<PAGE> 1
HIGH INCOME ADVANTAGE TRUST II
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
The high-yield bond market was very rewarding for investors in 1993.
Benefiting from the general decline in interest rates that characterized the
first 10 months of the year, as well as the continued improvement in corporate
credit quality, the high-yield market concluded 1993 as one of the fixed-income
market's top performers. What's more, 1993 marked the third successive year of
excellent returns for this market. In fact, over the past three years, the
high-yield market has outperformed all other fixed-income markets.
The high-yield market's continued strength was reflected in High Income
Advantage Trust II's impressive total return for the six-month period ended
January 31, 1994 of 5.82 percent, based on its $6.875 closing market price per
share on the New York Stock Exchange (NYSE). Based on its net asset value (NAV)
of $7.06 per share on January 31, 1994, the Trust's total return for the
six-month period was 13.19 percent. For the trailing 12-month period ended
January 31, 1994, the Trust's total return was 22.11 percent, based on the
closing NYSE market price per share quoted above and 27.02 percent based on the
NAV at the end of the period under review. As of January 31, 1994, the Trust's
net assets totaled more than $251 million, while its closing NYSE market price
represented a 2.62 percent discount to NAV.
Over the past six months, the Trust continued to distribute regular monthly
income dividends at a rate of $0.0525 per share. For the full six-month period,
the Trust paid income dividends totaling $0.39 per share, including an extra
income dividend of $0.0725 per share paid on December 23, 1993. With interest
rates still at historical lows despite the recent uptick, shareholders should be
aware that in 1994 it may be difficult for the Trust to meet or exceed the total
income distributions of the past 12 months. As always, however, the Trust will
strive to provide shareholders with an attractive level of income.
INVESTMENT STRATEGY
Our outlook for the high-yield market entering 1993 was favorable, based on
an improving economy and a low interest rate environment, and the Trust began
the year positioned to take advantage of a rising market. As the year began, we
saw many financially sound and fundamentally improving companies still trading
at sharply discounted prices within the B-rated sector of the market. The Trust
continued to maintain its focus on discounted, B-rated bonds throughout the
six-month period under review, as this sector in our opinion offered the most
attractive return potential. As the economic environment improved in the second
half of 1993, and as many issuers took steps toward upgrading their credit
quality, the Trust was rewarded by the above-average appreciation realized in
many of these discounted, B-rated issues. Some of the top performers held by the
Trust during the six-month period ended January 31, 1994 were Ivex Holdings
Corp., Gaylord Container Corp. and Stone Container Corp. In most cases, as the
issuer's prospects have improved, so too have their bond prices.
During the past six months, the Trust also was able to capitalize on the
ability of bond issuers to strengthen their credit quality by refinancing debt
in the prevailing low interest rate environment. As this trend has accelerated,
the Trust has captured significant capital appreciation. Among the Trust's
current
<PAGE> 2
holdings, several issuers have recently completed refinancings, including
American Standard, Inc., Fort Howard Corp. and Playtex Family Products Corp.
Finally, the Trust's focus on financially sound issuers with improving credit
trends, coupled with the strengthening economic environment, kept credit
disappointments during the six-month period to a minimum. This, in turn,
resulted in more appreciation for the Trust's shareholders, as well as a steady
level of income throughout the period.
MARKET OUTLOOK
Looking further into 1994, we remain optimistic about the prospects for the
high-yield bond market, based on our expectations for continued growth in the
economy and further improvements in corporate credit quality. We would expect
more high-yield issuers to either tap the equity markets in order to pay down
debt or refinance their existing debt in today's lower interest rate
environment. If the economy continues to recover and high-yield issuers work
toward strengthening their balance sheets, we would anticipate that the
attractive yields available today will provide investors not only with a healthy
yield advantage over alternative fixed-income products, but also with an
excellent opportunity for further capital appreciation in the event yields
decline.
We would like to remind you that the Trustees have approved a procedure
whereby the Trust, when appropriate, 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 at a price not above market value, if any
or net asset value, whichever is lower at the time of purchase.
We appreciate your support of High Income Advantage Trust II and look
forward to continuing to serve your investment needs.
