<PAGE> 1
MUNICIPAL INCOME TRUST II
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
We are pleased to present the annual report on the operations of Municipal
Income Trust II (NYSE symbol: TFB) for the year ended December 31, 1993.
MARKET CONDITIONS
Last year set records for municipals. Underwritings of new municipal bond
issues reached an all-time high. Yields fell to an all-time low of 5.41 percent
in October, as measured by The Bond Buyer Revenue Bond Index. The Index began
the year at 6.40 percent and ended December at 5.52 percent. In addition, the
passage and signing during the summer of the Clinton administration's Revenue
Reconciliation Act made higher marginal taxes a reality. Demand for tax-exempt
bonds strengthened under the new top federal tax rate of 39.6 percent (36% + a
3.6% surtax).
New-issue underwriting totaled $290 billion in 1993, increasing 23 percent
over the previous record set last year. Refunding issues, which are used by
state and local governments to refinance higher coupon debt, accounted for an
unprecedented two-thirds of total volume. Underwritings backed by insurance
shared 37 percent of market.
PERFORMANCE
Municipal Income Trust II's total return for the year ended December 31,
1993 was 10.32 percent, based on a closing New York Stock Exchange (NYSE) market
price of $10.875 per share, with dividends reinvested.
For the year, the Fund paid shareholders tax-free income dividends of $0.69
per share. The Fund maintained its level of monthly dividend payments at $0.0575
per share in 1993 despite the persistent decline in interest rates. However,
future common share dividend payments will be affected by sales or redemptions
of older, high-coupon bonds with reduced call protection.
PORTFOLIO STRUCTURE
At year end, the Fund's net assets totaled approximately $310 million. The
portfolio's long-term investments were diversified among 14 specific municipal
sectors and 54 separate issuers. The three largest specific sectors were public
facilities, hospital and transportation revenue bonds, representing 42 percent
of the Fund's assets. The average maturity and call protection of the long-term
holdings were 20 years and 7 years, respectively. Bonds subject to the federal
alternative minimum tax (AMT) comprised 32 percent of the portfolio.
<PAGE> 2
The credit quality of the long-term portfolio was:
<TABLE>
<CAPTION>
MOODY'S OR STANDARD & POOR'S RATINGS PERCENT
<S> <C>
Aaa or AAA............................................................... 17
Aa or AA................................................................. 13
A1 or A+................................................................. 13
A or A................................................................... 19
Baa or BBB............................................................... 31
Non-rated................................................................ 7
</TABLE>
The Fund's procedure for reinvestment of dividends and distributions is to
purchase all shares in the open market. This method helps the Fund support the
market value of its shares. In addition, the Trustees have approved a procedure
whereby the Fund may attempt to reduce or eliminate a market value discount from
net asset value by repurchasing shares in the open market or in privately
negotiated transactions.
We appreciate your support of Municipal Income Trust II and look forward to
continuing to serve your investment needs.
Very truly yours,
Charles A. Fiumefreddo
Chairman of the Board
<PAGE> 3
MUNICIPAL INCOME TRUST II
PORTFOLIO OF INVESTMENTS December 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- ---------- ------ -------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (96.9%)
GENERAL OBLIGATION (1.7%)
$ 2,250 California, Various Purpose dtd 10/1/92 (MBIA Insured)....... 6.00 % 10/ 1/21 $ 2,377,597
2,450 Rosemont, Illinois, 1993 Ser B............................... 5.50 12/ 1/07 2,540,993
165 New York City, New York, 1991 Ser F.......................... 8.25 11/15/17 201,447
------------
5,120,037
------------
EDUCATIONAL FACILITIES REVENUE (2.4%)
3,000 Massachusetts Health & Educational Facilities Authority,
Boston College Ser K....................................... 5.25 6/ 1/18 2,911,500
New York State Dormitory Authority, State University
2,000 1990 Ser A................................................. 7.50 5/15/13 2,472,840
