MUNICIPAL INCOME OPPORTUNITIES TRUST II
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDERS:
Long-term revenue bond yields, as measured by The Bond Buyer, reached a
record low of 5.41 percent in mid October. However, strong economic growth and
fears of renewed inflationary pressures subsequently caused yields to rise.
This reversed the trend toward lower yields that had been in place for more
than three years. Municipal bond yields lagged the rise in U.S. Treasury bond
yields through January. During February, municipal bond prices deteriorated
substantially after the Federal Reserve Board increased the fed funds rate
which banks charge each other for overnight borrowing. By the end of the period
under review, The Bond Buyer Revenue Bond Index had climbed to 5.88 percent,
its highest level in almost a year.
New-issue underwriting totaled a record $290 billion in 1993, a 23
percent increase over the previous high of $235 billion set in 1992. Refunding
issues, which are used by state and local governments to refinance higher-
coupon debt, represented 66 percent of total volume last year. New issues
backed by insurance had a 37 percent market share. This year's new-issue volume
is expected to decline by approximately 30 percent to the $200 billion range.
An estimated $260 billion in bonds will either mature or be called in 1994,
resulting in a decrease in outstanding municipal debt. For the first two months
of 1994, new-issue volume declined by 20 percent and totaled $30 billion.
Refunding activity, the catalyst of last year's record underwriting, dropped
even more sharply.
PERFORMANCE
Municipal Income Opportunities Trust II's (NYSE Symbol: OIB) total
return for the 12-month period ended February 28, 1994 was -0.36 percent. This
return was based on the change in New York Stock Exchange (NYSE) market price
from $8.75 to $8.125 per share and reinvestment of dividends and distributions.
The net asset value of OIB declined 4.27 percent from $9.13 to $8.74 per share.
Non-performing loans represented 6.7 percent of the Fund's assets at
the end of the period. These loans were in the nursing and health-related,
retirement and life care, industrial development/pollution control, public
facilities and multi-family housing revenue sectors. Issues representing
another 8 percent of assets are currently paying interest, but are expected to
be restructured. Revenues of these projects appear sufficient to sustain lower
debt-service levels. Two problem holdings in the industrial development
category were eliminated after the close of the fiscal year: Broward County,
Florida, Graphic Dynamics Inc. was liquidated in bankruptcy and Warren County
Development Authority, Georgia, Foundry East was sold.
For the 12-month period, the Fund paid shareholders income dividends
totaling $0.60 per share. The level of monthly dividend payments was maintained
at $0.05 per share throughout the fiscal year. However, future dividend levels
could be affected by problem loan restructuring or by sales/redemptions of
older, high-coupon bonds with reduced call protection.
PORTFOLIO STRUCTURE
The portfolio was diversified among 11 municipal sectors and 59
separate issuers. In keeping with the Fund's primary objective of providing
high current income, non-rated securities represented 79 percent of the
portfolio's $181 million in net assets. The portfolio's three largest municipal
sectors at the end of the period were industrial development/pollution control,
housing and nursing and health-related revenue bonds. These sectors represented
approximately 60 percent of the portfolio. The average maturity and call
protection of the Fund's long-term holdings were 22 years and 7.7 years,
respectively. Bonds subject to the alternative minimum tax comprised 42 percent
of the portfolio.
We would like to remind you that the Trustees have approved a procedure
whereby the Fund, 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 Municipal Income Opportunities Trust II
and look forward to continuing to serve your investment needs and objectives.
