 Airport), Series A-9, FGIC, 5.60%, 5/01/14................................ Aaa/AAA 956,460
West Covina, California Certificate of Participation (Queen of the Valley
2,000 Hospital), 6.50%, 8/15/14................................................. A/A 2,042,940
-----------
2,999,400
-----------
Colorado - 3.8%
Colorado Health Facilities Authority Hospital Revenue (Rocky Mountain
3,000 Adventist Healthcare Project), 6.625%, 2/01/22............................ Baa/BBB 2,976,030
-----------
Georgia - 2.6%
Fulton County, Georgia Housing Authority Single-Family Mortgage,
2,000 6.60%, 3/01/28 ........................................................... NR/AAA 2,023,740
-----------
Illinois - 9.5%
Chicago, Illinois Wastewater Transmission Revenue, FGIC,
3,000 5.125%, 1/01/25 .......................................................... Aaa/AAA 2,651,010
Illinois Health Facilities Authority Revenue Refunding (Lutheran General
1,500 Health System), Series C, 7.00%, 4/01/14.................................. A/A+ 1,665,810
3,000 Illinois State Sales Tax Revenue, Series V, 6.375%, 6/15/20............... A1/AAA 3,089,340
-----------
7,406,160
-----------
Maine - 3.4%
Maine State Housing Authority Mortgage Purchase, Series A-4,
525 6.375%, 11/15/12 ......................................................... A1/AA- 531,101
Maine State Housing Authority Mortgage Purchase, Series A-2,
2,110 6.65%, 11/15/25 .......................................................... A1/AA- 2,139,139
-----------
2,670,240
-----------
- ---------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
Page 2
</TABLE>
<PAGE>
M U N I C I P A L P A R T N E R S F U N D I N C.
Statement of Investments (continued)
June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Moody's/S&P Value
(000) Long-Term Investments (continued) Credit Rating (Note 2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maryland - 6.6%
Maryland State Community Development Administration, Department of
Housing and Community Development (Multi-Family Housing), Series E,
$1,300 6.85%, 5/15/25 ........................................................... Aa/NR $ 1,351,883
Northeast Maryland Waste Disposal Authority, Solid Waste Revenue
(Montgomery County Resource Recovery Project), Series A,
3,750 6.30%, 7/01/16 ........................................................... Aa/NR 3,755,063
-----------
5,106,946
-----------
Massachusetts - 2.2%
Massachusetts State Water Pollution Abatement Water Pollution Revenue
1,740 (New Bedford Loan Program), Series A, 5.70%, 2/01/14...................... Aa/NR 1,711,464
-----------
Michigan - 2.9%
Michigan Hospital Finance Authority Revenue Refunding (Pontiac
2,500 Osteopathic Project), 6.00%, 2/01/24...................................... Baa1/BBB 2,218,300
-----------
Minnesota - 4.6%
Minnesota State Housing Finance Agency Single-Family Mortgage,
3,550 Series H, 6.50%, 1/01/26# ................................................ Aa/AA+ 3,586,885
-----------
Nebraska - 7.8%
Nebraska Higher Education Loan Program Inc., Revenue, Sub-Series A-6,
6,000 6.45%, 6/01/18 ........................................................... A/NR 6,018,540
-----------
Nevada - 13.4%
Clark County, Nevada Passenger Facility Revenue (Macarran International
4,850 Airport), MBIA, 5.75%, 7/01/23............................................ Aaa/AAA 4,657,552
Nevada Housing Division, Single-Family Program, Series B-2,
4,355 6.40%, 10/01/25 .......................................................... Aa/NR 4,370,112
Nevada Housing Division, Single-Family Program, Series B-2,
1,300 6.95%, 10/01/26 .......................................................... Aa/NR 1,342,562
-----------
10,370,226
-----------
New Hampshire - 0.9%
New Hampshire State Housing Finance Authority, Single-Family
690 Residential, Series A, 6.80%, 7/01/15..................................... Aa/A+ 710,362
-----------
- ----------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
Page 3
</TABLE>
<PAGE>
M U N I C I P A L P A R T N E R S F U N D I N C.