2,000 1993 Ser A................................................. 5.25 5/15/15 1,927,720
------------
7,312,060
------------
ELECTRIC REVENUE (2.0%)
3,000 North Carolina Municipal Power Agency # 1, Catawba Ser
1992....................................................... 6.25 1/ 1/17 3,196,560
2,575 Washington Public Power Supply System, Nuclear Proj # 2
Refg Ser 1990 B............................................ 7.00 7/ 1/12 2,889,021
------------
6,085,581
------------
HOSPITAL REVENUE (13.4%)
2,000 Maricopa County Industrial Development Authority, Arizona,
Samaritan Health Ser 1985 A (Crossover Refunded)........... 9.25 12/ 1/15 2,234,360
1,400 Illinois Health Facilities Authority, Glen Oaks Medical
Center Inc Ser 1990 D...................................... 9.50 11/15/15 1,724,632
5,000 Kokomo Hospital Authority, Indiana, St Joseph's Hospital &
Health Center Refg 1988 Ser A (Prerefunded)................ 8.75 2/15/13 6,078,500
4,500 Missoula County, Montana, Community Medical Center Inc Refg
Ser 1988 B................................................. 9.00 6/ 1/18 5,156,685
3,500 New York State Medical Care Facilities Finance Agency,
Montefiore Medical Center -- FHA Insured Mtge 1989 Ser A... 7.25 2/15/24 3,929,695
5,750 North Carolina Medical Care Commission, Scotland Memorial
Hospital Ser 1988 (Prerefunded)............................ 8.625 10/ 1/11 6,987,572
1,295 Ward County, North Dakota, Trinity Obligated Group Crossover
Refg Ser 1991 B............................................ 7.50 7/ 1/21 1,451,799
6,500 Muskingum County, Ohio, Franciscan Health Advisory Services
Ser 1987................................................... 7.50 3/ 1/12 7,119,060
2,000 Montgomery County Higher Education & Health Authority,
Pennsylvania, Frankford Hospital Ser 1986.................. 7.875 1/ 1/19 2,196,340
4,000 Wisconsin Health & Educational Facilities Authority, Wheaton
Franciscan Services Inc Ser 1988 (Prerefunded)............. 8.20 8/15/18 4,779,400
------------
41,658,043
------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL
REVENUE (6.8%)
5,500 Wamego, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA
Insured)................................................... 7.00 6/ 1/31 6,376,590
2,000 Dayton, Ohio, Emery Air Freight Corp 1988 Ser A.............. 12.50 10/ 1/09 2,290,000
5,000 Tulsa Municipal Airport Trust, Oklahoma, American Airlines
Inc Ser 1988 (AMT)......................................... 7.375 12/ 1/20 5,391,500
Lexington County, South Carolina, Ellett Brothers
1,000 Refg Ser 1988.............................................. 10.625 9/ 1/02 1,080,970
1,000 Refg Ser 1988.............................................. 10.625 9/ 1/08 1,081,210
5,000 Sabine River Authority, Texas, Texas Utilities Electric Co
Ser 1993..................................................... 5.85 5/ 1/22 5,007,900
------------
21,228,170
------------
</TABLE>
<PAGE> 4
MUNICIPAL INCOME TRUST II
PORTFOLIO OF INVESTMENTS December 31, 1993 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- ---------- ------ -------- ------------
<C> <S> <C> <C> <C>
MORTGAGE REVENUE -- MULTI-FAMILY (0.6%)
$ 2,715 Eden Prairie, Minnesota, Fountain Place Apts Phase II Ser
A.......................................................... 9.75 % 7/15/19 $ 1,900,500
------------
MORTGAGE REVENUE -- SINGLE FAMILY (8.8%)
5,000 Alaska Housing Finance Corporation Inc, 1993 Ser 1........... 5.90 12/ 1/33 5,072,350
39,110 Pinellas County Housing Finance Authority, Florida, Ser
1983....................................................... 0.00 1/ 1/15 4,413,955
15,015 Illinois Housing Development Authority, Residential Ser 1984
B.......................................................... 0.00 2/ 1/16 1,679,277
2,510 Olathe, Kansas, GNMA Collateralized Ser 1989 A (AMT)......... 8.00 11/ 1/20 2,744,886
5,500 Maine Housing Authority, Purchase 1990 Ser A-4 (AMT)......... 6.40 11/15/23 5,697,175
2,390 New Hampshire Housing Finance Authority, Residential
GNMA-Backed Ser A (AMT).................................... 7.70 7/ 1/29 2,527,067
51,255 Southeast Texas Housing Finance Corporation, GNMA-Backed Ser
1988 A..................................................... 0.00 4/ 1/21 5,141,389
------------
27,276,099
------------
NURSING & HEALTH RELATED FACILITIES REVENUE (3.4%)
3,000 Iowa Finance Authority, Mercy Health Initiatives Ser 1989.... 9.95 7/ 1/19 3,179,010
3,000 Chester County Industrial Development Authority,