Very truly yours,
Charles A. Fiumefreddo
Chairman of the Board
<PAGE>
<TABLE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
PORTFOLIO OF INVESTMENTS February 28, 1994
==================================================================================================================================
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- --------- ---- ---- -----
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (96.6%)
GENERAL OBLIGATION (1.8%)
New York City, New York,
$ 2,000 Ser 1994 D........................................................... 5.75 % 8/15/10 $ 1,940,360
60 Ser 1990 D........................................................... 8.50 8/ 1/12 66,793
1,175 Ser 1990 D (Prerefunded)............................................. 8.50 8/ 1/12 1,322,886
- ------- -----------
3,235 3,330,039
- ------- -----------
EDUCATIONAL FACILITIES REVENUE (0.5%)
1,000 New York State Dormitory Authority, State University Ser 1993 A....... 5.25 5/15/15 932,120
- ------- -----------
HOSPITAL REVENUE (5.9%)
2,000 Corona, California, Vista Hospital Systems Inc Ser 1992 B COPs........ 9.50 7/ 1/20 2,184,460
Illinois Health Facilities Authority, Hinsdale Hospital
1,885 Ser 1990 C........................................................... 9.50 11/15/19 2,287,805
3,115 Ser 1990 C (Prerefunded)............................................. 9.50 11/15/19 4,013,771
2,000 Tarrant County Health Facilities Development Corporation, Texas,
Community Health Care Foundation Inc................................. 10.125 4/ 1/11 2,183,340
- ------- -----------
9,000 10,669,376
- ------- -----------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL
REVENUE (23.6%)
1,475 Metropolitan Washington Airports Authority, District of Columbia,
CaterAir International Corp Ser 1991 (AMT)........................... 10.125 9/ 1/11 1,568,854
1,440 Broward County, Florida, Graphic Dynamics Inc
Ser 1990 (AMT) (a)................................................... 10.375 3/ 1/10 216,000
3,500 Warren County Development Authority, Georgia, Foundry East
Ser 1989 (AMT) (a)................................................... 10.00 7/ 1/19 700,000
2,000 Chicago, Illinois, Chicago--O'Hare Intl Airport/American
Airlines Inc Ser 1990 A (AMT)........................................ 7.875 11/ 1/25 2,192,200
2,600 Holyoke, Massachusetts, McCormack/Partyka
Ser 1990 (AMT) (a)................................................... 10.00 8/15/10 1,950,000
Lapeer Economic Development Corporation, Michigan,
Dott Manufacturing Co
2,110 Ser 1989 B (AMT)..................................................... 9.00 11/15/19 2,131,100
2,070 Ser 1989 A (AMT)..................................................... 10.625 11/15/19 2,287,060
Michigan Strategic Fund, Kasle Steel Corp
1,789 Ser 1989 (AMT)....................................................... 9.375 10/ 1/06 1,981,498
5,207 Ser 1989 (AMT)....................................................... 9.50 10/ 1/14 5,765,585
1,485 Sanilac County Economic Development Corporation, Michigan,
Dott Manufacturing Co Ser 1989 (AMT)................................. 10.625 8/15/19 1,622,377
3,000 Claiborne County, Mississippi, Middle South Energy Inc Ser C.......... 9.875 12/ 1/14 3,636,030
6,000 Cleveland, Ohio, Continental Airlines Inc Ser 1990 A (AMT)............ 9.00 12/ 1/19 6,193,860
Oklahoma Development Finance Authority, Midway
Environmental Management Co Inc
645 Ser 1990 A (AMT)..................................................... 9.50 9/ 1/99 671,484
3,105 Ser 1989 B (AMT)..................................................... 9.50 9/ 1/15 3,261,647
</TABLE>
<PAGE>
<TABLE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
PORTFOLIO OF INVESTMENTS February 28, 1994 (continued)
==================================================================================================================================
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- --------- ---- ---- -----
<C> <S> <C> <C> <C>
$ 4,175 Westmoreland County Industrial Development Authority,
Pennsylvania, Valley Landfill/National Waste Energy Corp
Ser 1989 A (AMT)..................................................... 9.75% 8/ 1/04 $ 4,521,609
3,800 Carroll County Industrial Development Board, Tennessee,
Henry I Siegel Co Inc Ser 1990 (AMT)................................. 9.90 5/ 1/00 4,009,684
- ------- -----------
44,401 42,708,988
- ------- -----------
MORTGAGE REVENUE--MULTI-FAMILY (12.4%)
Boulder County, Colorado, Village Place at Longmont
3,065 Ser 1989 A (AMT)..................................................... 10.125 7/15/19 3,172,275
10,837 Ser 1989 B (AMT)..................................................... 0.00 7/15/19 838,115
1,500 Dade County Housing Finance Authority, Florida, Arena
Square North & South 1989 Ser 2 (AMT) (a)............................ 10.25 5/ 1/19 375,000
3,000 Palm Beach County Housing Authority, Florida, Scattered Sites
Ser 1990............................................................. 9.75 6/ 1/20 3,000,000
4,000 Tewksbury Housing Authority, Massachusetts, Sullivan Place
