UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-7812
Salomon Brothers Municipal Partners Fund II Inc.
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)
Christina T. Sydor, Esq.
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code:
(800)-725-6666
Date of fiscal year end: June 30
Date of reporting period: June 30, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
The Annual Report to Stockholders is filed herewith.
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Letter from the Chairman
[Picture R. Jay Gerken, CFA]
DEAR SHAREHOLDER,
The philosopher Bertrand Russell famously remarked that, "Change is one thing,
progress is another." You will notice in the following pages that we have begun
to implement some changes to your shareholder report and we will be reflecting
other changes in future reports. Our aim is to make meaningful improvements in
reporting on the management of your Fund and its performance, not just to enact
change for change's sake. Please bear with us during this transition period.
We know that you have questions about fund managers' decisions and plans, and we
want to be sure that you have easy access to the information you need. Keeping
investors informed is, and always will be, one of my top priorities as Chairman
of your Fund. To that end, we encourage you to contact Investor Relations at
1-800-SALOMON.
We invite you to read this report in full. Please take the opportunity to talk
to your financial adviser about this report or any other questions or concerns
you have about your Fund and your financial future. As always, thank you for
entrusting your assets to us. We look forward to helping you continue to meet
your financial goals. Please read on to learn more about your Fund's performance
and the Manager's strategy.
Sincerely,
/s/ R. Jay Gerken, CFA
R. Jay Gerken, CFA
Chairman and Chief Executive Officer
July 25, 2003
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Letter from the Manager
PERFORMANCE REVIEW
During the 12 months ended June 30, 2003, the Salomon Brothers Municipal
Partners Fund II Inc. ("Fund"), formerly known as Municipal Partners Fund II
Inc., distributed income dividends to shareholders totaling $0.81 per share. The
table below shows the annualized distribution yield and 12-month total return
based on the Fund's June 30, 2003 net asset value ("NAV") per share and its New
York Stock Exchange ("NYSE") closing price. i PAST PERFORMANCE IS NOT INDICATIVE
OF FUTURE RESULTS.
Based on NAV, the Fund performed better than its Lipper peer group of general
municipal debt closed-end funds (leveraged), which returned 10.95% for the same
period. ii
PRICE ANNUALIZED 12-MONTH
PER SHARE DISTRIBUTION YIELD iii TOTAL RETURN iii
----------------- --------------------- ---------------
$15.33 (NAV) 5.32% 12.83%
$13.92 (NYSE) 5.86% 13.78%
DESPITE CHALLENGES, MUNICIPAL BONDS POST GAINS
When the reporting period began, investors concerned about a persistently
sluggish economy, corporate scandals, and rising geopolitical tensions shifted
assets away from stocks and into U.S. Treasury bonds. In fact, the third quarter
of 2002 represented one of the most brutal quarters on record for equities and
one of the best for intermediate-term U.S. government bonds.
Municipal bond prices also rose during the third quarter of 2002 but were unable
to match the total returns achieved by Treasuries. Advances in the tax-exempt
market came despite a surge of new issuance from state and local governments.
The rising supply of securities was easily absorbed by heightened demand from
institutional and individual investors.
A larger-than-expected reduction in short-term interest rates by the Fed on
November 6, 2002 led the equity markets higher, and prices for U.S. Treasuries
and municipal bonds trended lower. However, stocks faltered and bonds rallied
during December, completing a difficult year for equities and an excellent one
for most sectors of the fixed-income marketplace.
Nonetheless, the municipal bond market faced its own set of challenges as 2003
began. For many states and municipalities, tax revenues continued to fall short
of budgeted projections, and costs for healthcare, homeland security and
education were rising sharply. At the same time, the build-up to the war in Iraq
led to heightened volatility in the stock and bond markets. Municipal bonds also
were affected during the first quarter of 2003 by an unfavorable court ruling
against leading tobacco company Altria Group, Inc., causing prices of bonds
backed by anticipated payments of the states' litigation settlement with the
nation's tobacco companies to plummet and liquidity to evaporate.
Despite these factors, municipal bonds posted favorable returns during the
second quarter of 2002. We attribute the market's strength, in part, to the
Fed's accommodative monetary policy, which in June, 2003 led to a further
reduction in short-term interest rates of 25 basis points, iv driving short-term
rates to just 1%, a level not seen since 1958. Even before the Fed cut rates, a
statement it released in May
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
addressing the prospect of "an unwelcome fall in inflation" ignited a powerful
rally in the bond markets as investors became increasingly convinced that
short-term interest rates were likely to remain low for the foreseeable future.
At the same time, the volume of newly issued municipal bonds continued to rise
during the first half of 2003 as state and local governments turned to the
public finance markets to pay for new projects, refinance outstanding debt at
lower interest rates, and plug holes in their budgets. The record supply of
municipal bonds helped keep yields of many tax-exempt bonds at attractive levels
compared to yields of U.S. Treasury securities.
Late in the reporting period, municipal bonds began to give back some of their
price gains as the stock market rallied and investors became more optimistic
about the chances for a stronger economy. Yet, the modest backup in tax-exempt
yields apparently has done little to deter issuers of long-term tax-exempt
bonds, and both new issuance and investor demand have remained strong.
DEFENSIVE POSITIONING AIDS FUND PERFORMANCE
In this volatile investment environment, we maintained a generally defensive
investment posture. Our focus on higher-quality bonds benefited the Fund's
performance when higher-quality bonds generally posted higher returns than
lower-rated bonds. In addition, our focus on quality helped the Fund avoid the
pitfalls affecting certain sectors of the market. For example, the Fund held no
tobacco-related bonds. We have always taken a skeptical view of this sector, and
we believed that these were not appropriate securities for our investors'
portfolios. This view was validated during the first quarter of 2003, when a
legal ruling against a leading tobacco company roiled the sector. Similarly, the
Fund held no bonds backed directly by airlines, enabling us to avoid the brunt
of continuing turmoil in the airline industry.