Very truly yours,
Charles A. Fiumefreddo
Chairman of The Board
<PAGE> 3
HIGH INCOME ADVANTAGE TRUST II
PORTFOLIO OF INVESTMENTS January 31, 1994 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- ----------- ------ -------- ------------
<S> <C> <C> <C>
CORPORATE BONDS (79.9%)
AEROSPACE (4.5%)
$ 5,000 PA Holdings Corp. ... 13.75 % 7/15/99 $ 5,331,250
6,000 Sabreliner Corp. .... 12.50 4/15/03 6,060,000
----------
11,391,250
----------
AIRLINES (4.1%)
7,500 GPA Delaware,
Inc. ............... 8.75 12/15/98 6,600,000
7,768 Trans World Airlines,
Inc. ............... 8.00 + 11/ 3/00 3,714,080
----------
10,314,080
----------
BUILDING & CONSTRUCTION (3.2%)
7,500 American Standard,
Inc................. 14.25 6/30/03 7,912,500
----------
CABLE & TELECOMMUNICATIONS (4.2%)
7,550 Cablevision Systems
Corp. .............. 14.00 11/15/03 7,852,000
2,500 Marcus Cable Co. .... 11.875 10/ 1/05 2,650,000
----------
10,502,000
----------
CHEMICALS (4.4%)
2,000 General Chemical..... 14.00 11/ 1/98 2,227,500
7,889 Georgia Gulf
Corp. .............. 15.00 4/15/00 8,756,790
----------
10,984,290
----------
COMPUTER EQUIPMENT (4.1%)
8,118 Memorex Telex
Corp.(b)............ 10.00 + 2/15/98 1,968,706
7,000 Unisys Corp. ........ 13.50 * 7/ 1/97 8,120,000
----------
10,088,706
----------
CONSUMER PRODUCTS (2.1%)
5,050 Playtex Family
Products Corp. ..... 14.75 12/15/97 5,365,625
----------
ENTERTAINMENT, GAMING & LODGING (10.8%)
7,500 Aztar Mortgage
Funding, Inc. ...... 13.50 9/15/96 7,875,000
2,500 Belle Casino,
Inc. -- 144A**...... 12.00 10/15/00 2,475,000
1,000 Casino America,
Inc. ............... 11.50 11/15/01 1,030,000
7,500 Fair Lanes, Inc. .... 11.875 8/15/97 5,550,000
5,000 Treasure Bay Gaming &
Resort,
Inc. -- 144A**...... 12.25 11/15/00 4,950,000
5,578 Trump Plaza Holding
Assoc. ............. 12.50 + 6/15/03 5,355,000
----------
27,235,000
----------
FOOD & BEVERAGE (0.2%)
1,000 Specialty Foods
Acquisition
Corp. .............. 13.00 ++ 8/15/05 530,000
----------
FOREST & PAPER PRODUCTS (7.0%)
1,000 Container Corp. ..... 14.00 12/ 1/01 1,121,050
3,500 Container Corp. ..... 15.50 ++ 12/ 1/04 6,816,250
5,000 Crown Packaging,
Inc. -- 144A**...... 12.25 ++ 11/ 1/03 2,393,750
7,500 Fort Howard Corp. ... 14.125++ 11/ 1/04 7,162,500
----------
17,493,550
----------
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- ----------- ------ -------- ------------
<S> <C> <C> <C>
HEALTHCARE PRODUCTS (4.5%)
$ 7,500 Alco Health Services
Corp. .............. 14.50 % 9/15/99 $ 8,325,000
2,850 Scherer R. P.
Corp. .............. 14.00 11/ 1/99 3,106,500
----------
11,431,500
----------
MANUFACTURING (3.7%)
5,000 Snydergeneral
Corp. .............. 14.25 11/15/00 5,287,500
2,500 Talley Industries,
Inc. ............... 12.25 ++ 10/15/05 1,562,500
2,500 Uniroyal Technology
Corp. .............. 11.75 6/ 1/03 2,587,500
----------
9,437,500
----------
MANUFACTURING -- DIVERSIFIED INDUSTRIES (6.8%)
5,000 Interlake Corp. ..... 12.125 3/ 1/02 5,262,500
7,500 MS Essex Holdings,
Inc. ............... 16.00 ++ 5/15/04 6,562,500
7,247 Thermadyne
Industries,
Inc.(b)............. 12.75 +* 11/ 1/99 5,335,754
----------
17,160,754
----------
OIL & GAS (3.1%)
7,600 Presidio Oil Co.
