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)
Robert I. Frenkel, Esq.
Salomon Brothers Asset Management Inc
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: DECEMBER 31, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
The SEMI-ANNUAL Report to Stockholders is filed herewith.
[INSERT SHAREHOLDER REPORT]
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Letter from the Chairman
Dear Shareholder,
Despite the challenging environment for bonds over the second half of 2003, your
fund generated positive returns. During the six months, bonds shed some of the
gains they had generated earlier in the year amid signs of a sharp pick-up in
the pace of third-quarter economic growth. Although the improvement in the
economy exerted pressure on bond prices, municipalities benefited from increased
tax revenues. Over the period, investment-grade municipal bonds generated better
total returns than comparable-maturity U.S. Treasuries. i
Within this environment, the fund returned 0.57%, based on its New York Stock
Exchange ("NYSE") market price and 1.63% based on its net asset value ("NAV") ii
per share. In comparison, the unmanaged Lehman Brothers Municipal Bond Index iii
returned 1.45% and the fund's Lipper general municipal debt (leveraged)
closed-end funds category average returned 3.22% over the same time frame. iv
Please note that Lipper performance returns are based on each fund's NAV.
During this six-month period, the fund distributed dividends to shareholders
totaling $0.408 per share. The performance table shows the fund's annualized
distribution yields as well as its six-month total return based on its NAV and
market price as of December 31, 2003. Certain investors may be subject to the
federal Alternative Minimum Tax, and state and local taxes will apply. Capital
gains, if any, are fully taxable. Please consult your personal tax adviser. PAST
PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
FUND PERFORMANCE
AS OF DECEMBER 31, 2003
Annualized Six-Month
Distribution Total
Price Per Share Yield Return
------------------------------------------------
$15.16 (NAV) 5.38% 1.63%
$13.58 (NYSE) 6.01% 0.57%
Total returns are based on changes in NAV or market
price, respectively. Total returns assume the
reinvestment of all dividends and/or capital gains
distributions, if any, 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 December 31, 2003 and is subject to change.
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Looking for Additional Information?
The fund is traded under the symbol "MPT" and its closing market price is
available in most newspapers under the NYSE 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 as well as
www.citigroupassetmanagement.com.
In a continuing effort to provide information concerning the fund, 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, for the fund's current NAV, market price
and other information.
Information About Your Fund
In recent months several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The fund's Adviser and some of its
affiliates have received requests for information from various government
regulators regarding market timing, late trading, fees and other mutual fund
issues in connection with various investigations. The fund has been informed
that the Adviser and its affiliates are responding to those information
requests, but are not in a position to predict the outcome of these requests and
investigations.
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/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman and Chief Executive Officer
January 12, 2004
The information provided 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 December 31, 2003 and are subject to
change. Please refer to pages 3 through 7 for a list and percentage breakdown of
the fund's holdings.
All index performance reflects no deduction for fees, expenses or taxes.
i Source: Based upon the total returns of municipal bonds and U.S. Treasury
bonds from index data derived from Lehman Brothers and Lipper Inc.,
respectively. Bear in mind that unlike most other investments, U.S.
Treasuries are guaranteed by the U.S. Government as to the timely payment
of principal and interest.
ii NAV is a price that reflects the value of the fund's underlying portfolio
plus other assets, less the fund's liabilities. 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,
which may be more or less than the fund's NAV.
iii The Lehman Brothers Municipal Bond Index is a broad measure of the
municipal bond market with maturities of at least one year. Please note
that an investor cannot invest directly in an index.
iv Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the six-month period ended December 31, 2003,
calculated among the 64 funds in the fund's Lipper category including the
reinvestment of dividends and capital gains, if any.
