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: June 30, 2004
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]
R. Jay Gerken, CFA
Chairman and
Chief Executive Officer
Dear Shareholder,
The bond market shifted gears during the past year due to investors' concerns
regarding a resurgence of inflation.
In anticipation of this, the fund assumed a defensive posture in terms of the
portfolio's average duration /i/ and average maturity. The fund's manager also
placed an emphasis on improving the portfolio's overall credit quality. This
strategy proved favorable during the second half of last year and the manager
believes it is a more prudent long-term approach. However, the period was also
characterized by bouts of volatility where certain sectors of long-duration,
low-credit quality securities performed extremely well. As a result, the fund's
performance did not always reflect moves in the market during the period.
Please read on for a more detailed look at prevailing economic and market
conditions during the fund's fiscal year and to learn how those conditions and
changes made to the portfolio during this time may have affected fund
performance.
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.
In November 2003, Citigroup Asset Management disclosed an investigation by the
Securities and Exchange Commission ("SEC") and the U.S. Attorney relating to
Citigroup Asset Management's entry into the transfer agency business during
1997-1999. On July 20, 2004, Citigroup disclosed that it had been notified by
the Staff of the SEC that the Staff is considering recommending a civil
injunctive action and/or an administrative proceeding against certain advisory
and transfer agent entities affiliated with Citigroup relating to the creation
and operation of its internal transfer agent unit to serve primarily the Smith
Barney family of mutual funds. This internal transfer agent did not provide
services to the fund. Citigroup is cooperating with the SEC and will seek to
resolve this matter in discussion with the SEC Staff. Although there can be no
assurance, Citigroup does not believe that this matter will have a material
adverse effect on the fund.
As always, thank you for your confidence in our stewardship of your assets. We
look forward to helping you continue to meet your financial goals.
Sincerely,
/s/ R. Jay Gerken, CFA
R. Jay Gerken, CFA
Chairman and Chief Executive Officer
July 20, 2004
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Manager Overview
Performance Review
Over the 12 months ended June 30, 2004, the fund returned -5.11%, based on its
New York Stock Exchange ("NYSE") market price and -0.17% based on its Net Asset
Value ("NAV") /ii/ per share. In comparison, the Lehman Brothers Municipal Bond
Index, /iii/ returned 0.76% over the same period. Based on NAV performance, the
fund's Lipper general municipal debt (leveraged) closed-end funds category
average was 1.89% over this same time frame /iv/. Please note that Lipper
performance returns are based on each fund's NAV.
Certain investors may be subject to the federal Alternative Minimum Tax, and
state and local taxes may apply. Capital gains, if any, are fully taxable.
Please consult your personal tax adviser.
During the 12-month period, the fund distributed dividends to shareholders
totaling $0.82 per share. The performance table shows the fund's 30-day SEC and
annualized distribution yields as well as its 12-month total return based on its
NAV and market price as of June 30, 2004. Past performance is no guarantee of
future results. The fund's yields will vary.
FUND PERFORMANCE
AS OF JUNE 30, 2004
Annualized 12-Month
30-Day Distribution Total
Price Per Share SEC Yield Yield Return
$14.49 (NAV) 6.32% 5.63% -0.17%
$12.43 (NYSE) 7.38% 6.56% -5.11%
ALL FIGURES REPRESENT PAST PERFORMANCE AND ARE NOT A GUARANTEE OF FUTURE
RESULTS. THE FUND'S YIELDS WILL VARY.
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 "SEC yield" is a return
figure often quoted by bond and other fixed income mutual funds. This quotation
is based on the most recent 30-day (or one month) period covered by the fund's
filings with the SEC. The yield figure reflects the dividends and interest
earned during the period after deduction of the fund's expenses for the period.
The annualized distribution yield assumes a current monthly income dividend rate
of $0.068 for 12 months. These yields are as of June 30, 2004 and are subject to
change.
Market Overview
Although bond prices got off to a rocky start in July 2003, they stabilized and
traded in a fairly tighter range in the fall. During this time, the economy
continued to grow at a more robust pace versus early 2003. The labor market,
however, continued to languish through most of the first quarter of this year.
Page 2
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
In March, the growth of non-farm payroll jobs rose significantly and remained
strong through the spring, although inflation also picked up. During this time,
short-term interest rates hovered near historic lows. After an extended period
of monetary easing, in which the Federal Reserve ("Fed") cut its target for
short-term rates to four-decade lows to help stimulate the economy, the Fed
reversed course by raising its target for the key federal funds rate to 1.25% in
late June. This action, in turn, triggered a rise in many other lending rates.
Higher interest rates can help temper economic growth and thereby curb
inflation, a byproduct of a stronger economy.
Given that the rate hike was widely anticipated due to the broader-based pick-up
in the economy and signals from the Fed, bond prices declined and yields rose in
advance of the Fed's action, particularly in April and much of May, before
stabilizing somewhat in June. Intermediate-term municipal bonds, particularly
those of seven- to 10-year maturities, succumbed to more pricing pressure than
longer-term issues. /v/
Factors Influencing Fund Performance
In anticipation that inflation would pick up, the fund assumed a defensive
posture in terms of the portfolio's average duration and average maturity. We
also placed an emphasis on improving the overall credit quality of the fund. Our
rationale was based upon our belief that this strategy could potentially enhance
the fund's long-term performance. This approach proved favorable during the
second half of 2003 when the fund outperformed the broader municipal bond
market. The reporting period, however, was also characterized by bouts of
volatility where long duration, low credit quality securities, such as tobacco
and airline bonds, performed extremely well. As expected, the fund's performance
did not always mirror moves in the market during those periods.
The average credit rating of holdings in the fund was Aa1 (or deemed by the
portfolio manager to be of comparable credit quality) /vi/. The fund's portfolio
had the largest exposure to the transportation, healthcare and utilities
sectors. The fund's largest aggregated holdings by state were New York, Illinois
and Texas.
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 press release that can be found on most
major financial web sites as well as www.sbam.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.
Page 3
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Thank you for your investment in the Salomon Brothers Municipal Partners Fund II
Inc. We appreciate your confidence in our stewardship of your assets and we look
forward to helping you continue to meet your financial goals.
