MUNICIPAL PARTNERS FUND II INC.
January 22, 2000
Dear Shareholders:
We are pleased to provide this semi-annual report for the Municipal Partners
Fund II Inc. ("Fund") as of December 31, 1999. Included are market commentary, a
schedule of the Fund's investments as of December 31, 1999 and financial
statements for the six months ended December 31, 1999. The Fund distributed
income dividends to common shareholders totaling $0.38 per share during the
period. The table below shows the annualized distribution rate and the six-month
total return based on the Fund's December 31, 1999 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
---------- ------------------ ------------
$12.79 (NAV) 5.86% (4.04)%
$11.1875 (NYSE) 6.70% (6.18)%
SPECIAL SHAREHOLDER NOTICE
We are proud to report that Municipal Partners Fund II Inc. has recently
received a 4-star (out of a possible 5 stars) rating from Morningstar Inc. as of
December 31, 1999.3
MARKET REVIEW
The bond markets encountered a wild swing in investor sentiment during the past
year as healthy optimism drove confidence at the onset, yet monetary policy
tightening concerns overshadowed bonds as the year progressed. Despite posting
negative returns, municipal bonds performed better than U.S. Treasuries during
the period. In our view, decreased supply, generous yield ratios at the
beginning of the year and an improvement in fundamental credit quality provided
support for municipal bonds.
- -----------
1 The NAV is calculated by subtracting total liabilities and outstanding
preferred stock from the closing value of all securities held by the Fund,
plus all other assets. This result (net assets of common shareholders) is
divided by the total number of common shares outstanding. The NAV fluctuates
with changes in the market price of securities in which the Fund has
invested. However, the price at which an investor buys or sells shares of
the Fund is its market price as determined by supply and demand.
2 Total returns are based on changes in NAV or the market value and assume the
reinvestment of all dividends and/or capital gains distributions in
additional shares. The annualized distribution rate is the Fund's current
monthly income dividend rate, annualized, and then divided by the NAV or the
market value noted in the report. This annualized distribution rate assumes
a current monthly income dividend rate of $0.0625 for twelve months. This
rate is as of January 31, 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 Fund. 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
fund investment. Past performance is not indicative of future results.
3 Morningstar Inc. proprietary ratings reflect historical risk adjusted
performance as of December 31, 1999. Ratings are loan-adjusted, updated
monthly and subject to change. Morningstar ratings are calculated from each
fund's three, five and ten-year average annual returns (if applicable) in
excess of 90-day Treasury bill returns with appropriate fee adjustment and a
risk factor that reflect fund performance below 90-day T-bill returns. The
highest Morningstar rating is five stars; the lowest is one star. The top
10% of the funds in a broad asset class receive five stars; the next 22.5%
receive four stars, the next 35% receive three stars, the next 22.5% receive
two stars and the next 10% receive one star. For the three, five and
ten-year period, there were 193, 193 and 37 funds respectively in the
municipal bond class.
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
State and local governments issued approximately $226 billion of debt during
1999 representing a 21% decline versus 1998's pace of $286 billion. The
reduction in the supply of municipal bonds was due to a precipitous drop in
refunding activity. Refunding issues eased almost 55% (year over year) while new
project funding remained virtually unchanged.
The amount of debt outstanding in the municipal market currently exceeds $1.5
trillion, according to data published by the Federal Reserve Board of Governors.
From 1997 through 1999, the 10 most populous U.S. states accounted for almost
60% of new municipal debt. Data from the U.S. Bureau of the Census indicated
that the top 10 states represent approximately 52% of the nation's population.
We think concentrated issuance of municipal securities is likely to continue in
the near term.
Demand for municipal bonds traditionally comes from three types of investors:
retail, mutual funds and property & casualty insurance companies. Strong demand
from retail investors absorbed most of last year's supply while property and
casualty insurance companies and mutual funds generally kept a low profile.
Generous municipal yield ratios at the beginning of the year did not attract
institutions but were enough to meet the needs of retail investors. During the
past year, municipal bond yields were more correlated with taxable spread yields
but less than U.S. Treasury yields. In our opinion, correlation between
municipal bonds and taxable spread products may develop into a long-term trend
if U.S. Treasury supply continues to decline.
A strong national economy improved the fundamental quality of many municipal
debt issuers. Credit upgrades outpaced weakening issues by a ratio of
approximately 4 to 1, according to Standard & Poor's, a major credit reporting
agency. Impressive participation by secondary insurance providers supported
relatively narrow municipal quality spreads. Insured securities represented
almost 50% of new municipal bond supply during the past few years.
INVESTMENT STRATEGY
Our philosophy of focusing on long-term fundamentals, rigorous credit analysis
and sector selection remains the foundation for how we manage the Fund. We have
remained short to neutral versus our benchmark in terms of our maturity
structure.
As of December 31, 1999, the Fund's long-term holdings consisted of 51 issues
throughout 24 different states. Moreover, the credit quality of the portfolio
remains high with an average credit quality of AA according to either Standard &
Poor's Ratings Group or Moody's Investors Services Inc. (Standard & Poor's
Corporation and Moody's Investor Service Inc. are two major credit reporting and
bond rating agencies.) The Fund had an average effective maturity of 13.1 years
and an average duration of 7.4 years. The portfolio is well-diversified with the
greatest industry sector weightings in transportation, health care and housing.
In response to the relatively tight risk premium levels of lower quality bonds,
we plan to continue investing in higher quality municipal bonds. One sector that
did not improve fundamentally during the period was the not-for-profit health
care sector. Health care providers continued to struggle with the Balanced
Budget Act of 1997. Accordingly, yield spreads for this sector widened
appreciably during 1999.