Page 2
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (unaudited)
December 31, 2003
Face
Amount Rating(a) Security Value
-----------------------------------------------------------------------------------------------------------------
Long-Term Investments -- 99.9%
California -- 2.2%
$2,850,000 AA- California Housing Finance Agency Home Mortgage Revenue, Series H,
6.150% due 8/1/16 .......................................................... $ 2,983,209
-----------
District of Columbia -- 1.6%
2,000,000 AAA District of Columbia Revenue, (American University), AMBAC-Insured,
5.625% due 10/1/26 ......................................................... 2,159,780
-----------
Florida -- 0.9%
1,000,000 AAA St. Johns County, FL Water and Sewer Revenue, MBIA-Insured,
5.500% due 6/1/11 .......................................................... 1,155,540
-----------
Georgia -- 0.0%
60,000 AAA Fulton County, GA Housing Authority, Single-Family Mortgage, Series A,
GNMA-Collateralized, 6.600% due 3/1/28 ..................................... 61,225
-----------
Illinois -- 19.9%
Chicago, IL Board of Education, (Chicago School Reform):
1,000,000 AAA AMBAC-Insured, 5.750% due 12/1/27 .......................................... 1,111,380
4,255,000 AAA MBIA-Insured, 6.000% due 12/1/16 ........................................... 4,793,258
1,750,000 AAA Chicago, IL Midway Airport Revenue, Series B, MBIA-Insured,
5.625% due 1/1/29 .......................................................... 1,855,928
1,000,000 AAA Chicago, IL Public Building Commission Building Revenue,(Chicago
School Reform), Series B, FGIC-Insured, 5.250% due 12/1/18 ................. 1,126,150
250,000 AAA Cook County, IL Refunding GO, Series A, MBIA-Insured,
5.625% due 11/15/16 ........................................................ 279,598
2,000,000 Aaa* Illinois Development Finance Authority, Revolving Fund Revenue,
5.250% due 9/1/12 .......................................................... 2,270,800
1,000,000 AA+ Illinois Educational Facilities Authority Revenue, (Northwestern University),
5.500% due 12/1/13 ......................................................... 1,157,940
Illinois Health Facilities Authority Revenue:
1,850,000 AAA Refunding, (SSM Health Care), MBIA-Insured, 6.550% due 6/1/13 .............. 2,261,329
2,000,000 AAA Servantcor Project, Series A, Escrowed to maturity with U.S. government
securities, FSA-Insured, 6.000% due 8/15/12 .............................. 2,379,000
605,000 A South Suburban Hospital Project, Escrowed to maturity with U.S. government
securities, 7.000% due 2/15/18 ........................................... 764,962
Illinois State, MBIA-Insured:
2,000,000 AAA 5.000% due 6/1/13 .......................................................... 2,237,660
3,000,000 AAA First Series, 5.500% due 8/1/17 ............................................ 3,467,970
2,645,000 AAA Illinois State, Sales Tax Revenue, 5.500% due 6/15/16 ........................ 2,970,309
-----------
26,676,284
-----------
------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 3
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (unaudited) (continued)
December 31, 2003
Face
Amount Rating(a) Security Value
-----------------------------------------------------------------------------------------------------------------
Indiana -- 1.8%
$2,000,000 BBB+ Indiana State Development Finance Authority, Environmental Revenue,
(USX Corp. Project), 5.250% due 12/1/22 .................................. $ 2,163,440
250,000 AAA Indiana State Revolving Fund Revenue, Series B, 5.000% due 8/1/23 .......... 258,110
-----------
2,421,550
-----------
Louisiana -- 3.8%
5,000,000 BBB+ Louisiana Public Facilities Authority, Hospital Revenue Refunding,
(Touro Infirmary Project), Series A, 6.125% due 8/15/23 .................. 5,061,400
-----------
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 ....................... 1,583,820
500,000 A University of Maryland Medical Systems, 6.000% due 7/1/32 .................. 531,435
2,000,000 Aaa* Northeast Maryland Waste Disposal Authority, Solid Waste Revenue
Refunding, AMBAC-Insured, 5.500% due 4/1/16 .............................. 2,213,620
-----------
4,328,875
-----------
Massachusetts -- 4.1%
1,250,000 AAA Massachusetts State GO, Series C, FGIC-Insured, 5.500% due 11/1/15 ......... 1,456,137
1,000,000 A Massachusetts State Health & Educational Facilities Authority Revenue,