Sincerely,
/s/ Robert E. Amodeo
Robert E. Amodeo
Executive Vice President
July 20, 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 June 30, 2004 and are subject to
change. Please refer to pages 5 through 9 for a list and percentage breakdown of
the fund's holdings.
RISKS: Investors could lose money on their investment in the fund. Certain
investors may be subject to the Federal Alterative Minimum Tax (AMT), and state
and local taxes will apply. Capital gains, if any, are fully taxable.
All index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
i Duration is a common gauge of the price sensitivity of a fixed income asset
or portfolio to a change in interest rates. (Multiplying the duration by
the expected change in interest rates tells you approximately how much that
security's price will change. For example, a bond with a seven-year
duration means that its price would decline about 7% for every
one-percentage-point increase in rates, and vice versa.)
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.
iv Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the 12-month period ended June 30, 2004, calculated
among the 64 funds in the fund's Lipper category including the reinvestment
of dividends and capital gains, if any.
v Source: Based upon Lehman Brothers index performance data for each
respective maturity category of municipal bonds.
vi Bonds rated "Aa" are judged to be of high quality by all standards by
Moody's Investors Service. 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 fluctuations 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. Numerical modifiers
1, 2 and 3 may be applied to each generic rating from "Aa" to "B", where 1
is the highest and 3 is the lowest rating within its generic category.
Page 4
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments
June 30, 2004
Face Rating(a)
Amount (unaudited) Security Value
------------------------------------------------------------------------------------------------------------------
Long-Term Investments -- 99.9%
California -- 2.3%
$ 275,000 AA- California Housing Finance Agency Home Mortgage Revenue, Series H, FHA-Insured,
6.150% due 8/1/16.............................................................. $ 283,940
2,500,000 AA- California State Economic Recovery, Series A, 5.250% due 7/1/12 ................. 2,748,125
-----------
3,032,065
-----------
District of Columbia -- 1.6%
2,000,000 AAA District of Columbia Revenue, (American University), AMBAC-Insured,
5.625% due 10/1/26 ............................................................ 2,068,220
-----------
Florida -- 0.9%
1,000,000 AAA St. Johns County, FL Water and Sewer Revenue, MBIA-Insured, 5.500% due 6/1/11 ... 1,115,300
-----------
Georgia -- 0.0%
20,000 AAA Fulton County, GA Housing Authority, Single-Family Mortgage, Series A,
GNMA-Collateralized, 6.600% due 3/1/28 ........................................ 20,334
-----------
Illinois -- 12.0%
Chicago, IL Board of Education, (Chicago School Reform), AMBAC-Insured:
100,000 AAA 5.750% due 12/1/27 ............................................................ 105,300
900,000 AAA Pre-Refunded -- Escrowed with state & local government securities to 12/1/07
(Call @ 102), 5.750% due 12/1/27 ............................................ 1,004,418
1,750,000 AAA Chicago, IL Midway Airport Revenue, Series B, MBIA-Insured, 5.625% due 1/1/29 1,769,722
1,000,000 AAA Chicago, IL Public Building Commission, Building Revenue, (Chicago School Reform),
Series B, FGIC-Insured, 5.250% due 12/1/18 .................................... 1,083,320
250,000 AAA Cook County, IL Refunding GO, Series A, MBIA-Insured, 5.625% due 11/15/16 ....... 271,243
2,000,000 Aaa* Illinois Development Finance Authority, Revolving Fund Revenue, 5.250% due 9/1/12 2,190,600
1,000,000 AA+ Illinois Educational Facilities Authority Revenue, (Northwestern University),
5.500% due 12/1/13 ............................................................ 1,098,300
Illinois Health Facilities Authority Revenue:
1,850,000 AAA Refunding, (SSM Health Care), MBIA-Insured, 6.550% due 6/1/13 ................. 2,174,638
2,000,000 AAA Servantcor Project, Series A, Escrowed to maturity with U.S.
government securities, FSA-Insured, 6.000% due 8/15/12 ...................... 2,289,440
605,000 A South Suburban Hospital Project, Escrowed to maturity with U.S. government
securities, 7.000% due 2/15/18 .............................................. 727,476
2,645,000 AAA Illinois State, Sales Tax Revenue, 5.500% due 6/15/16 ........................... 2,873,819
-----------
15,588,276
-----------
Indiana -- 1.8%
2,000,000 BBB+ Indiana State Development Finance Authority, Environmental Revenue,
(USX Corp. Project), 5.250% due 12/1/22 ....................................... 2,108,760
250,000 AAA Indiana State Revolving Fund Revenue, Series B, 5.000% due 8/1/23 ............... 251,767
-----------
2,360,527
-----------
------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 5
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (continued)
June 30, 2004
Face Rating(a)
Amount (unaudited) Security Value
------------------------------------------------------------------------------------------------------------------
Louisiana -- 3.9%
$5,000,000 BBB+ Louisiana Public Facilities Authority, Hospital Revenue Refunding,
(Touro Infirmary Project), Series A, 6.125% due 8/15/23 ...................... $ 5,033,800
-----------
Maryland -- 4.4%
Maryland State Health & Higher Educational Facilities Authority Revenue:
1,500,000 Baa1* Carroll County General Hospital, 6.000% due 7/1/37 ........................... 1,552,245
1,500,000 A Suburban Hospital, Series A, 5.500% due 7/1/16................................ 1,586,295
500,000 A University of Maryland Medical Systems, 6.000% due 7/1/32 .................... 519,945
2,000,000 Aaa* Northeast Maryland Waste Disposal Authority, Solid Waste Revenue Refunding,
AMBAC-Insured, 5.500% due 4/1/16 ............................................. 2,125,380
-----------
5,783,865
-----------
Massachusetts -- 4.1%
1,250,000 AAA Massachusetts State GO, Series C, FGIC-Insured, 5.500% due 11/1/15 ............. 1,390,525
1,000,000 A Massachusetts State Health & Educational Facilities Authority Revenue,
(Dana Farber Cancer Project), Series G-1, 6.250% due 12/1/22 ................. 1,080,430
2,650,000 AAA Massachusetts State Water Pollution Abatement, Series A, 5.750% due 8/1/29 ..... 2,818,116
-----------
5,289,071
-----------
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 .............................................. 1,085,850
1,500,000 AA- Michigan State Hospital Finance Authority, Revenue Refunding,
(Trinity Health), Credit C, 5.375% due 12/1/30 ............................... 1,511,550
-----------
2,597,400
-----------
Missouri -- 2.9%
Missouri State Environmental Improvement & Energy Research Authority:
2,500,000 AA PCR Refunding, (Associated Electric Co-op Thomas Hill), 5.500% due 12/1/10 ... 2,694,200
1,000,000 Aaa* Water Pollution Refunding, State Revolving Funds, Program A, 5.000% due 7/1/20 1,056,600
-----------
3,750,800
-----------
Nevada -- 3.3%
Clark County, NV:
3,000,000 AAA IDR Refunding, (Nevada Power Co. Project), Series C, AMBAC-Insured,
7.200% due 10/1/22 ......................................................... 3,116,100
1,000,000 AAA Passenger Facility Revenue, (McCarran International Airport), Series A,
MBIA-Insured, 5.750% due 7/1/23 ............................................ 1,044,910
140,000 AAA Nevada Housing Division, Single-Family Program, Series C, AMBAC-Insured,
6.350% due 10/1/12............................................................ 143,996
-----------