MARKET OUTLOOK
Looking ahead, the demands of a growing economy will call for a steady supply of
municipal debt. We expect new issuance of municipal bonds to range between $200
and $250 billion during 2000.
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Some municipalities are concerned about a possible reduction in sales tax
receipts due to the explosive growth of e-commerce. Most state and local
governments rely on sales tax revenue to help pay for essential services
including public safety, fire, health, education, roads and bridges. Consumers
are supposed to pay sales taxes voluntarily on items purchased from out-of-state
merchants via the Internet, but few do. Early estimates of sales tax shortfalls
from e-commerce are wide ranging. As a comparison, state officials believe that
$5 billion in taxes goes uncollected annually from mail order catalogue sales.
We do not think that growing Internet commerce poses an immediate threat to
either state or local revenue bases. In the near term, surging income tax
receipts generated by a vibrant U.S. economy should take the edge off any sales
tax shortfalls. Moreover, some municipal authorities used recent surplus tax
receipts to fund reserve (i.e., "rainy day") accounts. Capital deposited into
these accounts can help mitigate future revenue shortfalls. In April 2000, a
19-member Advisory Commission on Electronic Commerce will report to the U.S.
Congress about Internet tax issues, with the taxing of Internet commerce as the
main topic of their report. Other state and local organizations have also
recently been proactive in identifying other taxation alternatives.
The U.S. economy should remain stable this year as low unemployment and strong
consumer confidence will likely support demand for goods. Additionally, we think
that the Federal Reserve Board has engineered a good balance between strong
economic growth and an "acceptable" rate of inflation.
All of us at Salomon Brothers Asset Management Inc appreciate the confidence you
have demonstrated in the past and hope to continue to serve you in the new
century.
Cordially,
/s/ WILLIAM D. CVENGROS /s/ HEATH B. MCLENDON
WILLIAM D. CVENGROS HEATH B. MCLENDON
Co-Chairman of the Board Co-Chairman of the Board
/s/ ROBERT E. AMODEO
ROBERT E. AMODEO
Executive Vice President
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (unaudited)
December 31, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long-Term Investments -- 97.0%
CALIFORNIA -- 8.2%
$3,000,000 AA- California State Housing Finance Agency Home
Mortgage Revenue, Series H, 6.150% due 8/1/16............... $3,017,670
California State Public Works Board, Lease Revenue
Refunding Bonds:
2,175,000 Aaa* Department of Corrections, Series A, 6.875%
due 11/1/14, Pre-Refunded 11/1/04....................... 2,423,994
2,900,000 Aaa* Various University of California Projects,
1993 Series A, 7.000% due 3/1/14,
Pre-Refunded 3/1/04..................................... 3,210,909
1,000,000 A2* West Covina, CA COP (Queen of the Valley Hospital),
6.500% due 8/15/14, Pre-Refunded 8/15/04.................... 1,095,770
----------
9,748,343
----------
GEORGIA -- 0.2%
180,000 AAA Fulton County, GA Housing Authority Single-Family Mortgage,
6.600% due 3/1/28........................................... 186,091
----------
HAWAII -- 0.8%
1,000,000 A Hawaii State Department of Budget & Finance Special
Purpose Revenue, 6.000% due 7/1/11........................... 1,003,300
----------
ILLINOIS -- 17.6%
6,050,000 AAA Chicago Heights, IL GO, Series A, FGIC-Insured,
5.650% due 12/1/16.......................................... 5,914,480
Chicago, IL Board of Education (Chicago School Reform):
1,000,000 AAA AMBAC-Insured, 5.750% due 12/1/27........................... 945,620
4,255,000 AAA MBIA-Insured, 6.000% due 12/1/16............................ 4,280,998
3,500,000 AAA Chicago, IL O'Hare International Airport Special
Facility Revenue (International Terminal),
MBIA-Insured, 6.750% due 1/1/18............................. 3,651,375
Illinois Health Facilities Authority Revenue:
1,000,000 AAA Highland Park Project B, FGIC-Insured, 5.550% due 10/1/06... 1,022,760
1,850,000 AAA Refunding (SSM Health Care), MBIA-Insured, 6.550%
due 6/1/13................................................ 2,011,949
2,000,000 AAA Servantcor Project, Series A, FSA-Insured, 6.000%
Escrowed to Maturity 8/15/12.............................. 2,125,860
South Suburban Hospital Project:
395,000 A 7.000% due 2/15/18, Pre-Refunded 2/15/02.................. 419,782
605,000 A 7.000% Escrowed To Maturity 2/15/18....................... 673,184
----------
21,046,008
----------
- ----------------------------------------------------------------------------------------------------------
See notes to financial statements.