(Series B) ......... 14.05 *** 7/15/02 7,904,000
----------
RESTAURANTS (5.3%)
10,000 American Restaurant
Group Holdings
(Units) -- 144A**... 14.00 ++ 12/15/05 5,300,000
2,500 Carrols Corp. ....... 11.50 8/15/03 2,631,250
2,500 Flagstar Corp. ...... 11.25 11/ 1/04 2,606,250
2,500 Foodmakers, Inc. .... 14.25 5/15/98 2,659,375
----------
13,196,875
----------
RETAIL (4.0%)
5,000 Cort Furniture Rental
Corp. .............. 12.00 9/ 1/00 5,075,000
5,000 County Seat Stores
Co. (Units)......... 12.00 10/ 1/01 5,012,500
----------
10,087,500
----------
RETAIL -- FOOD CHAINS (5.9%)
3,495 Big Bear Stores
Co.................. 13.75 6/15/99 3,757,125
5,000 Food 4 Less Holdings,
Inc. ............... 15.25 ++ 12/15/04 3,500,000
22,000 Grand Union Capital
Corp. (Series A).... 0.00 1/15/07 2,640,000
5,000 Purity Supreme, Inc.
(Series B).......... 11.75 8/ 1/99 5,025,000
----------
14,922,125
----------
TEXTILES (2.0%)
5,000 JPS Textiles Group,
Inc. ............... 10.85 6/ 1/99 5,037,500
----------
</TABLE>
TOTAL CORPORATE BONDS
(IDENTIFIED COST $202,793,728) 200,994,755
----------
<PAGE> 4
HIGH INCOME ADVANTAGE TRUST II
PORTFOLIO OF INVESTMENTS January 31, 1994 (unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- ---------- -------------
<C> <S> <C>
PREFERRED STOCK (C) (0.4%)
AIRLINES (0.4%)
12,500 Trans World Airlines, Inc. 12.00% +
(Identified Cost $9,290,244)............. $ 909,282
-------------
COMMON STOCKS (A)(C) (7.0%)
AIRLINES (0.2%)
118,291 Trans World Airlines, Inc................. 502,737
-------------
AUTO PARTS (0.8%)
270,000 Harvard Industries, Inc. (Class B)........ 2,058,750
-------------
BUILDING & CONSTRUCTION (3.0%)
240,267 USG Corp.................................. 7,628,477
-------------
CONSUMER PRODUCTS (0.5%)
607,557 Triton Group, Ltd......................... 1,215,114
-------------
ENTERTAINMENT, GAMING & LODGING (0.3%)
67,051 SPI Holdings, Inc......................... 569,934
5,210 Trump Taj Mahal, Inc. (Class A)........... 130,250
-------------
700,184
-------------
FOOD & BEVERAGE (0.0%)
15,000 Specialty Foods Acquisition
Corp. -- 144A** ......................... 30,000
-------------
HEALTHCARE -- DIVERSIFIED (2.2%)
228,558 Charter Medical Corp. .................... 5,571,101
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $48,136,296)............... 17,706,363
-------------
</TABLE>
<TABLE>
<CAPTION>
Number of Expiration
Warrants Date
- ----------- ----------
<C> <S> <C> <C>
WARRANTS(A) (1.2%)
AEROSPACE (0.1%)
6,000 Sabreliner Corp.(c)......... 4/15/03 120,000
-------------
BUILDING & CONSTRUCTION (0.7%)
100,306 USG Corp.(c)................ 5/ 6/98 1,843,711
-------------
ENTERTAINMENT, GAMING & LODGING (0.2%)
2,500 Belle Casino,
Inc. -- 144A** ............ 10/ 1/03 112,500
3,263 Casino America, Inc. ....... 11/15/96 29,367
25,000 Treasure Bay Gaming &
Resort, Inc. -- 144A**..... 11/15/98 150,000
200 Trump Plaza Holding
Assoc. .................... 6/18/96 160,000
-------------
451,867
-------------
FOREST & PAPER PRODUCTS (0.1%)
5,000 Crown Packaging, Inc.--144A** .. 10/15/03 150,000
-------------
MANUFACTURING (0.0%)
25,000 Uniroyal Technology Corp. .. 6/ 1/03 68,750
-------------
MANUFACTURING -- DIVERSIFIED (0.0%)
925,900 Thermadyne Industries,
Inc.(c) .................. 12/31/00 64,813
-------------
RETAIL (0.1%)
165,000 New Cort Holdings Corp. .... 9/ 1/98 247,500
-------------
<CAPTION>
Number of Expiration
Warrants Date Value
- ----------- ---------- -------------
<C> <S> <C> <C>
RETAIL -- FOOD CHAINS (0.0%)
17,327 Purity Supreme, Inc. ....... 8/ 6/97 $ 866
-------------
TOTAL WARRANTS
(IDENTIFIED COST $1,331,249)................. 2,947,507
-------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date
- ----------- ------ --------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENTS (7.6%)
U.S. GOVERNMENT AGENCY(d) (1.4%)
$ 3,610 Federal Home Loan
Mortgage Corp. ....... 3.051 % 2/ 1/94 3,610,000
-------------
U.S. GOVERNMENT OBLIGATIONS (6.2%)
7,500 United States Treasury
Note.................. 13.125 5/15/94 7,710,938
7,500 United States Treasury
Note.................. 12.625 8/15/94 7,869,140
-------------
15,580,078
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $19,586,172)................. 19,190,078