4,305,006
-----------
------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 6
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (continued)
June 30, 2004
Face Rating(a)
Amount (unaudited) Security Value
------------------------------------------------------------------------------------------------------------------
New Jersey -- 5.9%
New Jersey EDA:
$3,750,000 AA- School Facilities Construction, Series G, 5.000% due 9/1/11 ................... $ 4,064,925
1,000,000 AAA Water Facilities Revenue, (New Jersey American Water Co., Inc. Project),
Series A, FGIC-Insured, 6.875% due 11/1/34 ................................. 1,035,150
1,265,000 AA- New Jersey State Educational Facilities Authority, Higher Education Capital
Improvement Fund, Series A, 5.250% due 9/1/12 ................................ 1,391,133
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 .............................. 1,154,470
-----------
7,645,678
-----------
New York -- 15.5%
850,000 AAA Nassau County, NY Interim Finance Authority, Sales Tax Secured, Series A, AMBAC-
Insured, 5.000% due 11/15/09 ................................................. 918,646
New York City, NY GO, Series A:
180,000 A 6.000% due 5/15/30 ........................................................... 190,784
820,000 A Pre-Refunded -- Escrowed with U.S. government securities to 5/15/10 (Call @ 101),
6.000% due 5/15/30 ......................................................... 942,246
1,600,000 AA+ New York City, NY Municipal Water Finance Authority, Water & Sewer System Revenue,
Series A, 5.500% due 6/15/23 ................................................. 1,659,696
4,500,000 AA+ New York City, NY Transitional Finance Authority Revenue, Series A,
5.500% due 11/15/17 .......................................................... 4,863,015
2,710,000 A+ New York Municipal Bond Bank Agency, Special School Purpose Revenue, Series C,
5.250% due 6/1/17 ............................................................ 2,835,554
1,000,000 AAA New York State Dormitory Authority Revenue, City University System Consolidated
2nd General Resolution, Series A, AMBAC-Insured, 6.125% due 7/1/12 ........... 1,140,790
1,500,000 AAA New York State Environmental Facilities Corp., Clean Water and Drinking
Revolving Funds, Series B, 5.000% due 11/15/16 ............................... 1,616,325
135,000 Aaa* New York State Mortgage Agency Revenue, 24th Series, 6.125% due 10/1/30 ........ 136,925
1,300,000 AAA New York State Urban Development Corp. Revenue, Correctional Facilities,
(Pre-Refunded -- Escrowed with U.S. government securities to 1/1/06 Call @ 102),
FSA-Insured, 5.375% due 1/1/25 ............................................... 1,389,661
4,400,000 AAA Port Authority of New York and New Jersey Construction, 96th Series, FGIC-Insured,
6.600% due 10/1/23 ........................................................... 4,493,192
-----------
20,186,834
-----------
Ohio -- 4.6%
2,500,000 AA- Franklin County, OH Hospital Revenue, (Holy Cross Health Systems Corp.),
5.875% due 6/1/21 ............................................................ 2,575,975
3,300,000 A+ Ohio State Water Development Authority, Solid Waste Disposal Revenue, (Broken Hill
Proprietary Co., Ltd.), 6.450% due 9/1/20 .................................... 3,420,285
-----------
5,996,260
-----------
------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 7
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (continued)
June 30, 2004
Face Rating(a)
Amount (unaudited) Security Value
------------------------------------------------------------------------------------------------------------------
Pennsylvania -- 4.7%
$3,500,000 AAA Delaware Valley, PA Regional Financial Authority, Local Government Revenue,
Series A, AMBAC-Insured, 5.500% due 8/1/28 ................................... $ 3,716,895
2,000,000 AAA Philadelphia, PA GO, Series A, XLCA-Insured, 5.250% due 2/15/14 ................ 2,151,880
250,000 AAA Philadelphia, PA School District, Series A, FSA-Insured, 5.500% due 2/1/31 ..... 259,398
-----------
6,128,173
-----------
Puerto Rico -- 9.7%
2,250,000 AAA Puerto Rico Commonwealth, Refunding Revenue, FGIC-Insured, 5.500% due 7/1/13 ... 2,533,860
Puerto Rico Commonwealth Highway & Transportation Authority, Highway Revenue:
3,000,000 AAA Series J, MBIA-Insured, 5.000% due 7/1/11 .................................... 3,275,400
1,600,000 AAA Series X, FSA-Insured, 5.500% due 7/1/15 ..................................... 1,795,264
Puerto Rico Electric Power Authority, Power Revenue:
1,000,000 AAA MBIA-Insured, 5.000% due 7/1/19 .............................................. 1,061,990
3,560,000 AAA Series KK, FSA-Insured, 5.250% due 7/1/12 .................................... 3,947,008
-----------
12,613,522
-----------
Tennessee -- 4.0%
1,000,000 Aaa* County of Montgomery, TN GO, FGIC-Insured, 5.000% due 5/1/14 ................... 1,070,270
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 ................... 1,994,870
1,200,000 AAA Memphis-Shelby County, TN Airport Authority Revenue, Series D, AMBAC-Insured,
6.000% due 3/1/24............................................................. 1,284,960
770,000 AA Tennessee Housing Development Agency, (Homeownership Program), Series 2C,
6.350% due 1/1/31 ............................................................ 808,600
-----------
5,158,700
-----------
Texas -- 10.2%
Austin, TX Airport System Revenue, Series A, MBIA-Insured:
3,475,000 AAA 6.200% due 11/15/15 .......................................................... 3,705,427
330,000 AAA Pre-Refunded -- Escrowed with state & local government securities to 11/15/07
(Call @ 100), 6.200% due 11/15/15 .......................................... 363,363
4,265,000 AAA Lower Colorado River Authority, TX Transmission Contract Revenue, AMBAC-Insured,
5.250% due 5/15/14 ........................................................... 4,615,412
1,380,000 AAA North Harris Montgomery Community College District, TX Refunding, FGIC-Insured,
5.375% due 2/15/16 ........................................................... 1,477,966
1,485,000 AAA South San Antonio, TX Independent School District, PSF-Insured,
5.000% due 8/15/15............................................................ 1,567,299
1,500,000 AAA Texas State Turnpike Authority Revenue, First Tier, Series A, AMBAC-Insured,
5.500% due 8/15/39 ........................................................... 1,547,865
-----------
13,277,332
-----------
Utah -- 0.4%
520,000 AAA Utah State Housing Finance Agency, Single-Family Mortgage, Issue H-2,
FHA-Insured, 6.250% due 7/1/22 ............................................... 535,439
-----------
------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 8
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Schedule of Investments (continued)
June 30, 2004
Face Rating(a)
Amount (unaudited) Security Value
------------------------------------------------------------------------------------------------------------------
Virginia -- 2.4%
$2,915,000 A- Greater Richmond Convention Center Authority, VA Hotel Tax Revenue,
(Convention Center Expansion Project), 6.125% due 6/15/20 .................... $ 3,187,261
------------
Washington -- 2.8%
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 ............. 1,924,453
400,000 AAA Seattle, WA GO, Series B, FSA-Insured, 5.750% due 12/1/28 ...................... 422,212
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 ........... 1,251,576
------------
3,598,241
------------
Wisconsin -- 0.5%
715,000 AA Wisconsin Housing & EDA, Homeownership Revenue, Series G, 6.300% due 9/1/17 .... 716,344
------------