1990 Issue (AMT) (a)................................................. 9.875 8/ 1/25 600,000
7,000 Eden Prairie, Minnesota, Fountain Place Apts Phase II
Refg Ser A........................................................... 9.75 7/15/19 4,900,000
Memphis Center City Revenue Finance Corporation, Tennessee,
Riverset Apts Phase II Refg
3,810 Ser 1989 A........................................................... 9.50 10/ 1/19 2,628,900
28,148 Ser 1989 B........................................................... 0.00 10/ 1/19 1,055,569
2,800 San Antonio Housing Finance Corporation, Texas, La Posada
Del Rey Ser 1990 A................................................... 10.00 2/ 1/20 3,001,320
Alexandria Redevelopment & Housing Authority, Virginia,
Courthouse Common Apts
2,000 Ser 1990 A (AMT)..................................................... 10.00 1/ 1/21 2,065,640
11,061 Ser 1990 B (AMT)..................................................... 0.00 1/ 1/21 831,947
- ------- -----------
77,221 22,468,766
- ------- -----------
MORTGAGE REVENUE--SINGLE FAMILY (4.7%)
3,500 Maine Housing Authority, Purchase 1990 Ser A-4 (AMT).................. 6.40 11/15/23 3,537,275
2,575 Ohio Housing Finance Authority, GNMA-Backed
1988 Ser B (AMT)..................................................... 8.25 12/15/19 2,748,658
Utah Housing Finance Agency,
1,200 Ser 1990 A-2 (AMT)................................................... 7.80 7/ 1/10 1,289,460
880 Ser 1990 A-2 (AMT)................................................... 7.875 7/ 1/22 960,494
- ------- -----------
8,155 8,535,887
- ------- -----------
NURSING & HEALTH RELATED FACILITIES REVENUE (23.6%)
2,365 Arkansas Development Finance Authority, Wynwood Nursing
Center Ser 1989 (AMT)................................................ 10.50 11/ 1/19 2,537,243
3,500 Vista, California, Long-Term Care Foundation of America
Ser 1989 COPs (a)(b)................................................. 9.875 1/ 1/20 2,100,000
2,000 North Miami, Florida, Hallmark Homes for Better Living
Foundation Ser 1990 A (a)............................................ 10.50 8/ 1/20 260,000
</TABLE>
<PAGE>
<TABLE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
PORTFOLIO OF INVESTMENTS February 28, 1994 (continued)
==================================================================================================================================
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- --------- ---- ---- -----
<C> <S> <C> <C> <C>
$ 3,965 Monroe County Development Authority, Georgia,
Health Scholarships Inc Ser 1989 A................................... 10.125% 9/ 1/19 $ 3,885,700
2,500 Sterling, Illinois, Hoosier Care Inc Ser 1989 A....................... 9.75 8/ 1/19 2,727,825
4,000 Iowa Financial Authority, Mercy Health Initiatives Ser 1989........... 9.95 7/ 1/19 4,232,640
3,340 Marion, Iowa, AHF/Kentucky-Iowa Inc Ser 1990.......................... 10.25 1/ 1/20 3,590,300
1,500 Westside Habilitation Center, Louisiana, Intermediate Care
Facility for the Mentally Retarded Refg Ser 1993..................... 8.375 10/ 1/13 1,520,175
1,100 Massachusetts Health & Educational Facilities Authority,
Farren Care Center 1989 Ser A........................................ 10.375 6/ 1/10 1,273,228
Massachusetts Industrial Finance Agency,
5,175 Greater Lynn Special Needs Housing Corp & Mental Health &
Retardation Assn 1990 Issue.......................................... 9.875 6/ 1/10 5,635,523
1,365 May Institute for Autistic Children Inc 1990 Issue................... 9.75 6/ 1/10 1,478,268
1,090 Pioneer Valley Living Care Center at Amherst 1990 Issue.............. 7.00 10/ 1/01 893,800
5,000 Chester County Industrial Development Authority, Pennsylvania,
RHA/PA Nursing Ser 1989.............................................. 10.125 5/ 1/19 5,352,850
1,490 Maury County Health & Educational Facilities Board,
Tennessee, Southern Healthcare/Heritage Manor of
Monteagle Ser 1990 E................................................. 10.50 3/ 1/20 1,601,631
2,000 Metropolitan Government of Nashville and Davidson County
Health & Educational Facilities Board, Tennessee,
Metro-Nashville Teachers Nursing Facility Inc
Ser 1989 (a)......................................................... 10.25 10/ 1/19 1,780,000
Tarrant County Health Facilities Development Corporation,
Texas, 3927 Foundation Inc
1,135 Ser 1989............................................................. 10.00 9/ 1/99 1,218,911
2,500 Ser 1989............................................................. 10.125 9/ 1/09 2,740,525
- ------- -----------
44,025 42,828,619
- ------- -----------
PUBLIC FACILITIES REVENUE (2.7%)
3,000 Geo L Smith II Georgia World Congress Center Authority,
Georgia, Domed Stadium Ser 1990 (AMT)................................ 7.875 7/ 1/20 3,362,670
2,500 Irwin County, Georgia, COPs (a)....................................... 9.50 12/ 1/10 1,500,000
2,360 LaSalle County Jail Facilities Finance Corporation, Texas,
Criminal Detention Center (a)........................................ 9.75 8/ 1/09 24
- ------- -----------