PAGE 4
</TABLE>
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (unaudited) (continued)
December 31, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INDIANA -- 3.6%
$2,000,000 AA+ Indiana Transportation Finance Authority Airport Facilities
Lease Revenue, Series A, 5.500% due 11/1/17................. $1,837,880
2,500,000 AAA Indianapolis, IN Airport Authority Revenue Refunding, Series A,
FGIC-Insured, 5.600% due 7/1/15............................. 2,434,400
----------
4,272,280
----------
IOWA -- 3.0%
3,350,000 NR Iowa Finance Authority Hospital Facility Revenue Refunding
(Trinity Regional Hospital Project), 7.000% due 7/1/12,
Pre-Refunded 7/1/02......................................... 3,573,847
----------
KANSAS -- 0.8%
1,000,000 AAA Wyandotte County, Kansas City, KSUniversity Government
Utility System Revenue, AMBAC-Insured, 5.750% due 9/1/24.... 962,960
----------
LOUISIANA -- 4.6%
6,000,000 BBB+ Louisiana Public Facilities Authority Hospital Revenue
Refunding (Touro Infirmary Project), Series B, 6.125%
due 8/15/23................................................. 5,493,78
----------
MASSACHUSETTS -- 2.9%
1,000,000 A Massachusetts State Health & Educational Facilities Authority
Revenue (Dana Farber Cancer Project), Series G-1,
6.250% due 12/1/22.......................................... 966,890
2,650,000 AA Massachusetts State Water Pollution Abatement, Series A,
5.750% due 8/1/29.......................................... 2,523,489
----------
3,490,379
----------
MISSOURI -- 2.1%
2,500,000 AA Missouri State Environmental Improvement & Energy Research
Authority PCR Refunding (Associated Electric Coop
Thomas Hill), 5.500% due 12/1/10............................ 2,542,325
----------
NEVADA -- 4.3%
3,000,000 AAA Clark County, NV IDR Refunding (Nevada Power Project),
AMBAC-Insured, 7.200% due 10/1/22........................... 3,216,480
1,000,000 AAA Clark County, NV Passenger Facility Revenue (McCarran
International Airport), MBIA-Insured, 5.750% due 7/1/23..... 934,180
985,000 AAA Nevada Housing Division, Single-Family Program, Series C,
AMBAC-Insured, 6.350% due 10/1/12.......................... 995,116
----------
5,145,776
----------
- ----------------------------------------------------------------------------------------------------------
See notes to financial statements.
PAGE 5
</TABLE>
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (unaudited) (continued)
December 31, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NEW JERSEY -- 0.9%
$1,000,000 AAA New Jersey EDA Water Facilities Revenue (New Jersey
American Water Co., Inc. Project), FGIC-Insured,
6.875% due 11/1/34.......................................... $1,059,810
----------
NEW YORK -- 16.6%
3,000,000 Aaa* The City of New York, GO Bonds, Fiscal 1994 Series B,
Subseries B-1, 7.000% due 8/15/16, Pre-Refunded 8/15/04 3,295,890
2,500,000 AAA Metropolitan Transportation Authority, NY (Transit Facilities),
Series O, MBIA-Insured, 6.375% due 7/1/20, Pre-Refunded
7/1/04...................................................... 2,691,125
New York State Dorm Authority Revenue:
2,000,000 AAA Manhattan Eye, Ear & Throat Hospital, 5.125%
Escrowed to Maturity 7/1/07............................... 1,997,360
2,800,000 A State University Educational Facilities, 5.500%
due 5/15/26............................................... 2,526,748
1,750,000 AA- New York State Local Government Assistance Corporation Revenue,
Series A, 6.000% due 4/1/16................................ 1,762,058
4,400,000 AAA Port Authority of New York and New Jersey Construction,
Ninety-Sixth Series, FGIC-Insured, 6.600% due 10/1/23 4,636,060
3,045,000 Aa3* Triborough Bridge & Tunnel Authority, NY General Purpose
Revenue, Series Y, 5.500% due 1/1/17....................... 2,959,892
----------
19,869,133
----------
OHIO -- 4.7%
2,500,000 AA Franklin County, OH Hospital Revenue (Holy Cross Health
Systems Corporation), 5.875% due 6/1/21..................... 2,404,250
2,300,000 A- Ohio State Water Development Authority Solid Waste
Disposal Revenue (Broken Hill Proprietary Co., Ltd.),
6.450% due 9/1/20........................................... 3,202,650
----------
5,606,900
----------
PENNSYLVANIA -- 4.5%
5,500,000 AAA Delaware Valley, PA Regional Finance Authority Local
Government Revenue, Series A, AMBAC-Insured,
5.500% due 8/1/28........................................... 5,106,145
250,000 AAA Philadelphia, PASchool District Refunding, Series D,
MBIA-Insured, 5.625% due 3/1/10............................. 256,658
----------
5,362,803
----------
SOUTH CAROLINA -- 2.1%
2,500,000 AA Greenville, SC Hospital Systems Hospital Facilities Revenue,
Series B, 5.700% due 5/1/12................................. 2,491,025
----------
- ----------------------------------------------------------------------------------------------------------
See notes to financial statements.