Statement of Investments (continued)
June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Moody's/S&P Value
(000) Long-Term Investments (continued) Credit Rating (Note 2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
New Jersey - 13.0%
New Jersey Economic Development Authority, Pollution Control Revenue
$5,150 (Public Service Electric and Gas Co. Project), MBIA, 6.40%, 5/01/32 ...... Aaa/AAA $ 5,308,620
New Jersey Economic Development Authority, Water Facilities Revenue
4,450 (New Jersey American Water Co., Inc. Project), FGIC, 6.875%, 11/01/34 .... Aaa/AAA 4,799,725
-----------
10,108,345
-----------
New York - 7.3%
Port Authority of New York & New Jersey Construction, Ninety-Sixth Series,
950 FGIC, 6.60%, 10/01/23 .................................................... Aaa/AAA 1,002,573
The City of New York, General Obligation Bonds, Series D,
2,000 6.00%, 8/01/11 ........................................................... Baa1/BBB+ 1,919,440
Triborough Bridge & Tunnel Authority, New York General Purpose Revenue,
2,850 Series Y, 5.50%, 1/01/17 ................................................. Aa/A+ 2,774,846
-----------
5,696,859
-----------
Ohio - 9.5%
Ohio State Water Development Authority Solid Waste Disposal Revenue
7,200 (North Star BHP Steel-Cargill Inc.), 6.30%, 9/01/20 ...................... Aa3/AA- 7,346,808
-----------
Pennsylvania - 8.1%
Monroeville, Pennsylvania Hospital Authority Hospital Revenue (Forbes
6,095 Health System), 7.00%, 10/01/13 .......................................... Baa1/BBB+ 6,286,566
-----------
Rhode Island - 4.1%
Rhode Island Housing &Mortgage Finance Corporation, Homeownership
3,115 Opportunity, Series 7B, 6.80%, 10/01/25 .................................. Aa/AA+ 3,192,003
-----------
South Dakota - 6.5%
South Dakota Housing Development Authority, Homeowner Mortgage,
4,955 Series D, 6.85%, 5/01/26 ................................................. Aa1/AAA 5,083,037
-----------
Tennessee - 4.6%
The Industrial Development Board of Humphreys County, Tennessee
3,400 (E.I. duPont de Nemours and Company Project), 6.70%, 5/01/24 ............. Aa3/AA- 3,580,302
-----------
- ----------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
Page 4
</TABLE>
<PAGE>
M U N I C I P A L P A R T N E R S F U N D I N C.
Statement of Investments (continued)
June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Moody's/S&P Value
(000) Long-Term Investments (concluded) Credit Rating (Note 2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Texas - 15.6%
Lower Neches Valley Authority, Texas Industrial Development Corporation
$6,000 (Mobil Oil Refining Corporate Project), 6.40%, 3/01/30 ................... Aa2/AA $ 6,082,680
Richardson, Texas Hospital Authority Hospital Revenue Refunding and
3,000 Improvement (Richardson Medical Center), 6.75%, 12/01/23 ................. Baa/BBB- 2,944,710
340 Texas State Veterans Housing Assistance, 6.80%, 12/01/23 ................. Aa/AA 348,282
West Side Calhoun County, Texas Navigation District Solid Waste Disposal
2,750 Revenue (Union Carbide Chemicals), 6.40%, 5/01/23 ........................ Baa2/BBB 2,718,430
------------
12,094,102
------------
Utah - 2.2%
Intermountain Power Agency, Utah Power Supply Revenue Refunding,
2,000 Series D, 5.00%, 7/01/21 ................................................. Aa/AA- 1,726,240
------------
Virginia - 3.8%
Giles County, Virginia Industrial Development Authority Revenue
2,000 (Hoechst Celanese Project), 5.95%, 12/01/25 .............................. A2/A+ 1,968,500
Virginia State Housing Development Authority Commonwealth Mortgage,
955 Subseries B-5, 6.30%, 1/01/27 ............................................ Aa1/AA+ 956,690
------------
2,925,190
------------
Washington - 1.9%
Washington State Housing Finance Commission, Single-Family Mortgage
1,460 Revenue Refunding, 6.15%, 1/01/26 ........................................ NR/AAA 1,440,421
------------
West Virginia -- 3.5%
West Virginia State Water Development Authority, Loan Program II,
2,445 Series A, 7.00%, 11/01/31, Pre-Refunded 11/01/01 ......................... NR/A- 2,718,864
------------
Total Long-Term Investments (cost $114,782,905) .......................... 115,574,727
------------
Short-Term Investments - 2.3%
- ----------------------------------------------------------------------------------------------------------------------
Arizona - 0.8%
300 Phoenix, Arizona General Obligation, Series 95-2, VR, 3.70%, 7/01/96 ..... VMIG-1/A-1+ 300,000
Pinal County, Arizona Industrial Development Authority Pollution Control
300 Revenue (Magma Copper Co.), VR, 3.60%, 7/01/96 ........................... P-1/A-1+ 300,000
------------
600,000
------------
- ----------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
Page 5
</TABLE>
<PAGE>
M U N I C I P A L P A R T N E R S F U N D I N C.