(Dana Farber Cancer Project), Series G-1, 6.250% due 12/1/22 ............. 1,056,370
2,650,000 AAA Massachusetts State Water Pollution Abatement, Series A,
5.750% due 8/1/29 ........................................................ 2,963,839
-----------
5,476,346
-----------
Michigan -- 2.0%
1,000,000 AAA Detroit, MI City School District, (School Building & Site Improvement),
Series A, FGIC-Insured, 5.500% due 5/1/17 ................................ 1,131,640
1,500,000 AA- Michigan State Hospital Finance Authority, Revenue Refunding,
(Trinity Health), Credit C, 5.375% due 12/1/30 ........................... 1,542,180
-----------
2,673,820
-----------
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 ....................................................... 2,767,700
-----------
Nevada -- 4.2%
Clark County, NV:
3,000,000 AAA IDR Refunding, (Nevada Power Co. Project), Series C, AMBAC-Insured,
7.200% due 10/1/22 ..................................................... 3,138,300
1,000,000 AAA Passenger Facility Revenue, (McCarran International Airport), Series A,
MBIA-Insured, 5.750% due 7/1/23 ........................................ 1,065,750
300,000 AAA Nevada Housing Division, Single-Family Program, Series C,
AMBAC-Insured, 6.350% due 10/1/12 ........................................ 311,334
------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 4
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (unaudited) (continued)
December 31, 2003
Face
Amount Rating(a) Security Value
-----------------------------------------------------------------------------------------------------------------
Nevada -- 4.2% (Continued)
$1,000,000 AAA Washoe County, NV School District, Series B, FGIC-Insured,
5.500% due 6/1/16 ........................................................ $ 1,157,320
-----------
5,672,704
-----------
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 ..... 1,063,780
1,000,000 AAA New Jersey State Transportation Trust Fund Authority, Transportation System,
Series B, (Pre-Refunded - Escrowed with U.S. government securities to
12/15/11 Call @ 100), MBIA-Insured, 6.000% due 12/15/19 .................. 1,202,510
-----------
2,266,290
-----------
New York -- 11.8%
New York City, NY GO, Series A:
180,000 A 6.000% due 5/15/30 ....................................................... 196,151
820,000 A Pre-Refunded - Escrowed with U.S. government securities to
5/15/10 (Call @ 101), 6.000% due 5/15/30 ............................... 979,588
1,600,000 AA New York City, NY Municipal Water Finance Authority, Water & Sewer
System Revenue, Series A, 5.500% due 6/15/23 ............................ 1,675,616
4,500,000 AA+ New York City, NY Transitional Finance Authority Revenue, Series A,
5.500% due 11/15/17 ...................................................... 5,075,010
190,000 Aaa* New York State Mortgage Agency Revenue, 24th Series, 6.125% due 10/1/30 .... 194,543
New York State Urban Development Corp. Revenue, Correctional Facilities:
1,500,000 AAA Pre-Refunded - Escrowed with U.S. government securities to
1/1/06 (Call @ 102), AMBAC-Insured, 5.375% due 1/1/25 .................. 1,643,850
1,300,000 AAA Pre-Refunded - Escrowed with U.S. government securities to
1/1/06 (Call @ 102), FSA-Insured, 5.375% due 1/1/25 .................... 1,424,670
4,400,000 AAA Port Authority of New York and New Jersey Construction, 96th Series,
FGIC-Insured, 6.600% due 10/1/23 ........................................ 4,612,344
-----------
15,801,772
-----------
Ohio -- 4.5%
2,500,000 AA- Franklin County, OH Hospital Revenue, (Holy Cross Health Systems Corp.),
5.875% due 6/1/21 ........................................................ 2,610,350
3,300,000 A+ Ohio State Water Development Authority, Solid Waste Disposal Revenue,
(Broken Hill Proprietary Co., Ltd.), 6.450% due 9/1/20 ................... 3,448,005
-----------
6,058,355
-----------
Oregon -- 2.1%
2,500,000 AAA Oregon State Department of Administration Services Revenue, FSA-Insured,
5.000% due 9/1/12 ........................................................ 2,815,950
-----------
--------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 5
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (unaudited) (continued)
December 31, 2003
Face
Amount Rating(a) Security Value
-----------------------------------------------------------------------------------------------------------------
Pennsylvania -- 4.8%
$3,500,000 AAA Delaware Valley, PA Regional Financial Authority, Local Government