PAGE 6
</TABLE>
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (unaudited) (continued)
December 31, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TENNESSEE -- 2.6%
$1,950,000 AA- The IDB of Humphreys County, TN Solid Waste Disposal Revenue,
(E.I. duPont de Nemours and Co. Project), 6.700%
due 5/1/24.................................................. $2,001,948
1,200,000 AAA Memphis-Shelby County, TNAirport Authority Airport Revenue,
Series D, AMBAC-Insured, 6.000% due 3/1/24.................. 1,168,560
------------
3,170,508
------------
TEXAS -- 6.1%
4,500,000 AAA Austin, TX Airport System Revenue, Series A, MBIA-Insured,
6.200% due 11/15/15......................................... 4,566,690
2,665,000 BBB Port Corpus Christi Authority, TX Nueces County PCR
(Hoechst Celanese Corporate Project), 6.875% due 4/1/17..... 2,724,483
------------
7,291,173
------------
UTAH -- 2.5%
3,025,000 AAA Utah State Housing Finance Agency Single-Family Mortgage,
Issue H-2, 6.250% due 7/1/22................................ 2,992,602
------------
VIRGINIA -- 3.4%
2,000,000 AA Fairfax County, VA EDA Lease Revenue (Government
Center Properties), 5.500% due 5/15/18...................... 1,897,960
Virginia State Housing Development Authority
Commonwealth Mortgage:
1,015,000 AAA Subseries A-4, MBIA-Insured, 6.200% due 7/1/12............ 1,029,677
1,185,000 AA+ Subseries I-1, 6.550% due 7/1/17.......................... 1,201,969
------------
4,129,606
------------
WASHINGTON -- 0.3%
400,000 AAA Seattle, WAGO, Series B, FSA-Insured, 5.750% due 12/1/28...... 379,508
------------
WEST VIRGINIA -- 1.4%
1,555,000 A- West Virginia State Water Development Authority,
Loan Program II, Series A, 7.000% due 11/1/31,
Pre-Refunded 11/1/0......................................... 1,649,233
------------
WISCONSIN -- 2.1%
2,485,000 AA Wisconsin Housing & EDA Revenue Refunding (Home
Ownership), Series G, 6.300% due 9/1/17..................... 2,492,206
------------
WYOMING -- 1.7%
2,000,000 AA Wyoming Community Development Authority Housing
Revenue, Series 1, 6.100% due 12/1/14....................... 1,996,000
------------
Total Long-Term Investments (Cost -- $114,762,907)............ 115,955,596
------------
- -----------------------------------------------------------------------------------------------------------
See notes to financial statements.
PAGE 7
</TABLE>
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (unaudited) (continued)
December 31, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT RATING(A) SECURITY VALUE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Investments -- 3.0%
ALASKA -- 1.3%
$1,600,000 A-1+ Valdez, AK Marine Terminal Revenue Refunding (Exxon
Pipeline Co. Project 2), VRDD, 4.750% due 12/1/33........... $ 1,600,000
-----------
IDAHO -- 0.1%
100,000 VMIG1* Power County, IDPCR (FMC Corp. Project), VRDD,
4.800% due 12/1/10.......................................... 100,000
-----------
INDIANA -- 0.2%
200,000 A-1 Jasper County, INPCRRefunding (Northern Indiana Public
Service), Series-C, VRDD, 4.800% due 4/1/19................. 200,000
-----------
MICHIGAN -- 0.2%
University of Michigan:
100,000 A-1+ University Hospital Revenue Refunding, Series A-2, VRDD,
4.800% due 12/1/24........................................ 100,000
100,000 A-1+ University Medical Plan Revenue, Series A, VRDD,
4.800% due 12/1/27........................................ 100,000
-----------
200,000
-----------
NEVADA -- 0.1%
100,000 A-1+ Clark County, NVIDR (Cogeneration Association IProject), VRDD,
4.900% due 11/1/2........................................... 100,000
-----------
NORTH CAROLINA -- 0.7%
850,000 VMIG1* North Carolina Medical Care Community Hospital Revenue
(Pooled Financing Project), Series A, VRDD, 4.800%
due 10/1/16................................................. 850,000
-----------
PENNSYLVANIA -- 0.4%
500,000 A-1+ Pennsylvania State Higher Educational Facilities Authority
Revenue Refunding (Carnegie Mellon University), Series B,
VRDD, 4.800% due 11/1/27.................................... 500,000
------------
Total Short-Term Investments (Cost -- $3,550,000)............. 3,550,000
------------
Total Investments -- 100% (Cost -- $118,312,907**)............ $119,505,596
============
<FN>
- --------------
(a) All ratings are by Standard & Poor's Ratings Service, except those which are
identified by an asterisk (*) are rated by Moody's Investors Service, Inc.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 9 and 10 for definition of bond ratings and certain security
descriptions.
- ----------------------------------------------------------------------------------------------------------
See notes to financial statements.
PAGE 8
</FN>
</TABLE>
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Long-Term Securities Ratings (unaudited)
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.
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 differs 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 it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt 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, they face 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 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 as 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 Moody's or Standard & Poor's.
PAGE 9
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Short-Term Securities Ratings (unaudited)
SP-1 -- Standard &Poor's highest rating indicating very strong or strong
capacity to pay principal and interest; those issues determined to 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.
VMIG 1 -- Moody's highest rating for issues having a demand feature -- VRDO.
P-1 -- Moody's highest rating for commercial paper and for VRDO prior to the
advent of the VMIG 1 rating.