Total Long-Term Investments (Cost -- $126,768,585) ............................. 129,988,448
------------
Short-Term Investments -- 0.1%
North Carolina -- 0.1%
100,000 A-1+ University of North Carolina Hospital, Chapel Hill Revenue, Series A,
VRDD, 1.040% due 2/15/31 (Cost -- $100,000).................................. 100,000
------------
Total Investments -- 100.0% (Cost -- $126,868,585**) ........................... $130,088,448
============
----------------------
(a) All ratings are by Standard & Poor's Ratings Service, except for those that
are identified by an asterisk (*), which are rated by Moody's Investors
Service.
** 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 HFA - Housing Finance Authority
AIG - American International Guaranty IDA - Industrial Development Authority
AMBAC - Ambac Assurance 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
HDC - Housing Development Corporation
-------
* Abbreviations may or may not appear in the Schedule of Investments.
Page 11
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Statement of Assets and Liabilities
June 30, 2004
ASSETS:
Investments, at value (Cost -- $126,868,585) ..................................... $130,088,448
Cash ............................................................................. 28,897
Interest receivable .............................................................. 1,887,064
Receivable for securities sold ................................................... 245,472
Prepaid expenses ................................................................. 10,735
-------------
Total Assets ..................................................................... 132,260,616
-------------
LIABILITIES:
Management fee payable ........................................................... 59,336
Dividends payable to Auction Rate Preferred Stockholders ......................... 3,207
Accrued expenses ................................................................. 160,720
------------
Total Liabilities ................................................................ 223,263
------------
Series M Auction Rate Preferred Stock
(900 shares authorized and issued at $50,000 per share) (Note 4) ................. 45,000,000
------------
Total Net Assets ...................................................................... $ 87,037,353
============
net asets:
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 .............................................. 1,602,538
Accumulated net realized loss from investment transactions ....................... (1,035,200)
Net unrealized appreciation of investments ....................................... 3,219,863
------------
Total Net Assets ...................................................................... $ 87,037,353
============
Net Asset Value, Per Share of Common Stock ($87,037,353 / 6,007,094 shares outstanding) $14.49
=======
---------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
Page 12
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Statement of Operations
For the Year Ended June 30, 2004
INVESTMENT INCOME:
Interest.......................................................................... $ 6,712,633
-----------
EXPENSES:
Management fee (Note 2) .......................................................... 740,152
Auction agent fees................................................................ 117,520
Audit and tax services ........................................................... 73,731
Directors' fees .................................................................. 67,508
Shareholder communications........................................................ 54,349
Legal............................................................................. 31,574
Transfer agent ................................................................... 24,337
Listing fees...................................................................... 24,044
Custody........................................................................... 18,914
Insurance......................................................................... 2,313
Other............................................................................. 21,755
-----------
Total Expenses.................................................................... 1,176,197
-----------
Net Investment Income.................................................................. 5,536,436
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3):
Realized Gain From Investment Transactions (excluding short-term investments):
Proceeds from sales............................................................ 65,595,504
Cost of securities sold........................................................ 63,430,260
-----------
Net Realized Gain................................................................. 2,165,244
-----------
Change in Net Unrealized Appreciation of Investments:
Beginning of year.............................................................. 10,599,306
End of year.................................................................... 3,219,863
-----------
Decrease in Net Unrealized Appreciation........................................... (7,379,443)
-----------
Net Loss on Investments................................................................ (5,214,199)
-----------
Dividends Paid to Auction Rate Preferred Stockholders
From Net Investment Income........................................................... (471,367)
-----------
Decrease in Net Assets From Operations................................................. $ (149,130)
===========
---------------------------------------------------------------------------------------------------------
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,
2004 2003
---------------------------------------------------------------------------------------------------------
OPERATIONS:
Net investment income ............................................... $ 5,536,436 $ 5,665,506
Net realized gain.................................................... 2,165,244 2,166,293
Increase (decrease) in net unrealized appreciation................... (7,379,443) 3,561,190
Dividends paid to Auction Rate Preferred Stockholders
from net investment income......................................... (471,367) (560,901)
------------ ------------
Increase (Decrease) in Net Assets From Operations ................... (149,130) 10,832,088
------------ ------------
DISTRIBUTIONS PAID TO COMMON STOCK SHAREHOLDERS FROM:
Net investment income................................................ (4,901,788) (4,865,746)
------------ ------------
Decrease in Net Assets From Distributions Paid to
Common Stock Shareholders.......................................... (4,901,788) (4,865,746)
------------ ------------
Increase (Decrease) in Net Assets......................................... (5,050,918) 5,966,342
NET ASSETS:
Beginning of year.................................................... 92,088,271 86,121,929
------------ ------------
End of year*......................................................... $87,037,353 $92,088,271
============ ============
* Includes undistributed net investment income of:........................ $1,602,538 $1,439,257
========== ==========
---------------------------------------------------------------------------------------------------------
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") 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 U.S. generally accepted accounting principles
("GAAP"). The preparation of financial statements in accordance with GAAP
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual amounts could differ
from those estimates.