-------------
TOTAL INVESTMENTS
(IDENTIFIED COST $281,137,689)(E)............ 96.1% 241,747,985
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES....................... 3.9 9,839,484
-------- -------------
NET ASSETS................................... 100.0% $251,587,469
-------- -------------
-------- -------------
</TABLE>
- ---------------
* Adjustable rate. Rate shown is the rate in effect at
January 31, 1994.
** Resale is restricted to qualified institutional investors.
*** Floating rate. Coupon is linked to the Gas Index. Rate shown is the rate in
effect at January 31, 1994.
+ Payment in kind securities.
++ Currently zero coupon under terms of the initial offering.
(a) Non-income producing.
(b) Non-income producing, issuer in bankruptcy.
(c) Acquired through exchange offer.
(d) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a bond equivalent yield.
(e) The aggregate cost for federal income tax purposes is $281,437,429; the
aggregate gross unrealized appreciation is $9,716,280 and the aggregate
gross unrealized depreciation is $49,405,724, resulting in net unrealized
depreciation of $39,689,444.
See Notes to Financial Statements
<PAGE> 5
HIGH INCOME ADVANTAGE TRUST II
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1994 (unaudited)
- -------------------------------------------
ASSETS:
Investments in securities, at value
(identified cost $281,137,689) (Note
1)....................................... $241,747,985
Cash....................................... 4,676
Receivable for:
Investments sold......................... 5,982,713
Interest................................. 5,872,076
Prepaid expenses and other assets.......... 3,555
------------
TOTAL ASSETS....................... 253,611,005
------------
LIABILITIES:
Payable for investments purchased.......... 1,683,076
Investment management fee payable (Note
2)....................................... 158,335
Accrued expenses (Note 3).................. 182,125
------------
TOTAL LIABILITIES.................. 2,023,536
------------
NET ASSETS:
Paid-in-capital............................ 344,428,742
Accumulated realized loss on
investments - net........................ (56,148,814)
Unrealized depreciation on investments -
net...................................... (39,389,704)
Accumulated undistributed net investment
income................................... 2,697,245
------------
NET ASSETS......................... $251,587,469
------------
------------
NET ASSET VALUE PER SHARE,
35,611,307 shares outstanding (unlimited
authorized shares of $.01 par value)..... $7.06
-----
-----
STATEMENT OF OPERATIONS For the six months ended
January 31, 1994 (unaudited)
- -------------------------------------------
INVESTMENT INCOME:
INTEREST INCOME........................... $13,755,583
-----------
EXPENSES
Investment management fee (Note 2)....... 910,539
Transfer agent fees and expenses (Note
3)..................................... 110,485
Professional fees........................ 37,463
Custodian fees........................... 27,600
Shareholder reports and notices.......... 20,403
Trustees' fees and expenses (Note 3)..... 16,813
Registration fees........................ 16,074
Organizational expenses (Note 1)......... 1,216
Other.................................... 3,756
------------
TOTAL EXPENSES......................... 1,144,349
------------
INVESTMENT INCOME - NET.............. 12,611,234
------------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS -- NET (NOTE 1):
Realized gain on investments - net....... 632,025
Change in unrealized depreciation on
investments - net...................... 17,104,596
------------
NET GAIN ON INVESTMENTS.............. 17,736,621
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS...... $30,347,855
-----------
-----------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the six
months ended For the
January 31, 1994 year ended
(unaudited) July 31, 1993
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Investment income - net............................................... $ 12,611,234 $ 27,329,742
Realized gain (loss) on investments - net............................. 632,025 (4,075,639)