Statement of Investments (concluded)
June 30, 1996 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Moody's/S&P Value
(000) Short-Term Investments (concluded) Credit Rating (Note 2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California - 0.1%
Los Angeles County, California Industrial Development Authority Industrial
$100 Development Revenue (Coe & Dru Inc.), VR, 4.20%, 7/01/96 ................. NR/NR $ 100,000
------------
Florida - 1.0%
Manatee County, Florida Pollution Control Revenue Refunding (Florida
600 Power & Light Co. Project), VR, 3.60%, 7/01/96 ........................... VMIG-1/A-1+ 600,000
Pinellas County, Florida Health Facilities Authority Revenue Refunding
200 (Pooled Hospital Loan Program), VR, 3.60%, 7/01/96 ....................... VMIG-1/A-1 200,000
------------
800,000
------------
Louisiana - 0.1%
Ascension Parish, Louisiana Pollution Control Revenue (BASF Wyandotte
100 Corp.), VR, 3.60%, 7/01/96 ............................................... P-1/NR 100,000
------------
New York - 0.3%
The City of New York, Industrial Development Agency Industrial
200 Development Revenue (Nippon Cargo Airlines Co.), VR, 4.30%, 7/01/96 ...... NR/A-1 200,000
------------
Total Short-Term Investments (cost $1,800,000) ......................................... 1,800,000
------------
Total Investments - 151.2% (cost $116,582,905).......................................... 117,374,727
------------
Other Assets in Excess of Liabilities - 0.3% ............................................ 251,174
------------
Total Net Assets - 151.5% ............................................................... 117,625,901
------------
Par value of 800 shares of preferred stock at $50,000 per share (Note 5)-(51.5%) ........ (40,000,000)
------------
Net Assets Applicable to Common Stock - 100%
(equivalent to $13.48 per share on 5,757,094 common shares outstanding) ................. $ 77,625,901
------------
- --------------------------------------------------------------------------------------------------------------------
<FN>
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.
VMIG - Variable Moody Investment Grade.
VR - Variable Rate Demand Note. Date shown is date of next interest rate
change and coupon rate is the rate in effect on June 30, 1996.
# - Securities valued at $3,586,885 as of June 30, 1996 were segregated
to be available for the purchase of delayed delivery securities with
a cost of $1,707,366.
</FN>
- ----------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
Page 6
</TABLE>
<PAGE>
M U N I C I P A L P A R T N E R S F U N D I N C.