The Fund also benefited from our emphasis on bonds in the 15- to 30-year
maturity range, which gained more value than shorter-maturity bonds as interest
rates and bond yields declined. Our security selection strategy generally
favored higher-coupon securities with relatively short "call" dates, which give
issuers the opportunity to redeem the bonds early. The higher-coupon securities
helped us maintain a competitive income stream and benefited from the effects of
capital appreciation when yields of newly issued bonds declined. Their
relatively short "calls" helped mute price volatility in the uncertain economic,
geopolitical and fiscal environments that prevailed for much of the reporting
period.
LOOKING FOR ADDITIONAL INFORMATION?
The Salomon Brothers Municipal Partners Fund II Inc. is traded under the symbol
"MPT" and its closing market price is available in most newspapers under the New
York Stock Exchange listings. The daily NAV is available online under symbol
XMPTX. Barron's and The Wall Street Journal's Monday editions carry closed-end
fund tables that will provide additional information. In addition, the Fund
issues a quarterly allocation press release that can be found on most major
financial web sites.
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
In a continuing effort to provide information concerning the Salomon Brothers
Municipal Partners Fund II Inc., shareholders may call 1-888-777-0102 or
1-800-SALOMON (toll free), Monday through Friday from 8:00 a.m. to 6:00 p.m.
Eastern Time (ET), for the Fund's current NAV, market price and other
information regarding the Fund's portfolio holdings and allocations.
Thank you for your investment in the Salomon Brothers Municipal Partners Fund II
Inc. We appreciate that you have entrusted us to manage your money and value our
relationship with you.
Sincerely,
/s/ Robert E. Amodeo
Robert E. Amodeo
Executive Vice President
July 25, 2003
The information provided in this letter by the Manager is not intended to be a
forecast of future events, a guarantee of future results or investment advice.
Views expressed may differ from those of the firm as a whole.
Portfolio holdings and breakdowns are as of June 30, 2003, and are subject to
change. Please refer to pages 5 through 9 for a list and percentage breakdown of
the Fund's holdings.
-----------------
i NAV is a price that reflects the value of the Fund's underlying portfolio.
However, the price at which an investor may buy or sell shares of the Fund
is at the Fund's market price as determined by supply of and demand for the
Fund's common shares.
ii Lipper is a major independent mutual-fund tracking organization. Average
annual returns are based on the 12-month period ended June 30, 2003,
calculated among 59 funds in the Lipper general municipal debt closed-end
funds (leveraged) category with reinvestment of dividends and capital gains
excluding sales charges.
iii Total returns are based on changes in NAV or the market price, respectively.
Total returns assume the reinvestment of all dividends and/or capital gains
distributions in additional shares. Annualized distribution yield is the
Fund's current monthly income dividend rate, annualized, and then divided by
the NAV or the market price noted in this report. The annualized
distribution yield assumes a current monthly income dividend rate of $0.068
for 12 months. This rate is as of June 30, 2003 and is subject to change.
iv A basis point is one one-hundredth (1/100 or 0.01) of one percent.
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments
June 30, 2003
FACE
AMOUNT RATING(A) SECURITY VALUE
-----------------------------------------------------------------------------------------------------------------
Long-Term Investments -- 100.0%
CALIFORNIA -- 2.3%
$3,000,000 AA- California Housing Finance Agency Home Mortgage Revenue, Series H,
6.150% due 8/1/16 .................................................... $ 3,148,890
-----------
DISTRICT OF COLUMBIA -- 1.6%
2,000,000 AAA District of Columbia Revenue, (American University), AMBAC-Insured,
5.625% due 10/1/26 ................................................... 2,164,760
-----------
FLORIDA -- 0.8%
1,000,000 AAA St. Johns County, FL Water and Sewer Revenue, MBIA-Insured,
5.500% due 6/1/11 .................................................... 1,167,210
-----------
GEORGIA -- 0.0%
60,000 AAA Fulton County, GA Housing Authority, Single-Family Mortgage, Series A,
GNMA-Collateralized, 6.600% due 3/1/28 ............................... 61,262
-----------
ILLINOIS -- 15.8%
Chicago, IL Board of Education, (Chicago School Reform):
1,000,000 AAA AMBAC-Insured, 5.750% due 12/1/27 .................................... 1,103,540
4,255,000 AAA MBIA-Insured, 6.000% due 12/1/16 ..................................... 4,883,506
1,750,000 AAA Chicago, IL Midway Airport Revenue, Series B, MBIA-Insured,
5.625% due 1/1/29 .................................................... 1,829,048
1,000,000 AAA Chicago, IL Public Building Commission Building Revenue, (Chicago School
Reform), Series B, FGIC-Insured, 5.250% due 12/1/18 .................. 1,146,520
250,000 AAA Cook County, IL Refunding GO, Series A, MBIA-Insured,
5.625% due 11/15/16 .................................................. 283,640
2,000,000 Aaa* Illinois Development Finance Authority, Revolving Fund Revenue,
5.250% due 9/1/12 .................................................... 2,300,680
1,000,000 AA+ Illinois Educational Facilities Authority Revenue, (Northwestern
University), 5.500% due 12/1/13 ...................................... 1,169,340
Illinois Health Facilities Authority Revenue:
1,850,000 AAA Refunding, (SSM Health Care), MBIA-Insured, 6.550% due 6/1/13 ........ 2,313,740
2,000,000 AAA Servantcor Project, Series A, FSA-Insured, Escrowed to maturity
with U.S. government securities, 6.000% due 8/15/12 ................ 2,433,260