Pennsylvania, RHA/PA Nursing Homes Inc..................... 10.125 5/ 1/19 3,231,360
4,685 Kirbyville Health Facilities Development Corporation, Texas,
Heartway III Corp Ser 1988 A............................... 11.25 3/20/21 4,075,950
------------
10,486,320
------------
PUBLIC FACILITIES REVENUE (17.0%)
20,100 San Francisco Redevelopment Agency, California, George R
Moscone Convention Ctr Ser 1988 (Crossover Refunded)....... 0.00 7/ 1/14 13,165,500
3,725 Hall County, Georgia, Public Facility Ser 1988
(Prerefunded).............................................. 8.625 1/ 1/08 4,402,578
2,250 Collinsville, Illinois, Metropolitan Exposition Auditorium &
Office Building Hotel Motel Food & Beverage Tax
(Prerefunded).............................................. 8.625 1/ 1/17 2,670,480
Indianapolis Local Public Improvement Bond Bank, Indiana,
10,000 Ser 1988 D (AMT) (Prerefunded)............................. 8.50 2/ 1/18 11,853,500
32,235 Ser 1988 D (AMT) (Prerefunded)............................. 0.00 2/ 1/18 5,169,849
5,000 New York State Dormitory Authority, New York City Court
Ser 1993 A................................................. 5.625 5/15/13 4,990,850
New York State Urban Development Corporation, Correctional
460 1991 Ser 1................................................. 7.50 4/ 1/02 532,528
1,475 1990 Ser 1 (Prerefunded)................................... 7.50 1/ 1/20 1,754,085
7,000 Virginia Port Authority, Commonwealth Port Fund Ser
1988 (AMT)................................................. 8.20 7/ 1/08 8,090,740
------------
52,630,110
------------
RESOURCE RECOVERY REVENUE (8.8%)
1,500 Regional Waste Systems Inc, Maine, 1986 Ser D-F (AMT)........ 8.15 7/ 1/11 1,736,835
7,095 Greater Detroit Resource Recovery Authority, Michigan, Ser
H.......................................................... 9.25 12/13/08 7,760,511
16,000 Lancaster County Solid Waste Management Authority,
Pennsylvania, Ser A (AMT).................................. 8.50 12/15/10 17,982,560
------------
27,479,906
------------
TAX ALLOCATION REVENUE (3.4%)
5,000 El Cajon Redevelopment Agency, California, Refg Ser 1992
(AMBAC Insured)............................................ 6.60 10/ 1/22 5,552,300
5,000 Rosemead Redevelopment Agency, California, Proj #1 Ser
1993 A..................................................... 5.60 10/ 1/33 4,867,500
------------
10,419,800
------------
TRANSPORTATION REVENUE (11.7%)
Denver, Colorado, Airport
10,000 Ser 1991 D (AMT)........................................... 7.75 11/15/21 11,209,800
2,500 Ser 1991 A (AMT)........................................... 8.75 11/15/23 2,992,425
2,000 Port Authority of New York & New Jersey, Cons Ser 61 (AMT)... 8.125 8/15/23 2,162,400
Allegheny County, Pennsylvania, Greater Pittsburgh Intl
Airport
5,500 Ser 1988 C (AMT) (MBIA Insured)............................ 8.25 1/ 1/16 6,316,640
10,500 Ser 1988 D (AMT) (FGIC Insured)............................ 7.75 1/ 1/19 11,694,165
2,000 Puerto Rico Highway & Transportation Authority, Refg Ser X... 5.25 7/ 1/21 1,921,300
------------
36,296,730
------------
</TABLE>
<PAGE> 5
MUNICIPAL INCOME TRUST II
PORTFOLIO OF INVESTMENTS December 31, 1993 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- ---------- ------ -------- ------------
<C> <S> <C> <C> <C>
WATER & SEWER REVENUE (3.0%)
$ 4,750 Fulton County, Georgia, Water & Sewer (Prerefunded).......... 8.25 % 1/ 1/14 $ 5,572,415
4,000 Massachusetts Water Resources Authority, 1993 Ser C.......... 5.25 12/ 1/20 3,843,880
------------
9,416,295
------------
OTHER REVENUE (13.9%)
3,500 California Special Districts Finance Authority, COPs 1988 Ser
A.......................................................... 8.50 7/ 1/18 3,963,855
19,580 Boulder County, Colorado, National Center for Atmospheric
Research Ser 1988 (Prerefunded)............................ 8.25 12/ 1/13 23,185,461
Tampa, Florida, Cap Impr
4,360 Ser 1988 A................................................. 8.25 10/ 1/18 4,802,976
10,000 Ser 1988 B................................................. 8.375 10/ 1/18 11,177,200
------------
43,129,492
------------
TOTAL MUNICIPAL BONDS (IDENTIFIED COST $266,940,287)................................ 300,439,143
------------
SHORT-TERM MUNICIPAL OBLIGATION (0.2%)
700 District of Columbia, General Fund Recovery, Ser B 1
(Tender 1/1/94) (Identified Cost $700,000)................. 4.75 * 6/ 1/03 700,000