<TABLE>
Statement of Assets and Liabilities
June 30, 1996 (unaudited)
<S> <C>
Assets
Investments, at value (cost - $116,582,905) ................................................... $117,374,727
Cash .......................................................................................... 34,474
Interest receivable ........................................................................... 2,015,411
Unamortized organization expenses (Note 2) .................................................... 22,340
Prepaid expenses .............................................................................. 27,028
------------
Total assets ...................................................................... 119,473,980
------------
Liabilities
Payable for investments purchased ............................................................. 1,707,366
Accrued management fee (Note 3) ............................................................... 57,346
Accrued audit and tax return preparation fees ................................................. 33,838
Accrued legal fee ............................................................................. 19,999
Accrued printing and mailing fees ............................................................. 18,000
Accrued transfer agent expense ................................................................ 2,998
Accrued custodian expense ..................................................................... 2,500
Other accrued expenses ........................................................................ 6,032
------------
Total liabilities ................................................................. 1,848,079
------------
Net Assets
Preferred Stock (Note 5) ...................................................................... 40,000,000
Common Stock ($.001 par value, 100,000,000 shares authorized; 5,757,094 shares outstanding) ... 5,757
Additional paid-in capital .................................................................... 79,673,514
Undistributed net investment income ........................................................... 309,252
Accumulated realized loss on investments ...................................................... (3,154,444)
Net unrealized appreciation on investments .................................................... 791,822
------------
Net assets ........................................................................ $117,625,901
------------
- -------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
Page 7
</TABLE>
<PAGE>
<TABLE>
M U N I C I P A L P A R T N E R S F U N D I N C.
Statement of Operations
For the Six Months Ended June 30, 1996 (unaudited)
<S> <C> <C>
Investment Income
Income
Interest (reduced by net premium amortization of $17,436)..................... $ 3,667,442
Operating expenses
Management fee (Note 3).............................................$354,824
Auction agent fee................................................... 55,432
Audit and tax services.............................................. 36,340
Printing............................................................ 24,747
Legal............................................................... 18,077
Directors' fees and expenses (Note 3)............................... 13,424
Custodian........................................................... 12,616
Transfer agent...................................................... 8,155
Listing fee......................................................... 8,063
Amortization of deferred organization expenses (Note 2)............. 7,058
Shareholder annual meeting.......................................... 5,469
Other............................................................... 11,067
--------
Total operating expenses......................................................... 555,272
-----------
Net investment income................................................................. 3,112,170
-----------
Net Realized and Unrealized Gain (Loss)
Net Realized Gain on Investments...................................................... 5,628
Change in Net Unrealized Depreciation on Investments.................................. (4,210,367)
-----------
Net realized gain and change in net unrealized depreciation on investments............ (4,204,739)
-----------
Net Decrease in Net Assets from Operations............................................$(1,092,569)
-----------
- ------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
Page 8
</TABLE>
<PAGE>
M U N I C I P A L P A R T N E R S F U N D I N C.
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
For the
Six Months For the
Ended June 30, Year Ended
1996 December 31,
(unaudited) 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income................................................. $ 3,112,170 $ 6,341,398
Net realized gain (loss) on investments .............................. 5,628 (696,257)
Change in net unrealized appreciation (depreciation) on investments... (4,210,367) 15,833,547
------------ ------------
Net increase (decrease) in net assets from operations................. (1,092,569) 21,478,688
------------ ------------
Dividends
To common shareholders from net investment income..................... (2,245,267) (4,594,161)
To preferred shareholders from net investment income.................. (733,766) (1,656,333)
------------ ------------
(2,979,033) (6,250,494)
------------ ------------
Total increase (decrease) in net assets............................... (4,071,602) 15,228,194
Net Assets
Beginning of period................................................... 121,697,503 106,469,309
------------ ------------
End of period (includes undistributed net investment income of
$309,252 and $176,115, respectively).............................. $117,625,901 $121,697,503
------------ ------------
- ----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
Page 9
</TABLE>
<PAGE>
M U N I C I P A L P A R T N E R S F U N D I N C.
Statement of Cash Flows
For the Six Months Ended June 30, 1996 (unaudited)
Cash Flows from Operating Activities:
Proceeds from sales of portfolio investments................ $ 18,910,580
Purchases of portfolio securities........................... (17,282,488)
Net purchases of short-term investments..................... (1,700,000)
-------------
(71,908)
Net investment income....................................... 3,112,170
Amortization of net premium on investments.................. 17,436
Amortization of organization expenses....................... 7,058
Net change in receivables/payables related to operations.... (80,375)
-------------
Net cash provided by operating activities............... 2,984,381
-------------
Cash Flows used by Financing Activities:
Common stock dividends paid................................. (2,245,267)
Preferred stock dividends paid.............................. (733,766)
-------------
Net cash used by financing activities................... (2,979,033)
-------------
Net increase in cash............................................. 5,348
Cash at beginning of period...................................... 29,126
-------------
Cash at end of period............................................ $ 34,474
-------------
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
Page 10
<PAGE>
M U N I C I P A L P A R T N E R S F U N D I N C.