605,000 A South Suburban Hospital Project, Escrowed to maturity with
U.S. government securities, 7.000% due 2/15/18 ..................... 785,006
3,000,000 AAA Illinois State First Series, MBIA-Insured, 5.500% due 8/1/17 ........... 3,545,010
-----------
21,793,290
-----------
INDIANA -- 1.8%
2,000,000 BBB+ Indiana State Development Finance Authority, Environmental Revenue,
(USX Corp. Project), 5.250% due 12/1/22 .............................. 2,171,720
250,000 AAA Indiana State Revolving Fund Revenue, Series B, 5.000% due 8/1/23 ...... 260,623
-----------
2,432,343
-----------
-----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
PAGE 5
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (continued)
June 30, 2003
FACE
AMOUNT RATING(A) SECURITY VALUE
-----------------------------------------------------------------------------------------------------------------
LOUISIANA -- 3.7%
$5,000,000 BBB+ Louisiana Public Facilities Authority, Hospital Revenue Refunding,
(Touro Infirmary Project), Series A, 6.125% due 8/15/23 (b) .......... $ 5,100,500
-----------
MARYLAND -- 3.2%
Maryland State Health & Higher Educational Facilities Authority Revenue:
1,500,000 Baa1* Carroll County General Hospital, 6.000% due 7/1/37 ................... 1,608,915
500,000 A University of Maryland Medical Systems, 6.000% due 7/1/32 ............ 540,405
2,000,000 Aaa* Northeast Maryland Waste Disposal Authority, Solid Waste Revenue
Refunding, AMBAC-Insured, 5.500% due 4/1/16 .......................... 2,219,700
-----------
4,369,020
-----------
MASSACHUSETTS -- 4.0%
1,250,000 AAA Massachusetts State GO, Series C, FGIC-Insured, 5.500% due 11/1/15 ..... 1,482,087
1,000,000 A Massachusetts State Health & Educational Facilities Authority Revenue,
(Dana Farber Cancer Project), Series G-1, 6.250% due 12/1/22 ......... 1,059,500
2,650,000 AAA Massachusetts State Water Pollution Abatement, Series A,
5.750% due 8/1/29 .................................................... 2,966,913
-----------
5,508,500
-----------
MICHIGAN -- 1.9%
1,000,000 AAA Detroit, MI City School District, (School Building & Site Improvement)
Series A, FGIC-Insured, 5.500% due 5/1/17 ............................ 1,141,030
1,500,000 AA- Michigan State Hospital Finance Authority Revenue Refunding,
(Trinity Health), Credit C, 5.375% due 12/1/30 ....................... 1,552,035
-----------
2,693,065
-----------
MISSOURI -- 2.1%
2,500,000 AA Missouri State Environmental Improvement & Energy Research Authority,
PCR Refunding, (Associated Electric Co-op Thomas Hill),
5.500% due 12/1/10 ................................................... 2,830,950
-----------
NEVADA -- 3.4%
Clark County, NV:
3,000,000 AAA IDR Refunding, (Nevada Power Co. Project), Series C, AMBAC-Insured,
7.200% due 10/1/22 ................................................. 3,158,550
1,000,000 AAA Passenger Facility Revenue, (McCarran International Airport), Series A,
MBIA-Insured, 5.750% due 7/1/23 .................................... 1,062,740
470,000 AAA Nevada Housing Division, Single-Family Program, Series C,
AMBAC-Insured, 6.350% due 10/1/12 .................................... 492,663
-----------
4,713,953
-----------
-----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements
PAGE 6
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (continued)
June 30, 2003
FACE
AMOUNT RATING(A) SECURITY VALUE
-----------------------------------------------------------------------------------------------------------------
NEW JERSEY -- 1.7%
$1,000,000 AAA New Jersey EDA, Water Facilities Revenue, (New Jersey American
Water Co., Inc. Project), Series A, FGIC-Insured, 6.875% due 11/1/34 . $ 1,078,380
1,000,000 AAA New Jersey State Transportation Trust Fund Authority, Transportation
System, Series B, MBIA-Insured (Pre-Refunded - Escrowed with U.S.
government securities to 12/15/11 Call @ 100), 6.000% due 12/15/19 ... 1,235,180
-----------
2,313,560
-----------
NEW YORK -- 16.3%
1,000,000 A New York City, NY GO, Series A, 6.000% due 5/15/30 ..................... 1,086,000
1,600,000 AA New York City, NY Municipal Water Finance Authority, Water & Sewer
System Revenue, Series A, 5.500% due 6/15/23 ......................... 1,700,016
4,500,000 AA+ New York City, NY Transitional Finance Authority Revenue, Series A,
5.500% due 11/15/17 .................................................. 5,098,410
1,435,000 AA- New York State Local Government Assistance Corp. Revenue, Series A,
(Pre-Refunded - Escrowed with U.S. government securities to 4/1/05
Call @ 102), 6.000% due 4/1/16 ....................................... 1,582,719
210,000 Aaa* New York State Mortgage Agency Revenue, 24th Series,
6.125% due 10/1/30 ................................................... 216,069
New York State Urban Development Corp. Revenue, Correctional Facilities:
1,500,000 AAA AMBAC-Insured, (Pre-Refunded - Escrowed with U.S. government securities
to 1/1/06 Call @ 102), 5.375% due 1/1/25 ........................... 1,674,720
1,300,000 AAA FSA-Insured, (Pre-Refunded - Escrowed with U.S. government securities
to 1/1/06 Call @ 102), 5.375% due 1/1/25 ........................... 1,451,424
4,400,000 AAA Port Authority of New York and New Jersey Construction, 96th Series,
FGIC-Insured, 6.600% due 10/1/23 ..................................... 4,671,480
Triborough Bridge & Tunnel Authority, NY General Purpose Revenue, Series Y:
1,370,000 AAA 5.500% due 1/1/17 .................................................... 1,631,067
2,750,000 AAA MBIA-Insured, 5.500% due 1/1/17 ...................................... 3,274,040
-----------
22,385,945
-----------
OHIO -- 4.4%
2,500,000 AA- Franklin County, OH Hospital Revenue, (Holy Cross Health Systems Corp.),
5.875% due 6/1/21 .................................................... 2,624,225
3,300,000 A Ohio State Water Development Authority, Solid Waste Disposal Revenue,