------------
TOTAL INVESTMENTS
(IDENTIFIED COST $267,640,287)(A).................................... 97.1% 301,139,143
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES......................... 2.9 9,041,321
----- ------------
NET ASSETS............................................................. 100.0% $310,180,464
----- ------------
----- ------------
</TABLE>
- ---------------
* Variable or floating rate security. Coupon rate shown reflects current rate.
(a) The aggregate cost for federal income tax purposes is $267,640,287; the
aggregate gross unrealized appreciation is $35,334,133 and the aggregate
gross unrealized depreciation is $1,835,277, resulting in net unrealized
appreciation of $33,498,856.
See Notes to Financial Statements
<PAGE> 6
MUNICIPAL INCOME TRUST II
FINANCIAL STATEMENTS
- --------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1993
- --------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $267,640,287) (Note
1)....................................... $ 301,139,143
Cash....................................... 98,594
Receivables for:
Interest................................. 5,113,424
Investments sold......................... 4,114,083
Prepaid expenses........................... 4,807
-------------
TOTAL ASSETS....................... 310,470,051
-------------
LIABILITIES:
Investment advisory fee payable (Note 2)... 113,023
Administration fee payable (Note 3)........ 71,343
Accrued expenses (Note 4).................. 105,221
-------------
TOTAL LIABILITIES.................. 289,587
-------------
NET ASSETS:
Paid in capital............................ 272,565,189
Accumulated undistributed realized gain on
investments - net........................ 2,530,461
Unrealized appreciation on investments -
net...................................... 33,498,856
Accumulated undistributed investment
income - net............................. 1,585,958
-------------
NET ASSETS......................... $ 310,180,464
-------------
-------------
NET ASSET VALUE PER SHARE, 28,685,916
shares outstanding (unlimited shares
authorized of $.01 par value)............ $10.81
------
------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------
STATEMENT OF OPERATIONS
For the year ended December 31, 1993
- ------------------------------------
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME........................... $ 22,160,043
-------------
EXPENSES
Investment advisory fee (Note 2)......... 1,221,219
Administration fee (Note 3).............. 739,785
Transfer agent fees and expenses (Note
4)..................................... 139,250
Professional fees........................ 63,030
Shareholder reports and notices (Note
4)..................................... 43,150
Trustees' fees and expenses (Note 4)..... 32,617
Registration fees........................ 31,892
Organizational expenses (Note 1)......... 5,874
Other.................................... 22,405
-------------
TOTAL EXPENSES......................... 2,299,222
-------------
INVESTMENT INCOME - NET.............. 19,860,821
-------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS -- NET (Note 1):
Realized gain on investments - net....... 2,645,205
Change in unrealized appreciation on
investments - net...................... 7,409,189
-------------
NET GAIN ON INVESTMENTS................ 10,054,394
-------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $ 29,915,215
-------------
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
year ended year ended
December 31, 1993 December 31, 1992
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Investment income - net................................................ $ 19,860,821 $ 19,977,409
Realized gain on investments - net..................................... 2,645,205 349,137
Change in unrealized appreciation on investments - net................. 7,409,189 3,432,617
------------- -------------
Net increase in net assets resulting from operations................. 29,915,215 23,759,163
------------- -------------
Dividends and distributions to shareholders from:
Investment income - net................................................ (19,793,282) (19,762,478)
Realized gain on investments - net..................................... (114,744) (377,326)
------------- -------------
Total dividends and distributions.................................... (19,908,026) (20,139,804)
------------- -------------