SECURITIES VALUATION. Tax-exempt securities are valued by independent pricing
services which use prices provided by market-makers or estimates of market
values obtained from yield data relating to instruments or securities with
similar characteristics. Short-term investments having a maturity of 60 days or
less are valued at amortized cost which approximates market value. Securities
for which reliable quotations are not readily available are valued at fair value
as determined in good faith by, or under procedures established by, the Board of
Directors.
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 15
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (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
SBAM is the Fund's investment manager and administrator and as such provides
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. SBFM is compensated by
SBAM, and not the Fund, for its services.
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 year ended June 30, 2004, 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 ................................................. $63,396,080
===========
Sales ..................................................... $65,595,504
===========
At June 30, 2004, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
Gross unrealized appreciation ............................. $4,524,150
Gross unrealized depreciation ............................. (1,304,287)
----------
Net unrealized appreciation ............................... $3,219,863
==========
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 16
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (continued)
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, 2004 ranged from 0.700% to 1.400%. The weighted average dividend rate for
the year ended June 30, 2004 was 1.045%.
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 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, 2004
COMMON STOCK DIVIDENDS. On May 14, 2004, 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 30, and August 27, 2004 to
shareholders of record on July 13 and August 17, 2004, respectively. In addition
on July 29, 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 September 24, October 29 and November 26, 2004 to shareholders of
record on September 14, October 13 and November 16, 2004, respectively.
Page 17
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Notes to Financial Statements (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
--------------------------------------------------------------------------------
6/28/04 6/29/04 7/5/04 1.300%
7/2/04 7/6/04 7/12/04 1.400
7/12/04 7/13/04 7/19/04 1.180
7/19/04 7/20/04 7/26/04 1.200
7/26/04 7/27/04 8/2/04 1.050
8/2/04 8/3/04 8/9/04 1.230
--------------------------------------------------------------------------------
Note 7. Capital Loss Carryforward
At June 30, 2004, the Fund had, for Federal income tax purposes, approximately
$1,035,000 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:
2005 2007 2008
--------------------------------------------------------------------------------
Carryforward amounts $342,000 $141,000 $552,000
--------------------------------------------------------------------------------
Note 8. Income Tax Information and Distributions to Shareholders
At June 30, 2004, the tax basis components of distributable earnings were:
Undistributed tax-exempt income ................................ $ 1,605,745
===========
Accumulated capital losses ..................................... $(1,035,200)
===========
Unrealized appreciation ........................................ $ 3,219,863
===========
The tax character of distributions paid during the year ended
June 30, 2004 was:
Tax-exempt income .............................................. $ 5,361,937
===========
Ordinary income ................................................ $11,218
===========
Page 18
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Note 9. Additional Information
Citigroup has been notified by the Staff of theSecurities and Exchange
Commission ("SEC") that the Staff is considering recommending a civil injunctive
action and/or an administrative proceeding against Citigroup Asset Management
("CAM"), including its applicable investment advisory companies and Citicorp
Trust Bank ("CTB"), an internal transfer agent, relating to the creation and
operation of the internal transfer agent unit to serve certain CAM-managed
funds. CTB did not provide services to the Fund. This notification arises out of
a previously disclosed investigation by the SEC and the U.S. Attorney and
relates to CTB's entry in 1999 into the transfer agency business, CAM's
retention of, and agreements with an unaffiliated sub transfer agent, the
adequacy of the disclosures made to the fund boards that approved the transfer
agency arrangements, (including CAM's failure to disclose a related revenue
guarantee agreement benefiting CAM and its affiliates), and CAM's operation of
and compensation for the transfer agency business. The revenue guarantee
described above was terminated in 1999 and CAM will be paying the applicable
funds, primarily through fee waivers, a total of approximately $17 million (plus
interest) that is the amount of the revenue received by Citigroup relating to
the revenue guarantee. The Fund did not implement the contractual arrangement
described above and therefore will not receive any portion of the payment.
Citigroup is cooperating fully in the investigation and will seek to resolve the
matter in discussions with the SECStaff. Although there can be no assurance,
Citigroup does not believe that this matter will have a material adverse effect
on the Fund.