Notes to Financial Statements
(unaudited)
Note 1. Organization
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 commenced
operations on January 29, 1993. The Fund's primary investment objective is to
seek a high level of current income which is exempt from regular federal income
taxes, consistent with the preservation of capital. As a secondary investment
objective, the Fund intends to enhance portfolio value by purchasing tax exempt
securities that, in the opinion of Salomon Brothers Asset Management Inc (the
"Investment Adviser"), may appreciate in value relative to other similar
obligations in the marketplace.
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. The
policies are in conformity with generally accepted accounting principles
("GAAP"). The preparation of financial statements in accordance with GAAP
requires management to make estimates and assumptions that effect the reported
amounts and disclosures in the financial statements. Actual amounts could differ
from those estimates.
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 accrued on a daily
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 11
<PAGE>
M U N I C I P A L P A R T N E R S F U N D I N C.
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 (See Note 4) 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 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 GAAP.
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.
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 & Co., Inc. ("Oppenheimer"),
pursuant to which the Investment Manager, among other things, supervises the
Fund's investment 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 Salomon
Brothers Inc, 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.
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.
Page 12
<PAGE>
M U N I C I P A L P A R T N E R S F U N D I N C.
Notes to Financial Statements (continued)
(unaudited)
At June 30, 1996, Oppenheimer and the Investment Adviser owned 3,547 and 4,275
shares of the Fund, respectively.
The Fund pays each Director not affiliated with the Investment Manager or the
Investment Adviser a fee of $5,000 per year, $700 for attendance at each board
and audit committee 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 six months ended June 30, 1996, aggregated $18,989,854 and $18,910,580,
respectively. At December 31, 1995, the Fund had a net capital loss carryover of
approximately $3,160,000 of which $526,000 will be available through December
31, 2001, $1,930,000 will be available through December 31, 2002 and $704,000
will be available through December 31, 2003 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 June 30, 1996 was
substantially the same as the cost basis for financial reporting. Gross
unrealized appreciation and depreciation amounted to $1,868,209 and $1,076,387,
respectively, resulting in net unrealized appreciation for federal income tax
purposes of $791,822.
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. 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 six months
ended June 30, 1996 ranged from 3.54% to 3.93%. The weighted average dividend
rate for the six months ended June 30, 1996 was 3.628%. The Board of Directors
designated the dividend period commencing April 23, 1996 as a Special Rate
Period. Pursuant to this Special Rate Period, the dividend rate set by the
auction held on April 22, 1996 remained in effect through July 22, 1996. The
dividend rate for this Special Rate Period was 3.649%. The Board of Directors
designated the dividend period commencing July 23, 1996 as a Special Rate
Period. Pursuant to this Special Rate Period, the dividend rate set by the
auction held on July 22, 1996 remains in effect through October 21, 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 3.65%.
Page 13
<PAGE>
M U N I C I P A L P A R T N E R S F U N D I N C.
Notes to Financial Statements (concluded)
(unaudited)
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 June 30, 1996
On July 1 and August 1, 1996, the Board of Directors of the Fund declared a
common share dividend from net investment income in the amount of $.065 and
$.0665 per share, respectively, payable on July 31 and August 30, 1996 to
shareholders of record on July 16 and August 13, 1996, respectively.
Note 7. Concentration of Credit Risk
Since the Fund invests a portion of its assets in issuers located in a single
state, it may be affected by economic and political developments in a specific
state or region. Certain debt obligations held by the Fund are entitled to the
benefit of insurance, standy letters of credit or other guarantees of banks or
other financial institutions.