(Broken Hill Proprietary Co., Ltd.), 6.450% due 9/1/20 ............... 3,472,986
-----------
6,097,211
-----------
PENNSYLVANIA -- 4.0%
4,500,000 AAA Delaware Valley, PA Regional Financial Authority, Local Government
Revenue, Series A, AMBAC-Insured, 5.500% due 8/1/28 .................. 5,191,650
250,000 AAA Philadelphia, PA School District, Series A, FSA-Insured, 5.500% due 2/1/31 271,712
-----------
5,463,362
-----------
-----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
PAGE 7
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (continued)
June 30, 2003
FACE
AMOUNT RATING(A) SECURITY VALUE
-----------------------------------------------------------------------------------------------------------------
PUERTO RICO -- 4.3%
$1,600,000 AAA Puerto Rico Commonwealth Highway & Transportation Authority,
Highway Revenue, Series X, FSA-Insured, 5.500% due 7/1/15 ............ $ 1,907,952
1,000,000 AAA Puerto Rico Municipal Finance Agency, Series A, FSA-Insured,
5.250% due 8/1/21 .................................................... 1,092,020
2,500,000 AAA Puerto Rico Public Buildings Authority Revenue Guaranteed Refunding,
(Government Facilities), Series H, XLCA-Insured, 5.250% due 7/1/13 ... 2,910,150
-----------
5,910,122
-----------
TENNESSEE -- 3.2%
1,950,000 AA- Humphreys County, TN IDB, Solid Waste Disposal Revenue,
(E.I. du Pont de Nemours & Co. Project), 6.700% due 5/1/24 ........... 2,046,233
1,200,000 AAA Memphis-Shelby County, TN Airport Authority Revenue, Series D,
AMBAC-Insured, 6.000% due 3/1/24 ..................................... 1,313,004
945,000 AA Tennessee Housing Development Agency, (Homeownership Program),
Series 2C, 6.350% due 1/1/31 ......................................... 1,016,244
-----------
4,375,481
-----------
TEXAS -- 10.6%
Austin, TX Airport System Revenue, Series A, MBIA-Insured:
4,170,000 AAA 6.200% due 11/15/15 .................................................. 4,583,706
330,000 AAA Pre-Refunded - Escrowed with state and local government securities
to 11/15/07 Call @ 100, 6.200% due 11/15/15 ....................... 385,513
2,745,000 AAA Irving, TX Waterworks &Sewer Revenue, (Refunding & Import System
New Lien), FSA-Insured, 5.000% due 8/15/08 ........................... 3,096,360
1,000,000 AAA Lower Colorado River Authority, Texas Revenue Refunding, MBIA-Insured,
5.000% due 5/15/08 ................................................... 1,122,100
1,035,000 AAA Midland, TX Independent School District Refunding, GO, PSFG-Insured,
5.000% due 2/15/12 ................................................... 1,170,916
1,380,000 AAA North Harris Montgomery Community College, District Texas Refunding,
FGIC-Insured, 5.375% due 2/15/16 ..................................... 1,542,812
2,500,000 AAA Texas State Turnpike Authority Revenue, First Tier, Series A,
AMBAC-Insured, 5.500% due 8/15/39 .................................... 2,709,625
-----------
14,611,032
-----------
UTAH -- 0.7%
940,000 AAA Utah State Housing Finance Agency, Single-Family Mortgage, Issue H-2,
6.250% due 7/1/22 .................................................... 983,710
-----------
VIRGINIA -- 3.9%
2,000,000 AA+ Fairfax County, VA EDA, Lease Revenue, (Government Center Properties),
5.500% due 5/15/18 ................................................... 2,061,460
2,915,000 A- Greater Richmond Convention Center Authority, VA Hotel Tax Revenue,
(Convention Center Expansion Project), 6.125% due 6/15/20 ............ 3,270,426
-----------
5,331,886
-----------
-----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
PAGE 8
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (continued)
June 30, 2003
FACE
AMOUNT RATING(A) SECURITY VALUE
-----------------------------------------------------------------------------------------------------------------
WASHINGTON -- 7.3%
$1,900,000 AAA Chelan County, WA Public Utility District, (Chelan Hydro System No. 1),
Construction Revenue, Series A, AMBAC-Insured, 5.450% due 7/1 ........ $ 1,976,456
3,500,000 AAA Energy Northwest, Washington Electric Revenue Refunding, (Project No. 1),
Series A, MBIA-Insured, 5.750% due 7/1/17 ............................ 4,001,900
400,000 AAA Seattle, WA GO, Series B, FSA-Insured, 5.750% due 12/1/28 .............. 446,596
1,950,000 AA+ Washington State GO, Series C, 5.500% due 7/1/18 ....................... 2,294,526
1,200,000 AAA Washington State Public Power Supply System Revenue Refunding,
(Nuclear Project No. 1), Series A, MBIA-Insured, 5.125% due 7/1/17 ... 1,286,328
------------
10,005,806
------------
WISCONSIN -- 1.8%
2,485,000 AA Wisconsin Housing & EDA, Homeownership Revenue, Series G,
6.300% due 9/1/17 .................................................... 2,557,015
------------
WYOMING -- 1.2%
1,590,000 AA Wyoming Community Development Authority, Housing Revenue, Series 1,
6.100% due 12/1/14 ................................................... 1,669,325
------------
Total Investments -- 100.0% (Cost -- $127,088,892**) ................... $137,688,198
============
----------------
(a) All ratings are by Standard & Poor's Ratings Service, except for those which
are identified by an asterisk (*), are rated by Moody's Investors Service.
(b) Security is segregated as collateral for a pending transaction with an
extended settlement.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 10 and 11 for definitions of ratings and abbreviations.
-----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
PAGE 9
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Long-Term Security 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 they are 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 ("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 10
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Short-Term Security 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.
VMIG1 -- 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.