Revenue, Series A, AMBAC-Insured, 5.500% due 8/1/28 ...................... $ 3,936,275
2,000,000 AAA Philadelphia, PA GO, Series A, XLCA-Insured, 5.250% due 2/15/14 ............ 2,243,020
250,000 AAA Philadelphia, PA School District, Series A, FSA-Insured, 5.500% due 2/1/31 . 267,647
-----------
6,446,942
-----------
Puerto Rico -- 3.3%
2,250,000 AAA Puerto Rico Commonwealth, GO, FGIC-Insured, 5.500% due 7/1/13 .............. 2,634,840
1,600,000 AAA Puerto Rico Commonwealth Highway & Transportation Authority,
Highway Revenue, Series X, FSA-Insured, 5.500% due 7/1/15 ................ 1,875,968
-----------
4,510,808
-----------
Tennessee -- 3.1%
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 ............... 2,017,372
1,200,000 AAA Memphis-Shelby County, TN Airport Authority Revenue, Series D,
AMBAC-Insured, 6.000% due 3/1/24 ......................................... 1,333,356
805,000 AA Tennessee Housing Development Agency, (Homeownership Program),
Series 2C, 6.350% due 1/1/31 ............................................. 860,175
-----------
4,210,903
-----------
Texas -- 12.1%
Austin, TX Airport System Revenue, Series A, MBIA-Insured:
4,170,000 AAA 6.200% due 11/15/15 ...................................................... 4,553,640
330,000 AAA Pre-Refunded - Escrowed with state & local government securities to
11/15/07 (Call @ 100), 6.200% due 11/15/15 ............................. 377,015
4,265,000 AAA Lower Colorado River Authority, TX Transmission Contract Revenue,
FGIC-Insured, 5.250% due 5/15/14 ......................................... 4,802,347
1,380,000 AAA North Harris Montgomery Community College District, TX Refunding,
FGIC-Insured, 5.375% due 2/15/16 ......................................... 1,532,642
Texas State Turnpike Authority Revenue:
1,500,000 AAA First Tier, Series A, AMBAC-Insured, 5.500% due 8/15/39 .................. 1,612,455
3,000,000 AA Second Tier, 5.000% due 6/1/08 ........................................... 3,320,970
-----------
16,199,069
-----------
Utah -- 0.7%
940,000 AAA Utah State Housing Finance Agency, Single-Family Mortgage, Issue H-2,
6.250% due 7/1/22 ........................................................ 978,766
-----------
Virginia -- 4.0%
2,000,000 AA+ Fairfax County, VA EDA Lease Revenue, (Government Center Properties),
5.500% due 5/15/18 ....................................................... 2,072,940
2,915,000 A- Greater Richmond Convention Center Authority, VA Hotel Tax Revenue,
(Convention Center Expansion Project), 6.125% due 6/15/20 ................ 3,286,867
-----------
5,359,807
-----------
--------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 6
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (unaudited) (continued)
December 31, 2003
Face
Amount Rating(a) Security Value
-----------------------------------------------------------------------------------------------------------------
Washington -- 4.4%
$1,900,000 AAA Chelan County, WA Public Utility District, (Chelan Hydro System No. 1),
Construction Revenue, Series A, AMBAC-Insured, 5.450% due 7/1/37 ......... $ 1,977,976
400,000 AAA Seattle, WA GO, Series B, FSA-Insured, 5.750% due 12/1/28 .................. 442,452
1,950,000 AA+ Washington State GO, Series C, 5.500% due 7/1/18 ........................... 2,253,147
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 ....... 1,290,384
------------
5,963,959
------------
Wisconsin -- 1.6%
2,075,000 AA Wisconsin Housing & EDA, Homeownership Revenue, Series G,
6.300% due 9/1/17 ........................................................ 2,104,527
------------
Total Long-Term Investments (Cost -- $125,433,257) ......................... 134,155,581
------------
Short-Term Investments -- 0.1%
District of Columbia -- 0.1%
100,000 A-1+ District of Columbia Revenue, (MultiModal - Medlantic), Series C,
FSA-Insured, VRDD, 1.000% due 8/15/38 (Cost -- $100,000) ................. 100,000
------------
Total Investments -- 100.0% (Cost -- $125,533,257**) ....................... $134,255,581
============
---------------------
(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.
** Aggregate cost for Federal income tax purposes is substantially the same.
See pages 8 and 9 for definitions of ratings and abbreviations.
------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 7
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 8
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 in the schedule of investments.