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:
2004 2003 2002 2001 2000
--------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR................ $15.33 $14.34 $13.94 $13.09 $13.71
------ ------ ------ ------ ------
INCOME (LOSS) FROM OPERATIONS:
Net investment income.......................... 0.92 0.94 1.00 1.04 1.04
Net realized and unrealized gain (loss). (0.86) 0.95 0.29 0.86 (0.60)
Dividends paid to Auction Rate Preferred
Stockholders from net investment income ..... (0.08) (0.09) (0.14) (0.30) (0.31)
------ ------ ------ ------ ------
Total Income (Loss) From Operations............... (0.02) 1.80 1.15 1.60 0.13
------ ------ ------ ------ ------
DISTRIBUTIONS PAID TO COMMON STOCK
SHAREHOLDERS FROM:
Net investment income.......................... (0.82) (0.81) (0.75) (0.75) (0.75)
------ ------ ------ ------ ------
Total Distributions Paid to Common
Stock Shareholders............................. (0.82) (0.81) (0.75) (0.75) (0.75)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR...................... $14.49 $15.33 $14.34 $13.94 $13.09
====== ====== ====== ====== ======
PER SHARE MARKET VALUE, END OF YEAR............... $12.43 $13.92 $13.00 $12.52 $11.5625
====== ====== ====== ====== ========
TOTAL RETURN, BASED ON MARKET PRICE(1)............ (5.11)% 13.78% 10.11% 15.14% 0.26%
RATIOS TO AVERAGE NET ASSETS OF
COMMON SHAREHOLDERS(2):
Operating expenses.............................. 1.31% 1.39% 1.35% 1.38% 1.39%
Net investment income........................... 6.18% 6.30% 7.02% 7.63% 7.95%
NET ASSETS OF COMMON SHAREHOLDERS,
END OF YEAR (000S).............................. $87,037 $92,088 $86,122 $83,747 $78,617
PORTFOLIO TURNOVER RATE........................... 48% 67% 52% 15% 40%
AUCTION RATE PREFERRED STOCK:
Total Amount Outstanding (000s)................. $45,000 $45,000 $45,000 $45,000 $45,000
Asset Coverage Per Share........................ 146,708 152,320 145,691 143,052 137,352
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, distributions 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 Registered Public Accounting Firm
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, 2004, 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 the Standards of the
Public Company Accounting Oversight Board (United States). Those standards
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, 2004 by correspondence with the custodian
and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
August 19 2004
Page 21
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Additional Information (unaudited)
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 IN
FUND COMPLEX
TERM OF PRINCIPAL OVERSEEN BY
POSITION(S) OFFICE(1) AND OCCUPATION(S) DIRECTOR OTHER
HELD WITH LENGTH OF DURING PAST (INCLUDING BOARD MEMBERSHIPS
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, 35 None
Colman Consulting Co. Member of 2003 Colman
278 Hawley Road the Nominating Consulting Co.
North Salem, NY 10560 and Audit
Age 58 Committees,
Class II
Daniel P. Cronin Director and Since Formerly, Associate 32 None
24 Woodlawn Avenue Member of 2003 General Counsel,
New Rochelle, NY 10804 the Nominating Pfizer Inc.
Age 58 and Audit
Committees,
Class III
Leslie H. Gelb Director and Since President, Emeritus 32 Director of two
150 East 69th Street Member of 2000 and Senior Board Fellow, registered
New York, NY 10021 the Nominating The Council on Foreign investment
Age 66 and Audit Relations; Formerly, companies
Committees, Columnist, Deputy advised by
Class I Editorial Page Editor Advantage
andEditor, Op-Ed Page, Advisors, Inc.
The New York Times ("Advantage")
William R. Hutchinson Director and Since President, W.R. 42 Director,
535 N. Michigan Member of 2003 Hutchinson & Associates Associated
Suite 1012 Nominating Inc.; Formerly Group Vice Banc-Corp.
Chicago, IL 60611 and Audit President, Mergers and
Age 61 Committees, Acquisitions, BP Amoco
Class I p.l.c.
Page 22
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Additional Information (unaudited) (continued)
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
TERM OF PRINCIPAL OVERSEEN BY
POSITION(S) OFFICE(1) AND OCCUPATION(S) DIRECTOR OTHER
HELD WITH LENGTH OF DURING PAST (INCLUDING BOARD MEMBERSHIPS
NAME, ADDRESS AND AGE FUND(1) TIME SERVED FIVE YEARS THE FUND) HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------
Riordan Roett Director and Since Professor and Director 32 None
The Johns Hopkins University Member of 1997 Latin American Studies
1740 Massachusetts Ave., NW the Nominating Program, Paul H. Nitze
Washington, DC 20036 and Audit School of Avanced
Age 65 Committees, International Studies,
Class I The Johns Hopkins
University
Jeswald W. Salacuse Director and Since Henry J. Braker 32 Director of two
Tufts University Member of 2000 Professor of registered
The Fletcher School of the Nominating Commercial Law and investment
Law & Diplomacy and Audit formerly Dean, The companies
160 Packard Avenue Committees, Fletcher School of advised by
Medford, MA 02155 Class III Law & Diplomacy, Advantage
Age 66 Tufts University
INTERESTED DIRECTOR:
R. Jay Gerken, CFA(2) Director, Since Managing Director 221 None
Citigroup Asset Management Chairman 2002 of Citigroup Global
("CAM") and Chief Markets Inc. ("CGM");
399 Park Avenue Executive Officer, Chairman, President,
4th Floor Class II Chief Executive Officer
New York, NY 10022 and Director of
Age 53 Smith Barney Fund
Management LLC
("SBFM"), Travelers
Investment Adviser, Inc.
("TIA") and Citi Fund
Management Inc.
("CFM"); President and
Chief Executive Officer
of certain mutual funds
associated with Citigroup
Inc. ("Citigroup");
Formerly Porfolio
Manager of Smith Barney
Allocation Series Inc. (from
1996 to 2001) and Smith
Barney Growth and
Income Fund (from 1996
to 2000)
Page 23
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Additional Information (unaudited) (continued)
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
TERM OF PRINCIPAL OVERSEEN BY
POSITION(S) OFFICE(1) AND OCCUPATION(S) DIRECTOR OTHER
HELD WITH LENGTH OF DURING PAST (INCLUDING BOARD MEMBERSHIPS
NAME, ADDRESS AND AGE FUND(1) TIME SERVED FIVE YEARS THE FUND) HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------
OFFICERS:
Peter J. Wilby, CFA President Since Managing Director N/A N/A
CAM 2002 of CGM and SBAM
399 Park Avenue (since January 1996)
4th Floor
New York, NY 10022
Age 45
Andrew B. Shoup Senior Vice Since Director of CAM; N/A N/A
CAM President and 2003 Senior Vice President
125 Broad Street, 11th Floor Chief and Chief Administrative
New York, NY 10004 Administrative Officer of mutual funds
Age 47 Officer associated with Citigroup;
Treasurer of certain
mutual funds associated
with Citigroup; Head of
International Funds
Administration of CAM
(from 2001 to 2003);
Director of Global
Funds Administration of
CAM (from 2000 to
2001); Head of U.S.