Security Descriptions (unaudited)
<TABLE>
<S> <C> <C> <C>
ABAG - Association of Bay Area Governors GO - General Obligation Bonds
AIG - American International Guaranty HDC - Housing Development Corporation
AMBAC - American Municipal Bond Assurance HFA - Housing Finance Authority
Corporation IDA - Industrial Development Authority
BAN - Bond Anticipation Notes IDB - Industrial Development Board
BIG - Bond Investors Guaranty IDR - Industrial Development Revenue
CGIC - Capital Guaranty Insurance Company INFLOS - Inverse Floaters
CHFCLI - California Health Facility ISD - Independent School District
Construction Loan Insurance LEVRRS - Leveraged Reverse Rate Securities
CONNIE LOC - Letter of Credit
LEE - College Construction Loan Association MBIA - Municipal Bond Investors Assurance
COP - Certificate of Participation Corporation
EDA - Economic Development Authority MVRICS - Municipal Variable Rate Inverse
EDR - Economic Development Revenue Coupon Security
FGIC - Financial Guaranty Insurance Company PCR - Pollution Control Revenue
FHA - Federal Housing Administration PSFG - Permanent School Fund Guaranty
FHLMC - Federal Home Loan Mortgage RAN - Revenue Anticipation Notes
Corporation RIBS - Residual Interest Bonds
FLAIRS - Floating Adjustable Interest Rate RITES - Residual Interest Tax-Exempt Securities
Securities SYCC - Structured Yield Curve Certificate
FNMA - Federal National Mortgage Association TAN - Tax Anticipation Notes
FRTC - Floating Rate Trust Certificates TECP - Tax Exempt Commercial Paper
FSA - Financial Security Assurance TOB - Tender Option Bonds
GIC - Guaranteed Investment Contract TRAN - Tax and Revenue Anticipation Notes
GNMA - Government National Mortgage VA - Veterans Administration
Association VRDD - Variable Rate Daily Demand
VRWE - Variable Rate Wednesday Demand
</TABLE>
PAGE 10
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Statement of Assets and Liabilities (unaudited)
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost-- $118,312,907)............................................. $119,505,596
Cash.................................................................................... 97,631
Interest receivable..................................................................... 2,062,833
Receivable for securities sold.......................................................... 315,000
Prepaid expenses........................................................................ 35,472
------------
TOTAL ASSETS............................................................................ 122,016,532
------------
LIABILITIES:
Management fee payable (Note 2)......................................................... 62,348
Accrued expenses........................................................................ 107,391
------------
TOTAL LIABILITIES....................................................................... 169,739
------------
TOTAL NET ASSETS............................................................................. $121,846,793
============
NET ASSETS:
Preferred Stock (Note 4)................................................................ $ 45,000,000
------------
Common Stock ($0.001 par value, 100,000,000 shares authorized; 6,007,094
shares outstanding)................................................................... 6,007
Additional paid-in capital.............................................................. 83,244,145
Undistributed net investment income..................................................... 756,241
Accumulated net realized loss on investments............................................ (8,352,289)
Net unrealized appreciation on investments.............................................. 1,192,689
------------
Net Assets Applicable to Common Stock................................................... 76,846,793
------------
TOTAL NET ASSETS............................................................................. $121,846,793
============
NET ASSET VALUE PER SHARE OF COMMON STOCK ($76,846,793 / 6,007,094 shares outstanding)....... $12.79
======
- -----------------------------------------------------------------------------------------------------------
See notes to financial statements.
PAGE 11
</TABLE>
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Statement of Operations (unaudited)
For the Six Months Ended December 31, 1999
<TABLE>
INVESTMENT INCOME:
<S> <C>
Interest.............................................................. $ 3,664,543
-----------
EXPENSES:
Management fees (Note 2) ............................................. 376,250
Auction agent fees.................................................... 61,528
Audit and tax services ............................................... 35,192
Shareholder communications............................................ 24,131
Legal ................................................................ 14,578
Directors' fees and expenses ......................................... 12,602
Listing fees.......................................................... 8,151
Transfer agent ....................................................... 8,067
Custodian............................................................. 3,025
Other................................................................. 10,835
-----------
TOTAL EXPENSES........................................................ 554,359
-----------
NET INVESTMENT INCOME...................................................... 3,110,184
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 3):
Net Realized Loss From Security Transactions
(excluding short-term securities):
Proceeds from sales................................................ 21,156,244
Cost of securities sold............................................ 22,024,134
-----------
NET REALIZED LOSS..................................................... (867,890)
-----------
Change in Net Unrealized Appreciation on Investments:
Beginning of period................................................ 5,858,791
End of period...................................................... 1,192,689
-----------
DECREASE IN NET UNREALIZED APPRECIATION............................... (4,666,102)
-----------
NET LOSS ON INVESTMENTS.................................................... (5,533,992)
-----------
DECREASE IN NET ASSETS FROM OPERATIONS..................................... $(2,423,808)
===========
- -----------------------------------------------------------------------------------------
See notes to financial statements.
PAGE 12
</TABLE>
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Statements of Changes in Net Assets
For the Six Months Ended December 31, 1999 (unaudited)
and the Year Ended June 30, 1999
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income ............................................... $ 3,110,184 $ 6,255,197
Net realized loss.................................................... (867,890) (216,350)
Decrease in net unrealized appreciation.............................. (4,666,102) (4,139,763)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ................... (2,423,808) 1,899,084
------------ ------------
DIVIDENDS PAID FROM
NET INVESTMENT INCOME TO:
Common shareholders.................................................. (2,252,651) (4,505,322)
Preferred shareholders............................................... (842,115) (1,628,268)
------------ ------------
DECREASE IN NET ASSETS FROM DIVIDENDS (3,094,766) (6,133,590)
------------ ------------
DECREASE IN NET ASSETS (5,518,574) (4,234,506)
NET ASSETS:
Beginning of period.................................................. 127,365,367 131,599,873
------------ ------------
END OF PERIOD*....................................................... $121,846,793 $127,365,367
============ ============
*Includes undistributed net investment income of:......................... $756,241 $740,823
======== ========
Statement of Cash Flows (unaudited)
For the Six Months Ended December 31, 1999
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Proceeds from sales of portfolio securities........................................... $ 21,281,245
Purchases of portfolio securities.................................................... (19,225,955)
Net purchases of short-term securities................................................ (2,000,000)
------------
55,290
Net investment income ................................................................ 3,110,184
Accretion of net discount on investments.............................................. (13,363)
Net change in receivables/payables related to operations.............................. 10,266
------------
NET CASH PROVIDED BY OPERATING ACTIVITIES............................................. 3,162,377
------------
CASH FLOWS USED BY FINANCING ACTIVITIES:
Common stock dividends paid........................................................... (2,252,651)
Preferred stock dividends paid........................................................ (842,115)
------------
NET CASH USED BY FINANCING ACTIVITIES................................................. (3,094,766)
-----------
Net Increase in Cash....................................................................... 67,611
Cash, Beginning of Period.................................................................. 30,020
-----------
CASH, END OF PERIOD........................................................................ $ 97,631
===========
- -------------------------------------------------------------------------------------------------------
See notes to financial statements.