Abbreviations* (unaudited)
ABAG - Association of Bay Area Governors HDC - Housing Development Corporation
AIG - American International Guaranty HFA - Housing Finance Authority
AMBAC - American Municipal Bond Assurance IDA - Industrial Development Authority
Corporation IDB - Industrial Development Board
BAN - Bond Anticipation Notes IDR - Industrial Development Revenue
BIG - Bond Investors Guaranty INFLOS - Inverse Floaters
CGIC - Capital Guaranty Insurance Company ISD - Independent School District
CHFCLI - California Health Facility LEVRRS - Leveraged Reverse Rate Securities
Construction Loan Insurance LOC - Letter of Credit
CONNIE MBIA - Municipal Bond Investors Assurance
LEE - College Construction Loan Association Corporation
COP - Certificate of Participation MVRICS - Municipal Variable Rate Inverse
EDA - Economic Development Authority Coupon Security
EDR - Economic Development Revenue PCR - Pollution Control Revenue
FGIC - Financial Guaranty Insurance Company PSFG - Permanent School Fund Guaranty
FHA - Federal Housing Administration RAN - Revenue Anticipation Notes
FHLMC - Federal Home Loan Mortgage RIBS - Residual Interest Bonds
Corporation RITES - Residual Interest Tax-Exempt Securities
FLAIRS - Floating Adjustable Interest Rate SYCC - Structured Yield Curve Certificate
Securities TAN - Tax Anticipation Notes
FNMA - Federal National Mortgage Association TECP - Tax Exempt Commercial Paper
FRTC - Floating Rate Trust Certificates TOB - Tender Option Bonds
FSA - Financial Security Assurance TRAN - Tax and Revenue Anticipation Notes
GIC - Guaranteed Investment Contract VA - Veterans Administration
GNMA - Government National Mortgage VRDD - Variable Rate Daily Demand
Association VRWE - Variable Rate Wednesday Demand
GO - General Obligation Bonds XLCA - XL Capital Assurance
----------------
* Abbreviations may or may not appear on the schedule of investments.
PAGE 11
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Statement of Assets and Liabilities
June 30, 2003
ASSETS:
Investments, at value (Cost -- $127,088,892) .................. $137,688,198
Cash .......................................................... 136,122
Interest receivable ........................................... 2,067,635
Receivable for securities sold ................................ 495,000
Prepaid expenses .............................................. 13,529
------------
TOTAL ASSETS .................................................. 140,400,484
------------
LIABILITIES:
Payable for securities purchased .............................. 3,117,454
Management fee payable ........................................ 62,704
Accrued expenses .............................................. 132,055
------------
TOTAL LIABILITIES ............................................. 3,312,213
------------
SERIES M AUCTION RATE PREFERRED STOCK
(900 SHARES AUTHORIZED AND ISSUED AT $50,000 PER SHARE) (NOTE 4) 45,000,000
------------
TOTAL NET ASSETS ................................................... $ 92,088,271
============
NET ASSETS:
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 ........................... 1,439,257
Accumulated net realized loss from investment transactions .... (3,200,444)
Net unrealized appreciation of investments .................... 10,599,306
------------
TOTAL NET ASSETS ................................................... $ 92,088,271
============
NET ASSET VALUE, PER SHARE ($92,088,271 / 6,007,094 capital
shares outstanding) ........................................... $15.33
======
------------------------------------------------------------------------------------
See Notes to Financial Statements.
PAGE 12
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Statement of Operations
For the Year Ended June 30, 2003
INVESTMENT INCOME:
Interest....................................................... $ 6,912,345
-----------
EXPENSES:
Management fee (Note 2) ....................................... 771,886
Auction agent fees............................................. 120,490
Shareholder communications..................................... 84,941
Legal.......................................................... 72,529
Audit and tax services ........................................ 65,643
Directors' fees ............................................... 33,496
Transfer agent ................................................ 23,997
Listing fees................................................... 20,316
Custody........................................................ 18,829
Insurance...................................................... 2,527
Other.......................................................... 32,185
-----------
TOTAL EXPENSES................................................. 1,246,839
-----------
NET INVESTMENT INCOME............................................... 5,665,506
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 3):
Net Realized Gain From Investment Transactions (excluding
short-term investments):
Proceeds from sales......................................... 89,206,587
Cost of securities sold..................................... 87,040,294
-----------
NET REALIZED GAIN.............................................. 2,166,293
-----------
Change in Net Unrealized Appreciation of Investments:
Beginning of year........................................... 7,038,116
End of year................................................. 10,599,306
-----------
INCREASE IN NET UNREALIZED APPRECIATION........................ 3,561,190
-----------
NET GAIN ON INVESTMENTS............................................. 5,727,483
-----------
DIVIDENDS PAID TO AUCTION RATE PREFERRED STOCKHOLDERS
FROM NET INVESTMENT INCOME........................................ (560,901)
-----------
INCREASE IN NET ASSETS FROM OPERATIONS.............................. $10,832,088
===========
-------------------------------------------------------------------------------------
See Notes to Financial Statements.
PAGE 13
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Statements of Changes in Net Assets
For the Years Ended June 30,
2003 2002
-------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income .................................. $ 5,665,506 $ 5,995,484
Net realized gain....................................... 2,166,293 1,992,736
Increase (decrease) in net unrealized appreciation...... 3,561,190 (233,802)
Dividends paid to Auction Rate Preferred Stockholders
from net investment income............................ (560,901) (850,313)
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS ................. 10,832,088 6,904,105
----------- -----------
DISTRIBUTIONS PAID TO COMMON STOCK SHAREHOLDERS FROM:
Net investment income................................... (4,865,746) (4,529,350)
----------- -----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS PAID TO
COMMON STOCK SHAREHOLDERS............................. (4,865,746) (4,529,350)
----------- -----------
INCREASE IN NET ASSETS....................................... 5,966,342 2,374,755
NET ASSETS:
Beginning of year....................................... 86,121,929 83,747,174
----------- -----------
END OF YEAR*............................................ $92,088,271 $86,121,929
=========== ===========
* Includes undistributed net investment income of:........... $ 1,439,257 $ 1,200,398
=========== ===========
-------------------------------------------------------------------------------------------
See Notes to Financial Statements.