Citibank Funds
Administration of CAM
(from 1998 to 2000)
Robert E. Amodeo Executive Vice Since Managing Director of N/A N/A
CAM 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)
Frances M. Guggino Chief Financial Since Vice President N/A N/A
CAM Officer and 2004 of CGM;
125 Broad Street Treasurer Controller of certain
10th Floor mutual funds associated
New York, NY 10004 Controller Since with Citigroup
Age 46 2002
Page 24
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Additional Information (unaudited) (continued)
NUMBER OF
PORTFOLIOS IN
FUND COMPLEX
TERM OF PRINCIPAL OVERSEEN BY
POSITION(S) OFFICE(1) AND OCCUPATION(S) DIRECTOR OTHER
HELD WITH LENGTH OF DURING PAST (INCLUDING BOARD MEMBERSHIPS
NAME, ADDRESS AND AGE FUND(1) TIME SERVED FIVE YEARS THE FUND) HELD BY DIRECTOR
------------------------------------------------------------------------------------------------------------------
Joseph T. Volpe Controller Since Vice President of CGM; N/A N/A
CAM 2004 Controller of certain
125 Broad Street mutual funds associated
10th Floor with Citigroup
New York, NY 10004
Age 42
Robert I. Frenkel Secretary and Since Managing Director and N/A N/A
CAM Chief Legal 2003 General Counsel of
300 First Stamford Place Officer Global Mutual Funds
4th Floor for CAM and its
Stamford, CT 06902 predecessor (since
Age 48 1994); Secretary of CFM
(from 2001 to 2004);
Secretary and Chief Legal
Officer of mutual funds
associated with Citigroup
------------------------------------------------------------------------------------------------------------------
(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 2006, 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 by the Fund's Board of Directors to hold
office for a one-year term and until their successors are duly elected and
qualified.
(2) Mr. Gerken is an "interested person" of the Fund as defined in the
Investment Company Act of 1940, as amended, because Mr. Gerken is an
officer of SBFM and certain of its affiliates.
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.
Beginning August 31, 2004, information on how the Fund voted proxies relating to
portfolio securities during the 12 month period ended June 30, 2004 will be
available (1) without charge, upon request, by calling 1-800-446-1013 and (2) on
the SEC's website at www.sec.gov.
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 website at www.sec.gov.
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, 2004:
o 99.79% of the dividends paid by the Fund from net investment income as
tax-exempt interest dividends for Federal income tax purposes.
Page 28
SALOMON BROTHERS MUNICIPAL PARTNERS FUND II INC.
Directors Salomon Brothers Municipal Partners Fund II Inc.
CAROL L. COLMAN 125 Broad Street
10th Floor, MF-2
DANIEL P. CRONIN New York, New York 10004
Telephone 1-888-777-0102
LESLIE H. GELB
INVESTMENT MANAGER
R. JAY GERKEN, CFA Salomon Brothers Asset Management Inc
399 Park Avenue
WILLIAM R. HUTCHINSON New York, New York 10022
RIORDAN ROETT AUCTION AGENT
Deutsche Bank
JESWALD W. SALACUSE 60 Wall Street
New York, New York 10005
Officers CUSTODIAN
State Street Bank and Trust Company
R. JAY GERKEN, CFA 225 Franklin Street
Chairman and Chief Executive Officer Boston, Massachusetts 02110
PETER J. WILBY, CFA DIVIDEND DISBURSING AND TRANSFER AGENT
President EquiServe Trust Company, N.A.
P.O. Box 43010
ANDREW B. SHOUP Providence, Rhode Island 02940-3010
Senior Vice President and
Chief Administrative Officer INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
ROBERT E. AMODEO PricewaterhouseCoopers LLP
Executive Vice President 1177 Avenue of the Americas
New York, New York 10036
FRANCES M. GUGGINO
Chief Financial Officer LEGAL COUNSEL
and Treasurer Simpson Thacher & Bartlett LLP
425 Lexington Avenue
ANDREW BEAGLEY* New York, New York 10017
Chief Compliance Officer
NEW YORK STOCK EXCHANGE SYMBOL
JOSEPH T. VOLPE MPT
Controller
ROBERT I. FRENKEL
Secretary and
Chief Legal Officer
----------
* As of July 29, 2004.
(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, 2004
----------------
SALOMON
----------------
BROTHERS
----------------
Asset Management
----------------
MPTANN 6/04
04-7054
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Directors of the registrant has determined that William R.
Hutchinson, the Chairman of the Board's Audit Committee, possesses the
technical attributes identified in Instruction 2(b) of Item 3 to Form
N-CSR to qualify as an "audit committee financial expert," and has
designated Mr. Hutchinson as the Audit Committee's financial expert.
Mr. Hutchinson is an "independent" Director pursuant to paragraph
(a)(2) of Item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees for Salomon Brothers Municipal Partners Fund II
Inc. were $40,000 and $40,000 for the years ended 6/30/04 and
6/30/03, respectively.
(b) Audit-Related Fees for Salomon Brothers Municipal Partners
Fund II Inc. were $32,000 and $32,000 for the years ended
6/30/04 and 6/30/03. These amounts represent procedures
performed and prepared for agreed upon procedures (which,
among other items, include maintenance testing in connection
with the Auction Rate Preferred Stock).