PAGE 13
</TABLE>
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (unaudited)
Note 1. Organization and Significant Accounting Policies
Municipal Partners Fund II Inc. ("Fund") was incorporated in Maryland on June
21, 1993 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 $0.001 par value common stock. 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 ("Investment Adviser"), may
appreciate in value relative to other similar obligations in the marketplace.
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 affect 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.
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 7) 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
PAGE 14
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (unaudited) (continued)
Note 4. The amounts 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.
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 2. Management and Advisory Fees and Other Transactions
The Fund has entered into a management agreement with PIMCO Advisors L.P.
("Investment Manager"), 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 management agreement was assigned to the
Investment Manager from its subsidiary, Value Advisors LLC on November 2, 1999.
The Investment Manager and the Fund entered into an investment advisory and
administration agreement with the Investment Adviser, a wholly owned subsidiary
of Salomon Brothers Holding Co. Inc., which in turn is wholly owned by Salomon
Smith Barney Holdings Inc. ("SSBH"), pursuant to which the Investment Adviser
provides investment advisory and administrative services to the Fund. The
Investment Adviser is responsible on a day-to-day basis 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 Investment
Adviser has delegated certain administrative services to SSB Citi Fund
Management LLC("SSBC"), formerly known as SSBC Fund Management Inc., an
affiliate of the Investment Adviser, pursuant to a Sub-Administration Agreement
between the Investment Adviser and SSBC.
The Fund pays the Investment Manager a monthly fee at an annual rate of 0.60% 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 0.36% 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.
At December 31, 1999, the Investment Adviser owned 4,161 shares of the Fund.
PAGE 15
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (unaudited) (continued)
Note 3. Investments
For the six months ended December 31, 1999, the aggregate cost of purchases and
proceeds from sales of investments (including maturities, but excluding
short-term securities) were as follows:
Purchases....................................................... $19,225,955
===========
Sales........................................................... $21,156,244
===========
At December 31, 1999, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
Gross unrealized appreciation................................... $ 2,855,460
Gross unrealized depreciation................................... (1,662,771)
-----------
Net unrealized appreciation..................................... $ 1,192,689
===========
Note 4. Preferred Stock
On October 1, 1993, the Fund closed its public offering of 900 shares of $0.001
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 December 31, 1999 ranged from 3.340% to 4.395%. The weighted average
dividend rate for the six months ended December 31, 1999 was 3.661%. The Board
of Directors designated the dividend period commencing December 7, 1999 as a
Special Rate Period. Pursuant to this Special Rate Period, the dividend rate set
by the auction held on December 6, 1999 remains in effect through March 6, 2000
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 4.395%.
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.
PAGE 16
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (unaudited) (continued)
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 5. Concentration of 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, standby letters of credit or other guarantees of banks or
other financial institutions.
Note 6. Common Stock Dividends Subsequent to December 31, 1999
On January 3 and February 1, 2000, the Board of Directors of the Fund declared a
common share dividend from net investment income, each in the amount of $0.0625
per share, payable on January 28 and February 25, 2000 to shareholders of record
on January 19 and February 15, 2000, respectively.
Note 7. Capital Loss Carryforward
At June 30, 1999, the Fund had, for Federal income tax purposes, approximately
$7,409,000 of loss carryforwards available to offset future capital gains. 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. The amount and
expiration of the carryforwards are indicated below. Expiration occurs on the
last day in June of the year indicated:
2003 2004 2005 2007
- --------------------------------------------------------------------------------
Carryforward Amounts $3,377,000 $3,081,000 $810,000 $141,000
- --------------------------------------------------------------------------------
PAGE 17
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Financial Highlights
Data for a share of common stock outstanding throughout each year ended June 30,
except where noted:
<TABLE>
<CAPTION>
1999(1) 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..... $ 13.71 $ 14.42 $13.70 $ 12.92 $ 12.58 $ 12.02
-------- -------- ------ ------- ------- -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income................. 0.52 1.04 1.03 1.05 1.05 1.07
Net realized and unrealized gain (loss) (0.92) (0.73) 0.72 0.75 0.29 0.57
-------- -------- ------ ------- ------- -------
Total Income (Loss) From Operations...... (0.40) 0.31 1.75 1.80 1.34 1.64
-------- -------- ------ ------- ------- -------
DIVIDENDS PAID FROM
NET INVESTMENT INCOME TO:
Common shareholders................... (0.38) (0.75) (0.75) (0.74) (0.71) (0.79)
Preferred shareholders................ (0.14) (0.27) (0.28) (0.28) (0.29) (0.29)
-------- -------- ------ ------- ------- -------
Total Dividends.......................... (0.52) (1.02) (1.03) (1.02) (1.00) (1.08)
-------- -------- ------ ------- ------- -------
NET ASSET VALUE, END OF PERIOD........... $ 12.79 $ 13.71 $14.42 $ 13.70 $ 12.92 $ 12.58
======== ======== ====== ======= ======= =======
PER SHARE MARKET VALUE, END OF PERIOD.... $11.1875 $12.3125 $12.75 $12.375 $ 10.75 $ 10.75
======== ======== ====== ======= ======= =======
TOTAL RETURN, BASED ON
MARKET PRICE(2)........................ (6.18)%++ 2.27% 9.20% 22.80% 6.62% 2.97%
RATIOS TO AVERAGE NET ASSETS OF
COMMON SHAREHOLDERS(3):
Operating expenses.................... 1.38%+ 1.30% 1.36% 1.42% 1.44% 1.50%
Net investment income................. 7.74+ 7.23 7.27 7.90 8.09 8.99
NET ASSETS OF COMMON SHAREHOLDERS,
END OF PERIOD (000)................... $76,847 $82,365 $86,600 $82,317 $77,628 $75,541
PREFERRED STOCK OUTSTANDING,
END OF PERIOD (000)................... $45,000 $45,000 $45,000 $45,000 $45,000 $45,000
PORTFOLIO TURNOVER RATE.................. 16% 19% 20% 7% 55% 24%
- -----------------------------------------------------------------------------------------------------------------
<FN>
(1) For the six months ended December 31, 1999 (unaudited).