Change in unrealized depreciation on investments - net................ 17,104,596 15,177,573
------------------- -------------------
Net increase in net assets resulting from operations.............. 30,347,855 38,431,676
Dividends to shareholders from investment income - net.................. (13,799,262) (32,501,092)
Transactions in shares of beneficial interest - net decrease (Note 4)... -0- (174,651)
------------------- -------------------
Total increase.................................................... 16,548,593 5,755,933
NET ASSETS:
Beginning of period..................................................... 235,038,876 229,282,943
------------------- -------------------
END OF PERIOD (including undistributed net investment income of
$2,697,245 and $3,885,273, respectively)............................... $ 251,587,469 $ 235,038,876
------------------- -------------------
------------------- -------------------
</TABLE>
See Notes to Financial Statements
<PAGE> 6
HIGH INCOME ADVANTAGE TRUST II
NOTES TO FINANCIAL STATEMENTS (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- High Income Advantage Trust II (the
"Trust") was organized on July 7, 1988 as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
a diversified closed-end management investment company. The Trust commenced
operations on September 30, 1988.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- (1) an equity portfolio security listed or
traded on the New York or American Stock Exchange is valued at its latest
sale price on that exchange (if there were no sales that day, the security
is valued at the latest bid price); (2) all other portfolio securities for
which over-the-counter market quotations are readily available are valued
at the latest bid price; (3) when market quotations are not readily
available, portfolio securities are valued at their fair value as
determined in good faith under procedures established by and under the
general supervision of the Trustees (valuation of securities for which
market quotations are not readily available may be based upon current
market prices of securities which are comparable in coupon, rating and
maturity or an appropriate matrix utilizing similar factors); (4) certain
of the Trust's portfolio securities may be valued by an outside pricing
service approved by the Trustees. The pricing service utilizes a matrix
system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, in determining
what it believes is the fair valuation of the portfolio securities valued
by such pricing service; and (5) short-term debt securities with remaining
maturities of 60 days or less at time of purchase are valued at amortized
cost; other short-term securities are valued on a mark-to-market basis
until such time as they reach a remaining maturity of 60 days, whereupon
they are valued at amortized cost using their value on the 61st day. All
other securities and other assets are valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.
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 Trust does not amortize premiums or accrue
discounts on fixed income securities in the portfolio, except those
original issue discounts for which amortization is required for federal
income tax purposes. Additionally, with respect to market discount, a
portion of any capital gain realized upon disposition may be
recharacterized as investment income. Realized gains and losses on security
transactions are determined on the identified cost method. Dividend income
is recorded on the ex-dividend date. Interest income is accrued daily
except where collection is not expected.
C. Federal Income Tax Status -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. Dividends and Distributions to Shareholders -- The Trust 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"
<PAGE> 7
HIGH INCOME ADVANTAGE TRUST II
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- --------------------------------------------------------------------------------
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 Trust's Investment Manager paid
organizational expenses of the Trust in the amount of $36,000. The Trust
reimbursed the Investment Manager for these costs which were fully
amortized as of September 30, 1993.