Total increase....................................................... 10,007,189 3,619,359
NET ASSETS:
Beginning of period...................................................... 300,173,275 296,553,916
------------- -------------
END OF PERIOD (including undistributed net investment income of
$1,585,958 and $1,518,419, respectively)............................... $ 310,180,464 $ 300,173,275
------------- -------------
------------- -------------
</TABLE>
See Notes to Financial Statements
<PAGE> 7
MUNICIPAL INCOME TRUST II
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Municipal Income Trust II (the
"Fund") is registered under the Investment Company Act of 1940, as amended (the
"Act"), as a diversified closed-end management investment company. It was
organized on March 15, 1988 as a Massachusetts business trust and commenced
operations on June 1, 1988. On March 1, 1993, the Fund changed its name from
Allstate Municipal Income Trust II to Municipal Income Trust II.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- Portfolio securities are valued for the Fund
by an outside independent pricing service approved by the Fund's Trustees.
The pricing service has informed the Fund that in valuing the Fund's
portfolio securities, it uses both a computerized grid matrix of tax-exempt
securities and evaluations by its staff, in each case based on information
concerning market transactions and quotations from dealers which reflect
the bid side of the market each day. The Fund's portfolio securities are
thus valued by reference to a combination of transactions and quotations
for the same or other securities believed to be comparable in quality,
coupon, maturity, type of issue, call provisions, trading characteristics
and other features deemed to be relevant.
B. Accounting for Investments -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). In computing
net investment income, the Fund amortizes premiums and original issue
discounts. Additionally, with respect to market discount on bonds purchased
after April 30, 1993, a portion of any capital gain realized upon
disposition is recharacterized as taxable investment income. Realized gains
and losses on security transactions are determined on the identified cost
method. Interest income is accrued daily.
C. Federal Income Tax Status -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable and nontaxable
income to its shareholders. Accordingly, no federal income tax provision is
required.
D. Dividends and Distributions to Shareholders -- The Fund records
dividends and distributions to its shareholders on the ex-dividend date.
The amount of dividends and distributions from net investment income and
net realized capital gains are determined in accordance with federal income
tax regulations, which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment; temporary differences do not require
reclassifications. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but
not for tax purposes are reported as dividends in excess of net investment
income or distributions in excess of net realized capital gains. To the
extent they exceed net investment income and net realized capital gains for
tax purposes, they are reported as distributions of paid-in-capital.
E. Organizational Expenses -- The Fund's Administrator paid the
organizational expenses of the Fund in the amount of $69,988. The Fund
reimbursed the Administrator for such expenses which were fully amortized
as of June 1, 1993.
<PAGE> 8
MUNICIPAL INCOME TRUST II
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY AGREEMENT -- Through February 28, 1993, pursuant to an
investment advisory agreement with Allstate Investment Management Company (the
"Former Investment Adviser"), the Fund paid its Former Investment Adviser an
advisory fee, calculated weekly and payable monthly, by applying the following
annual rates to the Fund's average weekly net assets: 0.50% of the portion of
the Fund's average weekly net assets not exceeding $250 million; 0.40% of the
portion of average weekly net assets exceeding $250 million but not exceeding
$500 million; 0.333% of the portion of average weekly net assets exceeding $500
million but not exceeding $750 million and 0.267% of the portion of average
weekly net assets exceeding $750 million. Fees paid to the Former Investment
Adviser amounted to $236,001. On March 1, 1993, Dean Witter InterCapital Inc.