Page 9
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Statement of Assets and Liabilities (unaudited)
December 31, 2003
ASSETS:
Investments, at value (Cost -- $125,533,257) ................ $134,255,581
Cash ........................................................ 94,153
Interest receivable ......................................... 1,842,311
Receivable for securities sold .............................. 25,000
------------
Total Assets ................................................ 136,217,045
------------
LIABILITIES:
Management fee payable ...................................... 63,203
Dividends payable to Auction Rate Preferred Stockholders .... 3,451
Accrued expenses ............................................ 107,843
------------
Total Liabilities ........................................... 174,497
------------
Series M Auction Rate Preferred Stock
(900 shares authorized and issued at $50,000 per share) (Note 4) 45,000,000
------------
Total Net Assets ............................................... $ 91,042,548
============
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 ......................... 1,575,642
Accumulated net realized loss from investment transactions .. (2,505,570)
Net unrealized appreciation of investments .................. 8,722,324
------------
Total Net Assets ............................................... $ 91,042,548
============
Net Asset Value, Per Share of Common Stock
($91,042,548 / 6,007,094 shares outstanding) ................. $15.16
======
------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 10
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Statement of Operations (unaudited)
For the Six Months Ended December 31, 2003
INVESTMENT INCOME:
Interest................................................... $ 3,421,675
-----------
EXPENSES:
Management fee (Note 2) ................................... 371,847
Auction agent fees......................................... 60,740
Shareholder communications................................. 38,055
Audit and tax services .................................... 37,565
Directors' fees ........................................... 37,298
Transfer agent ............................................ 13,676
Legal...................................................... 13,640
Listing fees............................................... 13,529
Custody.................................................... 8,093
Insurance.................................................. 1,012
Other...................................................... 11,248
-----------
Total Expenses............................................. 606,703
-----------
Net Investment Income......................................... 2,814,972
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3):
Realized Gain From Investment Transactions (excluding
short-term investments):
Proceeds from sales...................................... 35,147,359
Cost of securities sold.................................. 34,452,485
-----------
Net Realized Gain.......................................... 694,874
-----------
Change in Net Unrealized Appreciation of Investments:
Beginning of period...................................... 10,599,306
End of period............................................ 8,722,324
-----------
Decrease in Net Unrealized Appreciation.................... (1,876,982)
-----------
Net Loss on Investments....................................... (1,182,108)
-----------
Dividends Paid to Auction Rate Preferred Stockholders
From Net Investment Income.................................. (227,693)
-----------
Increase in Net Assets From Operations........................ $ 1,405,171
===========
-------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 11
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Statements of Changes in Net Assets
For the Six Months Ended December 31, 2003 (unaudited)
and the Year Ended June 30, 2003
December 31 June 30
------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income ................................ $ 2,814,972 $ 5,665,506
Net realized gain............................. 694,874 2,166,293
Increase (decrease) in net unrealized appreciation (1,876,982) 3,561,190
Dividends paid to Auction Rate Preferred Stockholders
from net investment income.......................... (227,693) (560,901)
----------- -----------
Increase in Net Assets From Operations ............... 1,405,171 10,832,088
----------- -----------
DISTRIBUTIONS PAID TO COMMON STOCK SHAREHOLDERS FROM:
Net investment income................................. (2,450,894) (4,865,746)
----------- -----------
Decrease in Net Assets From Distributions Paid to
Common Stock Shareholders........................... (2,450,894) (4,865,746)
----------- -----------
Increase (Decrease) in Net Assets........................ (1,045,723) 5,966,342
NET ASSETS:
Beginning of period................................... 92,088,271 86,121,929
End of period*........................................ $91,042,548 $92,088,271
=========== ===========
* Includes undistributed net investment income of: ...... $1,575,642 $1,439,257
========== ==========
------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 12
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (unaudited)
Note 1. Organization and Significant Accounting Policies
Salomon Brothers 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
("SBAM"), 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.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME. Investment 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, at least, 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
Page 13
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (unaudited) (continued)
in 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
The Fund entered into a new investment advisory and administration agreement
with SBAM. SBAM provides all management, advisory and administrative services
for the Fund. SBAM 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 SBAM and SBFM.
The Fund pays SBAM 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 SBAM.
Note 3. Investments
For the six months ended December 31, 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 ................................................. $32,906,253
===========
Sales ..................................................... $35,147,359
===========
At December 31, 2003, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
Gross unrealized appreciation ............................. $8,889,756
Gross unrealized depreciation ............................. (167,432)
-----------
Net unrealized appreciation ............................... $8,722,324
===========
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.
Page 14
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (unaudited) (continued)
Dividend rates generally reset every 7 days and are determined by auction
procedures. The dividend rates on the Preferred Stock during the six months
ended December 31, 2003 ranged from 0.700% to 1.400%. The weighted average
dividend rate for the six months ended December 31, 2003 was 1.005%.
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.
Note 5. Concentration of Risk
Since theFund 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 December 31, 2003
Common Stock Dividends. On October 24, 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 January 30, and February 27, 2004 to
shareholders of record on January 13 and February 18, 2004, respectively. In
addition on February 5, 2004, 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 March 26, April 30 and May 28, 2004 to shareholders of
record on March 16, April 20 and May 18, 2004, respectively.