PAGE 14
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements
Note 1. Organization and Significant Accounting Policies
Salomon Brothers Municipal Partners Fund II Inc. ("Fund"), formerly known as
Municipal Partners Fund II Inc., 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 Manager"), an indirect
wholly-owned subsidary of Citigroup Inc. ("Citigroup"), 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 accounting principles generally accepted in the
United States of America ("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 to common
shareholders monthly from net investment income. Net realized gains, if any, in
excess of loss carryovers are expected to be distributed annually (See Note 7).
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 15
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (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
Note 2. Management and Advisory Fees and Other Transactions
For the period from July 1, 2002 through December 15, 2002, the Fund had entered
into a management agreement with PIMCO Funds Advisors LLC ("PIMCO"), an indirect
wholly-owned subsidiary of Allianz Dresdner Asset Management of America L.P.,
formerly known as PIMCO Advisors L.P., a wholly-owned subsidiary of Allianz AG,
pursuant to which PIMCO, among other things, supervised the Fund's investment
program and monitors the performance of the Fund's service providers.
Effective December 16, 2002, the Fund entered into a new investment advisory and
administration agreement with the Investment Manager. Under the terms of the new
investment advisory and administration agreement approved by shareholders at the
Special Joint Meeting of Stockholders held on December 11, 2002, the Investment
Manager will provide all management, advisory and administrative services for
the Fund and PIMCO will cease to act as investment manager for the Fund. The
Investment Manager has delegated certain administrative services to Smith Barney
Fund Management LLC("SBFM"), another indirect wholly-owned subsidiary of
Citigroup, pursuant to a Sub-Administration Agreement between the Investment
Manager and SBFM.
The Fund pays the Investment Manager a monthly fee at an annual rate of 0.55% 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.
This fee is calculated daily and paid monthly.
Certain officers and/or directors of the Fund are also officers and/or directors
of the Investment Manager.
Note 3. Investments
For the year ended June 30, 2003, the aggregate cost of purchases and proceeds
from sales of investments (including maturities of long-term investments, but
excluding short-term investments) were as follows:
Purchases ..................................................... $93,891,678
===========
Sales ......................................................... $89,206,587
===========
PAGE 16
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (continued)
At June 30, 2003, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
Gross unrealized appreciation ................................. $10,701,574
Gross unrealized depreciation ................................. (102,268)
-----------
Net unrealized appreciation ................................... $10,599,306
===========
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 Stock") at an offering price
of $50,000 per share. The Preferred Stock has 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 7 days and are determined by auction
procedures. The dividend rates on the Preferred Stock during the year ended June
30, 2003 ranged from 0.840% to 1.750%. The weighted average dividend rate for
the year ended June 30, 2003 was 1.246%.
The Fund is subject to certain restrictions relating to the Preferred Stock. 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 Stock would be less than 200%. The Preferred Stock is 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.
The issuance of preferred stock poses certain risks to holders of common stock,
including, among others the possibility of greater market price volatility and
in certain market conditions, the yield to holders of common stock may be
adversely affected.
The Fund is required to maintain certain asset coverages with respect to the
Preferred Stock. If the Fund fails to maintain these coverages and does not cure
any such failure within the required time period, the Fund is required to redeem
a requisite number of the Preferred Stock in order to meet the applicable
requirement. Additionally, failure to meet the foregoing asset requirements
would restrict the Fund's ability to pay dividends.
PAGE 17
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (continued)
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. Events Subsequent to June 30, 2003
COMMON STOCK DIVIDENDS. On May 2, 2003, the Board of Directors of the Fund
declared two common share dividends from net investment income, each in the
amount of $0.068 per share, payable on July 25 and August 29, 2003 to
shareholders of record on July 15 and August 12, 2003, respectively. In addition
on July 18, 2003 the Board of Directors of the Fund declared three common share
dividends from net investment income, each in the amount of $0.068 per share,
payable on September 26, October 31 and November 28, 2003 to shareholders of
record on September 16, October 15 and November 18, 2003, respectively.
PREFERRED STOCK DIVIDENDS. The Board of Directors designated each of the
following dividend periods as a Special Rate Period. With each auction date, the
regular auction procedure resumes, subject to the Fund's ability to designate
any subsequent dividend period as a Special Rate Period.
AUCTION COMMENCEMENT OF RATE EFFECTIVE PREFERRED
DATE RATE PERIOD THROUGH RATE
--------------------------------------------------------------------------------
6/30/03 7/1/03 7/7/03 1.100%
7/7/03 7/8/03 7/14/03 0.850
7/14/03 7/15/03 7/21/03 0.700
7/21/03 7/22/03 7/28/03 0.750
7/28/03 7/29/03 8/4/03 0.810
8/4/03 8/5/03 8/11/03 0.900
--------------------------------------------------------------------------------
Note 7. Capital Loss Carryforward
At June 30, 2003, the Fund had, for Federal income tax purposes, approximately
$3,201,000 of unused capital 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 June 30 of the year indicated:
2004 2005 2007 2008
--------------------------------------------------------------------------------
Carryforward amounts $1,697,000 $810,000 $141,000 $553,000
--------------------------------------------------------------------------------
PAGE 18
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (continued)
Note 8. Income Tax Information and Distributions to Shareholders
At June 30, 2003, the tax basis components of distributable earnings were:
Undistributed tax-exempt income ............................................ $ 1,439,257
===========
Accumulated capital losses ................................................. $(3,200,444)
===========
Unrealized appreciation .................................................... $10,599,306
===========
The tax character of distributions paid during the year ended June 30, 2003 was:
Tax-exempt income .......................................................... $ 5,426,647
===========
PAGE 19
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Financial Highlights
Data for a share of common stock outstanding throughout each year ended June 30:
2003 2002 2001 2000 1999
--------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR......... $14.34 $13.94 $13.09 $13.71 $14.42
------ ------ ------ ------ -------
INCOME (LOSS) FROM OPERATIONS:
Net investment income................... 0.94 1.00 1.04 1.04 1.04
Net realized and unrealized gain (loss). 0.95 0.29 0.86 (0.60) (0.73)
Dividends paid to Auction Rate Preferred
Stockholders from net investment income (0.09) (0.14) (0.30) (0.31) (0.27)
------ ------ ------ ------ -------
Total Income From Operations............... 1.80 1.15 1.60 0.13 0.04
------ ------ ------ ------ -------
DISTRIBUTIONS PAID TO COMMON STOCK
SHAREHOLDERS FROM:
Net investment income................... (0.81) (0.75) (0.75) (0.75) (0.75)
------ ------ ------ ------ -------
Total Distributions Paid to Common
Stock Shareholders...................... (0.81) (0.75) (0.75) (0.75) (0.75)
------ ------ ------ ------ -------
NET ASSET VALUE, END OF YEAR............... $15.33 $14.34 $13.94 $13.09 $13.71
====== ====== ====== ======== ========
PER SHARE MARKET VALUE, END OF YEAR........ $13.92 $13.00 $12.52 $11.5625 $12.3125
====== ====== ====== ======== ========
TOTAL RETURN, BASED ON MARKET PRICE(1)..... 13.78% 10.11% 15.14% 0.26% 2.27%
RATIOS TO AVERAGE NET ASSETS OF
COMMON SHAREHOLDERS(2):
Operating expenses....................... 1.39% 1.35% 1.38% 1.39% 1.30%
Net investment income.................... 6.30 7.02 7.63 7.95 7.23
NET ASSETS OF COMMON SHAREHOLDERS,
END OF YEAR (000S)....................... $92,088 $86,122 $83,747 $78,617 $82,365
PORTFOLIO TURNOVER RATE.................... 67% 52% 15% 40% 19%
AUCTION RATE PREFERRED STOCK:
Total Amount Outstanding (000s).......... $45,000 $45,000 $45,000 $45,000 $45,000
Asset Coverage Per Share................. 152,320 145,691 143,052 137,352 141,517
Involuntary Liquidating Preference Per Share 50,000 50,000 50,000 50,000 50,000
Average Market Value Per Share........... 50,000 50,000 50,000 50,000 50,000
-------------------------------------------------------------------------------------------------------
(1) 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.
(2) 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 stockholders.
PAGE 20
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Report of Independent Auditors
To the Board of Directors and Shareholders of
Salomon Brothers Municipal Partners Fund II Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Salomon Brothers Municipal Partners
Fund II Inc. (the "Fund") at June 30, 2003, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at June
30, 2003 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
August 18, 2003
PAGE 21
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Additional Stockholder Information (unaudited)
RESULT OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Salomon Brothers Municipal Partners Fund
II Inc. was held on October 23, 2002, for the purpose of considering and voting
upon the election of a Director. The following table provides information
concerning the matter voted upon at the Meeting:
1. ELECTION OF A DIRECTOR
PREFERRED
SHARES PREFERRED
FOR SHARES
NOMINEE ELECTION WITHHELD
------------- ---------- -----------
R. Jay Gerken 893 2
PAGE 22
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Additional Information (unaudited) (continued)
INFORMATION ABOUT DIRECTORS AND OFFICERS
The business and affairs of Salomon Brothers Municipal Partners Fund II Inc.
("Fund") are managed under the direction of the Board of Directors. Information
pertaining to the Directors and Officers of the Fund is set forth below.
NUMBER OF
PORTFOLIOS ADVISED
BY SBAM(2)
TERM OF PRINCIPAL AND OVERSEEN BY
POSITION(S) OFFICE(1) AND OCCUPATION(S) DIRECTOR OTHER
HELD WITH LENGTH OF DURING PAST (INCLUDING DIRECTORSHIPS
NAME, ADDRESS AND AGE FUND(1) TIME SERVED FIVE YEARS THE FUND) HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------
NON-INTERESTED DIRECTORS:
Carol L. Colman Director and Since President, 33 None
Colman Consulting Co. Member of 2003 Colman
278 Hawley Road the Audit Consulting Co.
North Salem, NY 10560 Committee,
Age 57 Class II
Daniel P. Cronin Director and Since Associate General 30 None
Pfizer Inc. Member of 2003 Counsel, Pfizer Inc.
235 East 42nd Street the Audit
New York, NY 10017 Committee,
Age 57 Class I
Leslie H. Gelb Director and Since President Emeritus 33 Britannica.com;
The Council on Member of 2000 and Council Board Director of two
Foreign Relations the Audit Fellow of the Council registered
58 East 68th Street Committee, on Foreign Relations investment
New York, NY 10021 Class I companies
Age 66 advised by
Advantage
Advisers, Inc.
("Advantage")
Riordan Roett Director and Since Professor and Director 30 The Latin
The Johns Hopkins University Member of 1997 Latin American Studies America Equity
1740 Massachusetts Ave., NW the Audit Program, The Johns Fund, Inc.
Washington, DC 20036 Committee, Hopkins University
Age 64 Class III
Jeswald W. Salacuse Director and Since Henry J. Braker 30 Director of two
Tufts University Member of 2000 Professor of registered
The Fletcher School of the Audit Commercial Law and investment
Law & Diplomacy Committee, formerly Dean, The companies
160 Packard Avenue Class III Fletcher School of advised by
Medford, MA 02155 Law & Diplomacy, Advantage
Age 65 Tufts University
PAGE 23
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Additional Information (unaudited) (continued)
NUMBER OF
PORTFOLIOS ADVISED
BY SBAM(2)
TERM OF PRINCIPAL AND OVERSEEN BY
POSITION(S) OFFICE(1) AND OCCUPATION(S) DIRECTOR OTHER
HELD WITH LENGTH OF DURING PAST (INCLUDING DIRECTORSHIPS
NAME, ADDRESS AND AGE FUND(1) TIME SERVED FIVE YEARS THE FUND) HELD BY DIRECTOR
---------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTOR:
R. Jay Gerken, CFA Director, Since Managing Director 219 None
CGM Chairman 2002 of Citigroup Global
399 Park Avenue and Chief Markets Inc. ("CGM");
4th Floor Executive Officer, Chairman, President,
New York, NY 10022 Class II Chief Executive Officer
Age 52 and Director of
Smith Barney Fund
Management LLC
("SBFM"), Travelers
Investment Adviser, Inc.