(2) 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.
(3) Ratios calculated on the basis of income and expenses relative to the
average net assets of common shares and excludes the effect of dividend
payments to preferred shareholders.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
</FN>
</TABLE>
PAGE 18
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Selected Quarterly Financial Information (unaudited)
Summary of quarterly results of operations:
<TABLE>
<CAPTION>
NET REALIZED
NET INVESTMENT AND UNREALIZED
INCOME GAIN (LOSS)
----------------- --------------------
QUARTER ENDED* TOTAL PER SHARE TOTAL PER SHARE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
September 30, 1997........................................... $1,586 $0.26 $2,321 $0.39
December 31, 1997............................................ 1,534 0.26 1,829 0.30
March 31, 1998............................................... 1,562 0.26 (186) (0.03)
June 30, 1998................................................ 1,533 0.25 343 0.06
September 30, 1998........................................... 1,571 0.26 1,972 0.33
December 31, 1998............................................ 1,601 0.27 (1,640) (0.28)
March 31, 1999............................................... 1,533 0.25 (895) (0.15)
June 30, 1999................................................ 1,550 0.26 (3,793) (0.63)
September 30, 1999........................................... 1,552 0.26 (2,591) (0.43)
December 31, 1999............................................ 1,558 0.26 (2,943) (0.49)
- ------------------------------------------------------------------------------------------------------------
<FN>
*Totals expressed in thousands of dollars except per share amounts.
</FN>
PAGE 19
</TABLE>
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Additional Shareholder Information (unaudited)
On October 14, 1999, the Annual Meeting of the Fund's Stockholders was held for
the purpose of voting on the following matters:
1. The election of Heath B. McLendon and Charles F. Barber as Directors of
the Fund; and
2. The ratification of the selection of PricewaterhouseCoopers LLP as the
Fund's independent accountants for the fiscal year ending June 30, 2000.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
PREFERRED
PREFERRED % OF SHARES VOTES % OF SHARES VOTES % OF SHARES
NAME OF DIRECTORS VOTES FOR VOTED AGAINST VOTED ABSTAINED ABSTAINED
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Heath B. McLendon 839 99.8% 0 0.0% 2 0.2%
Charles F. Barber 839 99.8% 0 0.0% 2 0.2%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
COMMON
COMMON % OF SHARES VOTES % OF SHARES VOTES % OF SHARES
NAME OF DIRECTORS VOTES FOR VOTED AGAINST VOTED ABSTAINED ABSTAINED
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles F. Barber 5,493,676 98.1% 0 0.0% 109,153 1.9%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The results of the vote on Proposal 2 were as follows:
<TABLE>
<CAPTION>
% OF SHARES % OF SHARES VOTES % OF SHARES
VOTES FOR VOTED VOTES AGAINST VOTED ABSTAINED ABSTAINED
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5,475,383 99.5% 30,040 0.5% 0 0.0%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Other Information (unaudited)
Year 2000 Issue. As the year 2000 began, there were few problems caused by the
inability of certain computer systems to tell the difference between the year
2000 and the year 1900 (commonly known as the Year 2000 issue). It is still
possible that some computer systems could malfunction in the future because of
the Year 2000 issue or as a result of actions taken to address the Year 2000
issue. The Investment Adviser does not anticipate that its services or those of
the Fund's other service providers will be adversely affected, but the
Investment Adviser will continue to monitor the situation. If malfunctions
related to the Year 2000 issue do arise, the Fund and its investments could be
negatively affected.
PAGE 20
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Dividend Reinvestment Plan (unaudited)
Pursuant to certain rules of the Securities and Exchange Commission, the
following additional disclosure is provided.
Pursuant to the Fund's Dividend Reinvestment Plan ("Plan"), holders of Common
Stock whose shares of Common Stock are registered in their own names will be
deemed to have elected to have all distributions automatically reinvested by
State Street Bank and Trust Company ("Plan Agent") in Fund shares pursuant to
the Plan, unless they elect to receive distributions in cash. Holders of Common
Stock who elect to receive distributions in cash will receive all distributions
in cash by check in dollars mailed directly to the holder by the Plan Agent as
dividend-paying agent. Holders of Common Stock who do not wish to have
distributions automatically reinvested should notify the Plan Agent at the
address below. Distributions with respect to Common Stock registered in the name
of a bank, broker-dealer or other nominee (i.e., in "street name") will be
reinvested under the Plan unless the service is not provided by the bank,
broker-dealer or other nominee or the holder elects to receive dividends and
distributions in cash. Investors who own shares registered in the name of a
bank, broker-dealer or other nominee should consult with such nominee as to
participation in the Plan through such nominee, and may be required to have
their shares registered in their own names in order to participate in the Plan.