Page 15
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (unaudited) (continued)
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
------------------------------------------------------------------------------
12/29/03 12/30/03 1/5/04 1.400%
1/5/04 1/6/04 1/12/04 1.230
1/12/04 1/13/04 1/19/04 1.070
1/16/04 1/20/04 1/26/04 1.100
1/26/04 1/27/04 2/2/04 1.050
2/2/04 2/3/04 2/9/04 1.050
------------------------------------------------------------------------------
Note 7. Additional Information
The Fund has received the following information from Citigroup Asset Management
("CAM"), the Citigroup business unit which includes the Fund's Investment
Manager and other investment advisory companies, all of which are indirect,
wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry, through an
affiliate, into the transfer agent business in the period 1997-1999. As CAM
currently understands the facts, at the time CAM decided to enter the transfer
agent business, CAM sub-contracted for a period of five years certain of the
transfer agency services to a third party and also concluded a revenue guarantee
agreement with this sub-contractor providing that the sub-contractor would
guarantee certain benefits to CAM or its affiliates (the "Revenue Guarantee
Agreement"). In connection with the subsequent purchase of the sub-contractor's
business by an affiliate of the current sub-transfer agent (PFPC Inc.) used by
CAM on many of the funds it manages, this Revenue Guarantee Agreement was
amended eliminating those benefits in exchange for arrangements that included a
one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the Revenue
Guarantee Agreement with the sub-contractor at the time the Boards considered
and approved the transfer agent arrangements. Nor were the Boards informed of
the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable funds
approximately $17 million (plus interest) that CAM and its affiliates received
from the Revenue Guarantee Agreement and its amendment. The Fund did not
implement the contractual arrangement described above and therefore will not
receive any portion of the payment. CAM also plans an independent review to
verify that the transfer agency fees charged by CAM were fairly priced as
compared to competitive alternatives. CAM is instituting new procedures and
making changes designed to ensure no similar arrangements are entered into in
the future.
Page 16
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (unaudited) (continued)
CAM has briefed the SEC, the New York State Attorney General and other
regulators with respect to this matter, as well as the U.S. Attorney who is
investigating the matter. CAM is cooperating with governmental authorities on
this matter, the ultimate outcome of which is not yet determinable.
The Fund's transfer agent is EquiServe Trust Company, N.A., which is not
affiliated with CAM or PFPC Inc.
Page 17
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Financial Highlights
Data for a share of common stock outstanding throughout each year ended June 30,
unless otherwise noted:
2003(1) 2003 2002 2001 2000 1999
--------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period .......... $15.33 $14.34 $13.94 $13.09 $13.71 $14.42
------ ------ ------ ------ ------ ------
Income (Loss) From Operations:
Net investment income........................ 0.47 0.94 1.00 1.04 1.04 1.04
Net realized and unrealized gain (loss) ..... (0.19) 0.95 0.29 0.86 (0.60) (0.73)
Dividends paid to Auction Rate Preferred
Stockholders from net investment income ... (0.04) (0.09) (0.14) (0.30) (0.31) (0.27)
------ ------ ------ ------ ------ ------
Total Income From Operations................... 0.24 1.80 1.15 1.60 0.13 0.04
------ ------ ------ ------ ------ ------
Distributions Paid to Common Stock
Shareholders From:
Net investment income........................ (0.41) (0.81) (0.75) (0.75) (0.75) (0.75)
------ ------ ------ ------ ------ ------
Total Distributions Paid to Common
Stock Shareholders........................... (0.41) (0.81) (0.75) (0.75) (0.75) (0.75)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period ................ $15.16 $15.33 $14.34 $13.94 $13.09 $13.71
====== ====== ====== ====== ====== ======
Per Share Market Value, End of Period ......... $13.58 $13.92 $13.00 $12.52 $11.5625 $12.3125
====== ====== ====== ====== ======== ========
Total Return, Based on Market Price(2) ........ 0.57%++ 13.78% 10.11% 15.14% 0.26% 2.27%
Ratios to Average Net Assets of
Common Shareholders(3):
Operating expenses........................... 1.34%+ 1.39% 1.35% 1.38% 1.39% 1.30%
Net investment income........................ 6.24%+ 6.30% 7.02% 7.63% 7.95% 7.23%
Net Assets of Common Shareholders,
End of Period (000s)......................... $91,043 $92,088 $86,122 $83,747 $78,617 $82,365
Portfolio Turnover Rate...... 25% 67% 52% 15% 40% 19%
Auction Rate Preferred Stock:
Total Amount Outstanding (000s) ............. $45,000 $45,000 $45,000 $45,000 $45,000 $45,000
Asset Coverage Per Share..................... 151,159 152,320 145,691 143,052 137,352 141,517
Involuntary Liquidating Preference Per Share 50,000 50,000 50,000 50,000 50,000 50,000
Average Market Value Per Share .............. 50,000 50,000 50,000 50,000 50,000 50,000
---------------------------------------------------------------------------------------------------------
(1) For the six months ended December 31, 2003 (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 stockholders.