(the "Investment Adviser") assumed all investment advisory responsibilities.
Pursuant to an Investment Advisory Agreement (the "Advisory Agreement") with the
Investment Adviser, the Fund pays its Investment Adviser an advisory fee,
calculated weekly and payable monthly, by applying the following annual rates to
the Fund's average weekly net assets: 0.40% of the portion of the Fund's average
weekly net assets not exceeding $250 million and 0.30% of the portion of average
weekly net assets exceeding $250 million.
Under the terms of the Advisory Agreement, the Investment Adviser manages
the Fund's assets. Also, the Investment Adviser pays the salaries of all
personnel, including officers of the Fund, who are employees of the Investment
Adviser.
3. ADMINISTRATION AGREEMENT -- Pursuant to an Administration Agreement (the
"Administration Agreement") with Dean Witter InterCapital Inc. (the
"Administrator"), the Fund pays its Administrator an administration fee,
calculated weekly and payable monthly, by applying the following annual rates to
the Fund's average weekly net assets: 0.25% of the portion of the Fund's average
weekly net assets not exceeding $250 million; 0.20% of the portion of average
weekly net assets exceeding $250 million but not exceeding $500 million, 0.167%
of the portion of average weekly net assets exceeding $500 million but not
exceeding $750 million; and 0.133% of the portion of average weekly net assets
exceeding $750 million.
Under the terms of the Administration Agreement, the Administrator
maintains certain of the Fund's books and records and furnishes, at its own
expense, such office space, facilities, equipment, clerical help, bookkeeping
and certain legal services as the Fund may reasonably require in the conduct of
its business. In addition, the Administrator pays the salaries of all personnel,
including officers of the Fund, who are employees of the Administrator.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and the proceeds from sales of portfolio securities for the year ended
December 31, 1993, excluding short-term investments, aggregated $34,799,863 and
$35,099,931, respectively.
On April 1, 1991 the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Fund who will have
served as independent Trustees for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension costs for
the year ended December 31, 1993, included in Trustees' fees and expenses in the
Statement of Operations, amounted to $12,232. At December 31, 1993 the Fund had
an accrued pension liability of $39,299 which is included in accrued expenses in
the Statement of Assets and Liabilities.
<PAGE> 9
MUNICIPAL INCOME TRUST II
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
Dean Witter Trust Company, an affiliate of the Investment
Adviser/Administrator, is the Fund's transfer agent. During the year ended
December 31, 1993, the Fund incurred transfer agent fees and expenses of
$139,250 of which $12,764 was payable at December 31, 1993.
Bowne & Co., Inc. is an affiliate of the Fund by virtue of a common Fund
Trustee and Director of Bowne & Co. During the year ended December 31, 1993, the
Fund paid Bowne & Co., Inc. $9,068 for printing of shareholder reports.
5. SHARES OF BENEFICIAL INTEREST -- There have been no transactions in shares
of beneficial interest for the year ended December 31, 1993.