F. Repurchase Agreements -- The Trust's custodian takes possession on
behalf of the Trust of the collateral pledged for investments in repurchase
agreements. It is the policy of the Trust to value the underlying
collateral daily on a mark-to-market basis to determine that the value,
including accrued interest, is at least equal to the repurchase price plus
accrued interest. In the event of default of the obligation to repurchase,
the Trust has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement (the "Agreement") with Dean Witter InterCapital Inc., (the "Investment
Manager"), the Trust pays its Investment Manager monthly compensation calculated
weekly by applying the following annual rates to the Trust's weekly net assets:
0.75% of the portion of the average weekly net assets not exceeding $250
million; 0.60% of the portion of average weekly net assets exceeding $250
million but not exceeding $500 million; 0.50% of the portion of average weekly
net assets exceeding $500 million but not exceeding $750 million; 0.40% of the
portion of average weekly net assets exceeding $750 million but not exceeding $1
billion; and 0.30% of the portion of average weekly net assets exceeding $1
billion.
Under the terms of the Agreement, in addition to managing the Trust's
investments, the Investment Manager maintains certain of the Trust's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Trust who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and the proceeds from sales of portfolio securities for the six months
ended January 31, 1994, excluding short-term investments, aggregated
$123,064,040 and $125,320,144, respectively.
On April 1, 1991, the Trust established an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Trust who will
have served as an independent Trustee 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 six months ended January 31, 1994, included in Trustees' fees and expenses
in the Statement of Operations, amounted
<PAGE> 8
HIGH INCOME ADVANTAGE TRUST II
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- --------------------------------------------------------------------------------
to $4,970. At January 31, 1994 the Trust had an accrued pension liability of
$39,174 which is included in accrued expenses in the Statement of Assets and
Liabilities.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. During the six months ended January 31, 1994, the Trust
incurred transfer agent fees and expenses of $110,485, of which $48,618 was
payable at January 31, 1994.
4. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
Par
Value Capital Paid
of in Excess of
Shares Shares Par Value
---------- -------- ------------
<S> <C> <C> <C>
Balance, July 31, 1992............................. 35,641,307 $356,413 $344,248,167
Purchase of treasury shares (weighted average
discount 5.42%)*................................. (30,000) (300) (174,351)
---------- -------- ------------
Balance, July 31, 1993 and January 31, 1994........ 35,611,307 $356,113 $344,073,816
---------- -------- ------------
---------- -------- ------------
</TABLE>
- ---------------
* The Trustees have voted to retire the shares repurchased.
5. DIVIDENDS -- The Trust declared the following dividends from net investment
income --
<TABLE>
<CAPTION>
Declaration Amount Record Payable
Date Per Share Date Date
- ----------------- ---------- ------------------ ------------------
<S> <C> <C> <C>
February 1, 1994 $.0525 February 11, 1994 February 25, 1994
March 1, 1994 $.0525 March 11, 1994 March 25, 1994
</TABLE>
6. FEDERAL INCOME TAXES -- At July 31, 1993, the Trust had net capital loss
carryovers of approximately $50,328,000 of which $28,000 will be available
through July 31, 1998, $20,947,000 will be available through July 31, 1999 and
$29,353,000 will be available through July 31, 2000 to offset future capital
gains to the extent provided by regulations. Any net capital losses incurred
after October 31 ("post-October losses") within the taxable year are deemed to
arise on the first business day of the Trust's next taxable year. The Trust
incurred and will elect to defer such net capital losses of approximately
$6,153,000 during fiscal 1993. To the extent that these carryover losses are
used to offset future capital gains, it is probable that the gains so offset
will not be distributed to shareholders. For the six months ended January 31,
1994, the Trust had approximately $632,000 in net realized gains. At July 31,
1993, the Trust had temporary book/tax differences primarily attributable to
post-October losses.