++ Total return is not annualized, as it may not be representative of the
total return for the year.
+ Annualized.
Page 18
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Additional Shareholder Information (unaudited)
Result of Annual Meeting of Shareholders
The Annual Meeting of Shareholders of Salomon Brothers Municipal Partners Fund
II Inc. was initially held on October 9, 2003 and was then adjourned to November
13, 2003, for the purpose of considering and voting upon the election of
Directors. The following table provides information concerning the matter voted
upon at the Meeting:
1. Election of Directors* Common Shares Preferred Shares
--------------------------- --------------------------
Nominees Votes For Votes Withheld Votes For Votes Withheld
-------- --------- -------------- --------- --------------
Carol L. Colman........... 5,283,800 54,466 549 0
Daniel P. Cronin.......... 5,284,800 53,466 549 0
Leslie H. Gelb............ 5,259,800 78,466 549 0
William R. Hutchinson..... 5,284,800 53,466 549 0
Riordan Roett............. N/A N/A 549 0
*At December 31, 2003, in addition to Carol L. Colman, Daniel P. Cronin,
Leslie H. Gelb, William R. Hutchinson and Riordan Roett, the other Directors
of the Fund were as follows:
R. Jay Gerken
Jeswald W. Salacuse
Page 19
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 20
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.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by telephoning the Fund (toll-free) at 1-800-446-1013 and by
visiting the SEC's web site at www.sec.gov.
Page 21
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Directors Salomon Brothers Municipal Partners Fund II Inc.
CAROL L. COLMAN 125 Broad Street
DANIEL P. CRONIN 10th Floor, MF-2
LESLIE H. GELB New York, New York 10004
R. JAY GERKEN, CFA Telephone 1-888-777-0102
WILLIAM R. HUTCHINSON
RIORDAN ROETT INVESTMENT MANAGER
JESWALD W. SALACUSE Salomon Brothers Asset Management Inc
399 Park Avenue
Officers New York, New York 10022
R. JAY GERKEN, CFA
Chairman and Chief Executive Officer AUCTION AGENT
PETER J. WILBY, CFA Deutsche Bank
President 60 Wall Street
ANDREW B. SHOUP* New York, New York 10005
Senior Vice President,
Chief Administrative Officer CUSTODIAN
and Treasurer State Street Bank and Trust Company
ROBERT E. AMODEO 225 Franklin Street
Executive Vice President Boston, Massachusetts 02110
FRANCES M. GUGGINO
Controller DIVIDEND DISBURSING AND TRANSFER AGENT
ROBERT I. FRENKEL EquiServe Trust Company, N.A.
Secretary and P.O. Box 43010
Chief Legal Officer Providence, Rhode Island 02940-3010
LEGAL COUNSEL
-------------- Simpson Thacher & Bartlett LLP
* Elected Treasurer as of January 20, 2004. 425 Lexington Avenue
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 22
Salomon Brothers
Municipal Partners
Fund II Inc.
Semi-Annual Report
DECEMBER 31, 2003
EquiServe Trust Company, N.A.
P.O. Box 43010
Providence, Rhode Island 02940-3010
MPTSEMI 12/03
04-6086
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.
The Board of Directors of the Fund has delegated the authority to develop
policies and procedures relating to proxy voting to the Manager. The Manager is
part of Citigroup Asset Management ("CAM"), a group of investment adviser
affiliates of Citigroup, Inc. ("Citigroup"). Along with the other investment
advisers that comprise CAM, the Manager has adopted a set of proxy voting
policies and procedures (the "Policies") to ensure that the Manager votes
proxies relating to equity securities in the best interest of clients.
In voting proxies, the Manager is guided by general fiduciary principles and
seeks to act prudently and solely in the best interest of clients. The Manager
attempts to consider all factors that could affect the value of the investment
and will vote proxies in the manner that it believes will be consistent with
efforts to maximize shareholder values. The Manager may utilize an external
service provider to provide it with information and/or a recommendation with
regard to proxy votes. However, such recommendations do not relieve the Manager
of its responsibility for the proxy vote.