<TABLE>
<CAPTION>
Capital
Par Value Paid in
of Excess of
Shares Shares Par Value
----------- --------- ------------
<S> <C> <C> <C>
Balance, December 31, 1991, December 31, 1992
and December 31, 1993............................ 28,685,916 $ 286,859 $272,278,330
---------- --------- ------------
---------- --------- ------------
</TABLE>
6. DIVIDENDS -- The Fund has declared the following dividends from net
investment income --
<TABLE>
<CAPTION>
Declaration Amount Per Record Payable
Date Share Date Date
- ------------------ ---------- ------------------ ------------------
<S> <C> <C> <C>
December 28, 1993 $ 0.0575 January 7, 1994 January 21, 1994
February 1, 1994 $ 0.0525 February 11, 1994 February 25, 1994
</TABLE>
7. SELECTED QUARTERLY FINANCIAL DATA -- (unaudited)
<TABLE>
<CAPTION>
Quarters Ended*
-----------------------------------------------------------------
12/31/93 9/30/93 6/30/93 3/31/93
-------------- -------------- -------------- --------------
Per Per Per Per
Total Share Total Share Total Share Total Share
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income........ $5,480 $0.19 $5,601 $0.20 $5,567 $0.19 $5,512 $0.19
Investment income -- net....... 4,946 0.17 5,025 0.18 4,992 0.17 4,898 0.17
Realized and unrealized gain
(loss) on investments -- net. (410) (0.01) 2,644 0.09 3,176 0.11 4,644 0.16
</TABLE>
<TABLE>
<CAPTION>
Quarters Ended*
-----------------------------------------------------------------
12/31/92 9/30/92 6/30/92 3/31/92
-------------- -------------- -------------- --------------
Per Per Per Per
Total Share Total Share Total Share Total Share
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income........ $5,595 $0.19 $5,669 $0.20 $5,634 $0.20 $5,646 $0.20
Investment income -- net....... 4,952 0.17 5,031 0.18 4,989 0.17 5,005 0.18
Realized and unrealized gain
(loss) on investments -- net. 1,523 0.05 692 0.02 4,393 0.15 (2,826) (0.10)
</TABLE>
- ---------------
* Totals expressed in thousands of dollars.
<PAGE> 10
MUNICIPAL INCOME TRUST II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data and ratios for a share of beneficial interest outstanding
throughout each period:
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..... $ 10.46 $ 10.34 $ 9.79 $ 9.90 $ 9.72
-------- -------- -------- -------- --------
Investment income -- net............... 0.69 0.70 0.71 0.77 0.71
Realized and unrealized gain (loss) on
investments -- net................... 0.35 0.12 0.54 (0.13) 0.27
-------- -------- -------- -------- --------
Total from investment operations......... 1.04 0.82 1.25 0.64 0.98
-------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income... (0.69) (0.69) (0.67) (0.73) (0.73)
Distributions from net realized gains
on investments....................... -0-* (0.01) (0.03) (0.02) (0.07)
-------- -------- -------- -------- --------
Total dividends and distributions........ (0.69) (0.70) (0.70) (0.75) (0.80)
-------- -------- -------- -------- --------
Net asset value, end of period........... $ 10.81 $ 10.46 $ 10.34 $ 9.79 $ 9.90
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Market value, end of period.............. $ 10.875 $ 10.50 $ 10.00 $ 9.25 $ 10.00
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN+................... 10.32% 12.23% 16.12% (.60%) 11.16%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)............................. $310,180 $300,173 $296,554 $280,344 $285,124
Ratio of expenses to average net
assets................................. 0.75% 0.86% 0.86% 0.88% 0.87%
Ratio of net investment income to average
net assets............................. 6.46% 6.70% 7.05% 7.24% 7.20%
Portfolio turnover rate.................. 12% 7% 15% 24% 35%
</TABLE>
- ---------------
* Includes distribution of $0.004 per share.
+ Total investment return is based upon the current market value on the first
and last day of each period reported. Dividends and distributions are assumed
to be reinvested at the prices obtained under the Fund's dividend reinvestment
plan. Total investment return does not reflect sales charges or brokerage
commissions.
See Notes to Financial Statements
1993 FEDERAL TAX NOTICE (unaudited)
During the year ended December 31, 1993, the Fund paid to shareholders $.69 per
share from net investment income. All of the Fund's dividends from net
investment income were exempt interest dividends, excludable from gross income
for Federal income tax purposes. For the year ended December 31, 1993, the Fund
paid to shareholders $.004 per share from long-term capital gains.
<PAGE> 11
MUNICIPAL INCOME TRUST II
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of Municipal Income Trust II
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio 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 Municipal Income Trust II (formerly
Allstate Municipal Income Trust II), (the "Fund") at December 31, 1993, 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
generally accepted accounting principles. 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 generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities owned at December 31, 1993 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE
New York, New York
February 4, 1994
<PAGE> 12
TRUSTEES
Jack F. Bennett
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Albert T. Sommers
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
LEGAL COUNSEL
Sheldon Curtis
Two World Trade Center
New York, New York 10048
INDEPENDENT ACCOUNTANTS
Price Waterhouse
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
Municipal
Income
Trust II
Annual Report
December 31, 1993