<PAGE> 9
HIGH INCOME ADVANTAGE TRUST II
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- --------------------------------------------------------------------------------
7. SELECTED QUARTERLY FINANCIAL DATA --
<TABLE>
<CAPTION>
Quarters Ended*
--------------------------------
1/31/94 10/31/93
-------------- --------------
Per Per
Total Share Total Share
------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income....................................... $6,727 $.19 $7,029 $.20
Investment income - net....................................... 6,132 .17 6,479 .18
Realized and unrealized gain
on investments - net........................................ 10,070 .28 7,667 .22
</TABLE>
<TABLE>
<CAPTION>
Quarters Ended*
--------------------------------------------------------------------
7/31/93 4/30/93 1/31/93 10/31/92
--------------- -------------- -------------- --------------
Per Per Per Per
Total Share Total Share Total Share Total Share
------- ----- ------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income..... $ 8,360 $ .23 $6,769 $.19 $7,237 $.20 $7,107 $.20
Investment income - net..... 7,883 .22 6,221 .18 6,683 .19 6,543 .18
Realized and unrealized gain
(loss) on
investments - net......... 6,493 .17 5,748 .16 4,901 .14 (6,040) (.16)
</TABLE>
- ---------------
* Totals expressed in thousands of dollars.
<PAGE> 10
HIGH INCOME ADVANTAGE TRUST II
FINANCIAL HIGHLIGHTS (unaudited)
- --------------------------------------------------------------------------------
Selected data and ratios for a share of beneficial interest outstanding
throughout each period:
<TABLE>
<CAPTION>
For the period
For the six For the year ended July 31, September 30, 1988*
months ended ----------------------------------------- through
January 31, 1994 1993 1992 1991 1990 July 31, 1989
---------------- -------- -------- -------- -------- -------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period.... $6.60 $6.43 $5.68 $6.44 $8.76 $9.30
---------------- -------- -------- -------- -------- -------------------
Investment
income - net........ .35 .77 .91 .77 1.13 .98
Realized and
unrealized gain
(loss) on
investments - net... .50 .31 .50 (.70) (2.26) (.59)
---------------- -------- -------- -------- -------- -------------------
Total from investment
operations............. .85 1.08 1.41 .07 (1.13) .39
---------------- -------- -------- -------- -------- -------------------
Less dividends,
distributions and other
charges:
Dividends from net
investment income... (.39) (.91) (.66) (.77) (1.19) (.92)
Distributions to
shareholders from
paid in capital..... -0- -0- -0- (.06) -0- -0-
Offering costs charged
against capital..... -0- -0- -0- -0- -0- (.01)
---------------- -------- -------- -------- -------- -------------------
Total dividends,
distributions and other
charges................ (.39) (.91) (.66) (.83) (1.19) (.93)
---------------- -------- -------- -------- -------- -------------------
Net asset value, end of
period................. $7.06 $6.60 $6.43 $5.68 $6.44 $8.76
---------------- -------- -------- -------- -------- -------------------
---------------- -------- -------- -------- -------- -------------------
Market value, end of
period................. $6.875 $6.875 $6.50 $5.13 $6.00 $8.25
---------------- -------- -------- -------- -------- -------------------
---------------- -------- -------- -------- -------- -------------------
TOTAL INVESTMENT RETURN+... 5.82%(1) 22.16% 42.17% 3.03% (13.61)% (8.77)%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)......... $251,587 $235,039 $229,283 $210,595 $251,793 34$3,610
Ratio of expenses to
average net assets..... .94%(2) .95% .98% 1.07% .93% .85%(2)
Ratio of net investment
income to average net
assets................. 10.39%(2) 12.17% 14.83% 14.85% 15.74% 12.89%(2)
Portfolio turnover
rate................... 54% 138% 99% 129% 31% 101%
</TABLE>
- ---------------
* Commencement of operations.
+ 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 Trust's dividend
reinvestment plan. Total investment return does not reflect sales charges or
brokerage commissions.
(1) Not Annualized.
(2) Annualized.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
The financial statements included herein have been taken from the records of
the Trust without examination by the independent accountants and accordingly
they do not express an opinion thereon.
<PAGE> 11
(This Page Intentionally Left Blank)
<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
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Peter M. Avelar
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
HIGH
INCOME
ADVANTAGE
TRUST II
Semiannual Report
January 31, 1994