In the case of a proxy issue for which there is a stated position in the
Policies, CAM generally votes in accordance with such stated position. In the
case of a proxy issue for which there is a list of factors set forth in the
Policies that CAM considers in voting on such issue, CAM votes on a case-by-case
basis in accordance with the general principles set forth above and considering
such enumerated factors. In the case of a proxy issue for which there is no
stated position or list of factors that CAM considers in voting on such issue,
CAM votes on a case-by-case basis in accordance with the general principles set
forth above. Issues for which there is a stated position set forth in the
Policies or for which there is a list of factors set forth in the Policies that
CAM considers in voting on such issues fall into a variety of categories,
including election of directors, ratification of auditors, proxy and tender
offer defenses, capital structure issues, executive and director compensation,
mergers and corporate restructurings, and social and environmental issues. The
stated position on an issue set forth in the Policies can always be superseded,
subject to the duty to act solely in the best interest of the beneficial owners
of accounts, by the investment management professionals responsible for the
account whose shares are being voted. Issues applicable to a particular industry
may cause CAM to abandon a policy that would have otherwise applied to issuers
generally. As a result of the independent investment advisory services provided
by distinct CAM business units, there may be occasions when different business
units or different portfolio managers within the same business unit vote
differently on the same issue.
In furtherance of the Manager's goal to vote proxies in the best interest of
clients, the Manager follows procedures designed to identify and address
material conflicts that may arise between the Manager's interests and those of
its clients before voting proxies on behalf of such clients. To seek to identify
conflicts of interest, CAM periodically notifies CAM employees (including
employees of the Manager) in writing that they are under an obligation (i) to be
aware of the potential for conflicts of interest with respect to voting proxies
on behalf of client accounts both as a result of their personal relationships
and due to special circumstances that may arise during the conduct of CAM's and
the Manager's business, and (ii) to bring conflicts of interest of which they
become aware to the attention of compliance personnel. The Manager also
maintains and considers a list of significant relationships that could present a
conflict of interest for the Manager in voting proxies. The Manager is also
sensitive to the fact that a significant, publicized relationship between an
issuer and a non-CAM affiliate might appear to the public to influence the
manner in which the Manager decides to vote a proxy with respect to such issuer.
Absent special circumstances or a significant, publicized non-CAM affiliate
relationship that CAM or the Manager for prudential reasons treats as a
potential conflict of interest because such relationship might appear to the
public to influence the manner in which the Manager decides to vote a proxy, the
Manager generally takes the position that non-CAM relationships between
Citigroup and an issuer (e.g. investment banking or banking) do not present a
conflict of interest for the Manager in voting proxies with respect to such
issuer. Such position is based on the fact that the Manager is operated as an
independent business unit from other Citigroup business units as well as on the
existence of information barriers between the Manager and certain other
Citigroup business units.
CAM maintains a Proxy Voting Committee, of which the Manager personnel are
members, to review and address conflicts of interest brought to its attention by
compliance personnel. A proxy issue that will be voted in accordance with a
stated position on an issue or in accordance with the recommendation of an
independent third party is not brought to the attention of the Proxy Voting
Committee for a conflict of interest review because the Manager's position is
that to the extent a conflict of interest issue exists, it is resolved by voting
in accordance with a pre-determined policy or in accordance with the
recommendation of an independent third party. With respect to a conflict of
interest brought to its attention, the Proxy Voting Committee first determines
whether such conflict of interest is material. A conflict of interest is
considered material to the extent that it is determined that such conflict is
likely to influence, or appear to influence, the Manager's decision-making in
voting proxies. If it is determined by the Proxy Voting Committee that a
conflict of interest is not material, the Manager may vote proxies
notwithstanding the existence of the conflict.
If it is determined by the Proxy Voting Committee that a conflict of interest is
material, the Proxy Voting Committee is responsible for determining an
appropriate method to resolve such conflict of interest before the proxy
affected by the conflict of interest is voted. Such determination is based on
the particular facts and circumstances, including the importance of the proxy
issue and the nature of the conflict of interest. Methods of resolving a
material conflict of interest may include, but are not limited to, disclosing
the conflict to clients and obtaining their consent before voting, or suggesting
to clients that they engage another party to vote the proxy on their behalf.
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: March 4, 2004
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: March 4, 2004
By: /s/ Andrew B. Shoup
(Andrew B. Shoup)
Chief Administrative Officer of
Salomon Brothers Municipal Partners Fund II Inc.
Date: March 4, 2004