Page 14
<PAGE>
M U N I C I P A L P A R T N E R S F U N D I N C.
<TABLE>
<CAPTION>
Financial Highlights
Data for a share of common stock outstanding throughout each period:
For the
Six Months For the For the For the
Ended Year Ended Year Ended Period Ended
June 30, 1996 December 31, December 31, December 31,
(unaudited) 1995 1994 1993(a)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $ 14.19 $ 11.55 $ 14.59 $ 14.10
------- ------- ------- -------
Net investment income ..................................... .54 1.10 1.10 .87
Net realized gain (loss) and change in net
unrealized appreciation (depreciation) on investments .. (.73) 2.63 (3.04) .73
------- ------- ------- -------
Total from investment operations .......................... (.19) 3.73 (1.94) 1.60
------- ------- ------- -------
Less distributions
Dividends to common shareholders from net
investment income .................................... (.39) (.80) (.89) (.71)
Dividends to preferred shareholders from net
investment income .................................... (.13) (.29) (.21) (.14)
------- ------- ------- -------
Total distributions ....................................... (.52) (1.09) (1.10) (.85)
------- ------- ------- -------
Offering costs on issuance of common and
preferred shares ....................................... -- -- -- (.26)
------- ------- ------- -------
Net asset value, end of period ............................ $ 13.48 $ 14.19 $ 11.55 $ 14.59
------- ------- ------- -------
Per share market value, end of period ..................... $11.375 $11.625 $ 9.875 $ 13.75
Total investment return based on market
price per share (c) .................................... 1.13% 26.18% (22.57%) 2.31%(b)
Ratios to average net assets of common shareholders (d):
Operating expenses ..................................... 1.41%(e) 1.43% 1.49% 1.30%(e)
Net investment income before preferred
stock dividends .................................... 7.90%(e) 8.41% 8.67% 6.57%(e)
Preferred stock dividends .............................. 1.86%(e) 2.20% 1.68% 1.31%(e)
Net investment income available to
common shareholders ................................ 6.04%(e) 6.21% 6.99% 5.26%(e)
Net assets of common shareholders,
end of period (000) ................................ $77,626 $81,698 $66,469 $84,009
Preferred stock outstanding,
end of period (000) ................................ $40,000 $40,000 $40,000 $40,000
Portfolio turnover rate ................................ 16% 35% 17% 100%
- -----------------------------------------------------------------------------------------------------------------------
<FN>
(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. This calculation is not annualized.
(c) For purposes of this calculation, dividends on common shares are assumed to
be reinvested at prices obtained under the Fund's dividend reinvestment plan
and the broker commission paid to purchase or sell a share is excluded. This
calculation is not annualized.
(d) Ratios calculated on the basis of income, expenses and preferred stock
dividends relative to the average net assets of common shares.
(e) Annualized.
</FN>
See accompanying notes to financial statements.
Page 15
</TABLE>
<PAGE>
M U N I C I P A L P A R T N E R S F U N D I N C.
<TABLE>
<CAPTION>
Selected Quarterly Financial Information (unaudited)
Summary of quarterly results of operations:
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>
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
December 31, 1995............................................ 1,600 .28 4,478 .78
March 31, 1996............................................... 1,561 .27 (3,781) (.65)
June 30, 1996................................................ 1,551 .27 (424) (.08)
- ---------------------------------------------------------------------------------------------------------------
<FN>
*Totals expressed in thousands of dollars except per share amounts.
</FN>
See accompanying notes to financial statements.
Page 16
</TABLE>
<PAGE>
M U N I C I P A L P A R T N E R S F U N D I N C.
Left Column
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
LAWRENCE H. KAPLAN
Executive Vice President
and General Counsel
ALAN M. MANDEL
Treasurer
LAURIE A. PITTI
Assistant Treasurer
TANA E. TSELEPIS
Secretary
JENNIFER G. MUZZEY
Assistant Secretary
Right Column
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
NEW YORK STOCK EXCHANGE SYMBOL
MNP
<PAGE>
Municipal Partners
Fund Inc.
Semi-Annual Report
JUNE 30, 1996
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