("TIA") and Citi Fund
Management Inc.
OFFICERS:
Peter J. Wilby, CFA President Since Managing Director N/A N/A
CGM 2002 of CGM and Salomon
399 Park Avenue Brothers Asset
4th Floor Management Inc
New York, NY 10022 ("SBAM") since
Age 44 January 1996
Lewis E. Daidone Executive Vice Since Managing Director of N/A N/A
CGM President and 2002 CGM; Director and
125 Broad Street Chief Senior Vice President
11th Floor Administrative of SBFM and TIA;
New York, NY 10004 Officer Former Chief
Age 45 Financial Officer and
Treasurer of the mutual
funds affiliated with
Citigroup Inc.
Robert E. Amodeo Executive Vice Since Managing Director of N/A N/A
CGM President 1999 SBAM and CGM
399 Park Avenue since December 2001;
4th Floor Director of SBAM and
New York, NY 10022 CGM since December
Age 36 1998; Vice President of
SBAM and CGM from
January 1996 to
December 1998
PAGE 24
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Additional Information (unaudited) (continued)
NUMBER OF
PORTFOLIOS ADVISED
BY SBAM(2)
TERM OF PRINCIPAL AND OVERSEEN BY
POSITION(S) OFFICE(1) AND OCCUPATION(S) DIRECTOR OTHER
HELD WITH LENGTH OF DURING PAST (INCLUDING DIRECTORSHIPS
NAME, ADDRESS AND AGE FUND(1) TIME SERVED FIVE YEARS THE FUND) HELD BY DIRECTOR
-------------------------------------------------------------------------------------------------------------
Frances M. Guggino Controller Since Vice President N/A N/A
CGM 2002 of CGM
125 Broad Street
10th Floor
New York, NY 10004
Age 45
Christina T. Sydor Secretary Since Managing Director N/A N/A
CGM 1998 of CGM; General
300 First Stamford Place Counsel and
4th Floor Secretary of
Stamford, CT 06902 SBFM and TIA
Age 52
-------------------
(1) The Fund's Board of Directors is divided into three classes: Class I, Class
II and Class III. The terms of office of the Class I, II and III Directors
expire at the Annual Meetings of Stockholders in the year 2003, year 2005
and year 2004, respectively, or thereafter in each case when their
respective successors are duly elected and qualified. The Fund's executive
officers are chosen each year at the first meeting of the Fund's Board of
Directors following the Annual Meeting of Stockholders, to hold office until
the meeting of the Board following the next Annual Meeting of Stockholders
and until their successors are duly elected and qualified.
(2) Number of portfolios advised by Salomon Brothers Asset Management Inc
("SBAM") or affiliates of SBAM.
PAGE 25
SALOMON BROTHERS 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
EquiServe Trust Company, N.A. ("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 26
SALOMON BROTHERS 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 43010, Providence, Rhode Island 02940-3010.
____________________________________
This report is transmitted to the shareholders of Salomon Brothers Municipal
Partners Fund II Inc. for their information. This is not a prospectus, circular
or representation intended for use in the purchase of shares of the Fund or any
securities mentioned in this report.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock in the open market.
PAGE 27
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Tax Information (unaudited)
For Federal tax purposes, the Fund hereby designates for the fiscal year ended
June 30, 2003:
o 100% of the dividends paid by the Fund from net investment income as
tax-exempt for regular Federal income tax purposes.
PAGE 28
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Directors Salomon Brothers Municipal Partners Fund II Inc.
125 Broad Street
CAROL L. COLMAN 10th Floor, MF-2
DANIEL P. CRONIN New York, New York 10004
LESLIE H. GELB Telephone 1-888-777-0102
R. JAY GERKEN, CFA
RIORDAN ROETT INVESTMENT MANAGER
JESWALD W. SALACUSE Salomon Brothers Asset Management Inc
399 Park Avenue
New York, New York 10022
Officers
AUCTION AGENT
R. JAY GERKEN, CFA Deutsche Bank
Chairman and Chief Executive Officer 60 Wall Street
New York, New York 10005
PETER J. WILBY, CFA
President CUSTODIAN
State Street Bank and Trust Company
LEWIS E. DAIDONE 225 Franklin Street
Executive Vice President and Boston, Massachusetts 02110
Chief Administrative Officer
DIVIDEND DISBURSING AND TRANSFER AGENT
ROBERT E. AMODEO EquiServe Trust Company, N.A.
Executive Vice President P.O. Box 43010
Providence, Rhode Island 02940-3010
FRANCES M. GUGGINO
Controller LEGAL COUNSEL
Simpson Thacher & Bartlett LLP
CHRISTINA T. SYDOR 425 Lexington Avenue
Secretary New York, New York 10017
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
NEW YORK STOCK EXCHANGE SYMBOL
MPT
PAGE 29
(This page intentionally left blank.)
EquiServe Trust Company, N.A.
P.O. Box 43010
Providence, Rhode Island 02940-3010
Salomon Brothers Municipal Partners
Fund II Inc.
Annual Report
JUNE 30, 2003
MPTANN 6/03
03-5288
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment Company
Act of 1940, as amended) are effective based on their evaluation of
the disclosure controls and procedures as of a date within 90 days
of the filing date of this document.
(b) In the last 90 days, there have been no significant changes in the
Registrant's internal controls or in other factors that could
significantly affect these controls.
ITEM 10. EXHIBITS.
(a) Not applicable.
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly caused this
Report to be signed on its behalf by the undersigned, there unto duly
authorized.
Salomon Brothers Municipal Partners Fund II Inc.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Salomon Brothers Municipal Partners Fund II Inc.
Date: August 28, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
(R. Jay Gerken)
Chief Executive Officer of
Salomon Brothers Municipal Partners Fund II Inc.
Date: August 28, 2003
By: /s/ Lewis E. Daidone
Chief Administrative Officer of
Salomon Brothers Municipal Partners Fund II Inc.
Date: August 28, 2003