In addition, there were no Audit-Related Fees billed in the
years ended 6/30/04 and 6/30/03 for assurance and related
services by the Accountant to the Registrant's investment
adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling,
controlled by or under common control with the investment
adviser that provides ongoing services to the Salomon Brothers
Municipal Partners Fund II Inc. ("service affiliates"), that
were reasonably related to the performance of the annual audit
of the service affiliates. Accordingly, there were no such
fees that required pre-approval by the Audit Committee for the
period May 6, 2003 to June 30, 2004 (prior to May 6, 2003
services provided by the Accountant were not required to be
pre-approved).
(c) Tax Fees for Salomon Brothers Municipal Partners Fund II Inc.
were $3,000 and $3,000 for the years ended 6/30/04 and
6/30/03. These amounts represent aggregate fees paid for tax
compliance and tax advice, which includes (the filing and
amendment of federal, state and local income tax returns and
timely RIC qualification review) rendered by the Accountant to
Salomon Brothers Municipal Partners Fund II Inc.
There were no fees billed for tax services by the Accountants
to service affiliates for the period May 6, 2003 to June 30,
2004 that required pre-approval by the Audit Committee.
(d) There were no All Other Fees for Salomon Brothers Municipal
Partners Fund II Inc. for the years ended 6/30/04 and 6/30/03.
All Other Fees. The aggregate fees billed for all other
non-audit services rendered by the Accountant to Salomon
Brothers Asset Management ("SBAM"), and any entity
controlling, controlled by or under common control with SBAM
that provided ongoing services to Salomon Brothers Municipal
Partners Fund II Inc., requiring pre-approval by the Audit
Committee for the period May 6, 2003 to June 30, 2004, which
included the issuance of reports on internal control under SAS
No. 70 relating to various Citigroup Asset Management ("CAM")
entities, were $666,000, all of which were pre-approved by the
Audit Committee.
(e) (1) Audit Committee's pre-approval policies and procedures
described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.
The Charter for the Audit Committee (the "Committee") of the
Board of each registered investment company (the "Fund")
advised by Smith Barney Fund Management LLC or Salomon
Brothers Asset Management Inc or one of their affiliates
(each, an "Adviser") requires that the Committee shall approve
(a) all audit and permissible non-audit services to be
provided to the Fund and (b) all permissible non-audit
services to be provided by the Fund's independent auditors to
the Adviser and any Covered Service Providers if the
engagement relates directly to the operations and financial
reporting of the Fund. The Committee may implement policies
and procedures by which such services are approved other than
by the full Committee.
The Committee shall not approve non-audit services that the
Committee believes may impair the independence of the
auditors. As of the date of the approval of this Audit
Committee Charter, permissible non-audit services include any
professional services (including tax services), that are not
prohibited services as described below, provided to the Fund
by the independent auditors, other than those provided to the
Fund in connection with an audit or a review of the financial
statements of the Fund. Permissible non-audit services may not
include: (i) bookkeeping or other services related to the
accounting records or financial statements of the Fund; (ii)
financial information systems design and implementation; (iii)
appraisal or valuation services, fairness opinions or
contribution-in-kind reports; (iv) actuarial services; (v)
internal audit outsourcing services; (vi) management functions
or human resources; (vii) broker or dealer, investment adviser
or investment banking services; (viii) legal services and
expert services unrelated to the audit; and (ix) any other
service the Public Company Accounting Oversight Board
determines, by regulation, is impermissible.
Pre-approval by the Committee of any permissible non-audit
services is not required so long as: (i) the aggregate amount
of all such permissible non-audit services provided to the
Fund, the Adviser and any service providers
controlling, controlled by or under common control with the
Adviser that provide ongoing services to the Fund ("Covered
Service Providers") constitutes not more than 5% of the total
amount of revenues paid to the independent auditors during the
fiscal year in which the permissible non-audit services are
provided to (a) the Fund, (b) the Adviser and (c) any entity
controlling, controlled by or under common control with the
Adviser that provides ongoing services to the Fund during the
fiscal year in which the services are provided that would have
to be approved by the Committee; (ii) the permissible
non-audit services were not recognized by the Fund at the time
of the engagement to be non-audit services; and (iii) such
services are promptly brought to the attention of the
Committee and approved by the Committee (or its delegate(s))
prior to the completion of the audit. (2) For the Salomon
Brothers Municipal Partners Fund II Inc., the percentage of
fees that were approved by the audit committee, with respect
to: Audit-Related Fees were 100% and 100% for the years ended
6/30/04 and 6/30/03; Tax Fees were 100% and 100% for the years
ended 6/30/04 and 6/30/03; and Other Fees were 100% and 100%
for the years ended 6/30/04 and 6/30/03.
(f) N/A
(g) Non-audit fees billed by the Accountant for services rendered
to Salomon Brothers Municipal Partners Fund II Inc. and CAM
and any entity controlling, controlled by, or under common
control with CAM that provides ongoing services to Salomon
Brothers Municipal Partners Fund II Inc. were $2.1 million and
$6.4 million for the years ended 6/30/04 and 6/30/03.
(h) Yes. The Salomon Brothers Municipal Partners Fund II Inc.'s
Audit Committee has considered whether the provision of
non-audit services that were rendered to Service Affiliates
which were not pre-approved (not requiring pre-approval) is
compatible with maintaining the Auditor's independence. All
services provided by the Accountant to the Salomon Brothers
Municipal Partners Fund II Inc. or to Service Affiliates which
were required to be pre-approved were pre-approved as
required.
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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 10. 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-
3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act")) are effective as of a date within 90 days of the
filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the
disclosure controls and procedures required by Rule 30a-3(b)
under the 1940 Act and 15d-15(b) under the Securities Exchange
Act of 1934.
(b) There were no changes in the registrant's internal control
over financial reporting (as defined in Rule 30a-3(d) under
the 1940 Act) that occurred during the registrant's last
fiscal half-year (the registrant's second fiscal half-year in
the case of an annual report) that have materially affected,
or are likely to materially affect the registrant's internal
control over financial reporting.
ITEM 11. EXHIBITS.
(a) Code of Ethics attached hereto.
Exhibit 99.CODE ETH
(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: September 9, 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: September 9, 2004
By: /s/ Frances M. Guggino
(Frances M. Guggino)
Chief Financial Officer of
Salomon Brothers Municipal Partners Fund II Inc.
Date: September 9, 2004