The Plan Agent serves as agent for the holders of Common Stock in administering
the Plan. After the Fund declares a dividend on the Common Stock or determines
to make a capital gain distribution, the Plan Agent will, as agent for the
participants, receive the cash payment and use it to buy the Fund's Common Stock
in the open market, on the New York Stock Exchange or elsewhere, for the
participants' accounts. The Fund will not issue any new shares of Common Stock
in connection with the Plan.
Participants have the option of making additional cash payments to the Plan
Agent, monthly, in a minimum amount of $250, for investment in the Fund's Common
Stock. The Plan Agent will use all such funds received from participants to
purchase shares of Common Stock in the open market on or about the first
business day of each month. To avoid unnecessary cash accumulations, and also to
allow ample time for receipt and processing by the Plan Agent, it is suggested
that participants send in voluntary cash payments to be received by the Plan
Agent approximately ten days before an applicable purchase date specified above.
A participant may withdraw a voluntary cash payment by written notice, if the
notice is received by the Plan Agent not less than 48 hours before such payment
is to be invested.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in an account, including information
needed by shareholders for personal and tax records. Shares of Common Stock in
the account of each Plan participant will be held by the Plan Agent in the name
of the participant, and each shareholder's proxy will include those shares
purchased pursuant to the Plan.
In the case of holders of Common Stock, such as banks, broker-dealers or other
nominees, who hold shares for others who are beneficial owners, the Plan Agent
will administer the Plan on the basis of the number of shares of Common Stock
certified from time to time by the holders as representing the total amount
registered in such holders' names and held for the account of beneficial owners
that have not elected to receive distributions in cash.
PAGE 21
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Dividend Reinvestment Plan (unaudited) (continued)
There is no charge to participants for reinvesting dividends or capital gains
distributions or voluntary cash payments. The Plan Agent's fees for the
reinvestment of dividends and capital gains distributions and voluntary cash
payments will be paid by the Fund. However, each participant will pay a pro rata
share of brokerage commissions incurred with respect to the Plan Agent's open
market purchases in connection with the reinvestment of dividends and
distributions and voluntary cash payments made by the participant. The receipt
of dividends and distributions under the Plan will not relieve participants of
any income tax which may be payable on such dividends or distributions.
Participants may terminate their accounts under the Plan by notifying the Plan
Agent in writing. Such termination will be effective immediately if notice in
writing is received by the Plan Agent not less than ten days prior to any
dividend or distribution record date. Upon termination, the Plan Agent will send
the participant a certificate for the full shares held in the account and a cash
adjustment for any fractional shares or, upon written instruction from the
participant, the Plan Agent will sell part or all of the participant's shares
and remit the proceeds to the participant, less a $2.50 fee plus brokerage
commission for the transaction.
Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to notice of the termination sent to all participants in the
Plan at least 30 days before the record date for the dividend or distribution.
The Plan also may be amended by the Fund or the Plan Agent upon at least 30
days' written notice to participants in the Plan.
All correspondence concerning the Plan should be directed to the Plan Agent,
P.O. Box 8209, Boston, Massachusetts 02266-8209.
PAGE 22
<PAGE>
MUNICIPAL PARTNERS FUND II INC.
Directors
CHARLES F. BARBER
Consultant; formerly Chairman,
ASARCO Incorporated
WILLIAM D. CVENGROS
Co-Chairman of the Board;
Chief Executive Officer, and
President of Value Advisors LLC and
Chief Executive Officer and
President of PIMCO Advisors L.P.
HEATH B. MCLENDON
Co-Chairman of the Board;
Managing Director, Salomon Smith Barney Inc.
President and Director,
SSB Citi Fund Management
and Travelers Investment Advisers, Inc.
RIORDAN ROETT
Professor and Director, Latin American
Studies Program, Paul H. Nitze
School of Advanced International Studies,
Johns Hopkins University
ROBERT L. ROSEN
Chief Executive Officer,
R.L.R. Partners, LLC
Chairman, National Financial Partners
Officers
WILLIAM D. CVENGROS
Co-Chairman of the Board
HEATH B. MCLENDON
Co-Chairman of the Board
STEPHEN J. TREADWAY
President
ROBERT E. AMODEO
Executive Vice President
LEWIS E. DAIDONE
Executive Vice President and Treasurer
NEWTON B. SCHOTT
Executive Vice President
ANTHONY PACE
Controller
CHRISTINA T. SYDOR
Secretary
Municipal Partners Fund II Inc.
7 World Trade Center
New York, New York 10048
Telephone 1-888-777-0102
INVESTMENT ADVISER
Salomon Brothers Asset Management Inc
7 World Trade Center
New York, New York 10048
INVESTMENT MANAGER
PIMCO Advisors L.P.
800 Newport Center Drive
Suite 100
Newport Beach, California 92660
AUCTION AGENT
Bankers Trust Company
4 Albany Street
New York, New York 10006
CUSTODIAN
PNC Bank N.A.
200 Stevens Drive
Lester, PA 19113
DIVIDEND DISBURSING AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
NEW YORK STOCK EXCHANGE SYMBOL
MPT
<PAGE>
State Street Bank and Trust Company
P.O. Box 8200
Boston, Massachusetts 02266-8200
Municipal Partners
Fund II Inc.
Semi-Annual Report
DECEMBER 31, 1999
MPTSEMI 12/99
BULK RATE
U.S. POSTAGE
PAID
S. HACKENSACK, NJ
PERMIT No. 750