7,860 4,862,694
- ------- -----------
RETIREMENT & LIFE CARE FACILITIES REVENUE (5.4%)
2,200 Pima County Industrial Development Authority, Arizona, Country
Club of La Cholla Ser 1990 (AMT)..................................... 10.50 7/ 1/20 2,134,000
1,500 Colorado Health Facilities Authority, Liberty Heights Ser A (a) ...... 10.00 7/ 1/19 825,000
3,000 Independence Industrial Development Authority, Missouri,
Greenbriar Meadows Ser A (AMT) (a) .................................. 10.25 8/ 1/19 1,800,000
1,145 Charlotte Housing Authority, North Carolina, Merrywood Senior
Adult Community Ser 1989 A (AMT)..................................... 9.75 5/ 1/19 1,099,200
2,000 Lorain County, Ohio, Laurel Lakes, Ser 1993........................... 7.125 12/15/18 1,928,840
</TABLE>
<PAGE>
<TABLE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
PORTFOLIO OF INVESTMENTS February 28, 1994 (continued)
==================================================================================================================================
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- --------- ---- ---- -----
<C> <S> <C> <C> <C>
$ 2,500 Chesterfield County Industrial Development Authority, Virginia,
Brandermill Woods Ser 1991 A......................................... 10.625% 7/ 1/16 $ 2,075,000
- -------- -----------
12,345 9,862,040
- -------- -----------
TAX ALLOCATION REVENUE (11.6%)
980 Silverthorn Community Development District, Florida, Cap Impr
Ser 1990 A........................................................... 9.50 4/ 1/10 999,600
2,390 Bedford Park, Illinois, First Lien Ser 1990 (Prerefunded)............. 9.70 1/ 1/10 2,823,187
6,185 Carol Stream, Illinois, Carol Pointe Ser 1990 A....................... 9.50 1/15/10 6,689,016
Hodgkins, Illinois,
1,500 Ser 1991............................................................. 9.50 12/ 1/09 1,646,790
4,000 Second Lien Ser 1990 (Prerefunded)................................... 9.50 12/15/09 5,096,480
1,250 Madison Heights Tax Increment Finance Authority, Michigan,
Ser 1991............................................................. 8.50 3/15/01 1,315,286
2,065 Muskegon Downtown Development Authority, Michigan,
Ltd Oblig 1989 Ser A-1 (b)........................................... 9.75 6/ 1/18 2,379,788
- -------- -----------
18,370 20,950,147
- -------- -----------
TRANSPORTATION FACILITIES REVENUE (4.4%)
Denver, Colorado, Airport
3,000 Ser 1990 A (AMT)..................................................... 8.25 11/15/12 3,388,860
2,000 Ser 1991 A (AMT)..................................................... 8.75 11/15/23 2,360,700
2,000 Ser 1991 A (AMT)..................................................... 8.00 11/15/25 2,216,480
- -------- -----------
7,000 7,966,040
- -------- -----------
232,612 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $184,940,092)........................................... 175,114,716
- -------- -----------
SHORT-TERM MUNICIPAL OBLIGATION (1.1%)
2,000 Washington Health Care Facilities Authority, Fred Hutchinson
- -------- Cancer Hospital Ser A (Tender 3/1/94)
(Identified Cost $2,000,000)......................................... 2.30* 1/ 1/18 2,000,000
------------
$234,612 TOTAL INVESTMENTS (IDENTIFIED COST $186,940,092)(C)................... 97.7% 177,114,716
======== CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................ 2.3 4,221,573
------ ------------
NET ASSETS ........................................................... 100.0% $181,336,289
====== ============
<FN>
- ----------
* Variable or floating rate security. Coupon rate shown reflects current rate.
(a) Non-income producing, bond in default.
(b) Resale is restricted to qualified accredited investors.
(c) The aggregate cost for federal income tax purposes is $186,940,092; the aggregate gross unrealized appreciation is
$12,631,552 and the aggregate gross unrealized depreciation is $22,456,928, resulting in net unrealized depreciation of
$9,825,376.
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
FINANCIAL STATEMENTS
<CAPTION>
===============================================================================
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1994
===============================================================================
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $186,940,092) (Note 1)............... $177,114,716
Cash................................................... 230,793
Receivable for:
Interest.............................................. 4,065,055
Investments sold...................................... 137,166
Prepaid expenses and other assets...................... 31,144
Deferred organizational expenses (Note 1).............. 2,804
------------
TOTAL ASSETS...................................... 181,581,678
------------
LIABILITIES:
Investment advisory fee payable (Note 2)............... 77,813
Administration fee payable (Note 3).................... 46,687
Accrued expenses (Note 4).............................. 120,889
------------
TOTAL LIABILITIES................................. 245,389
------------
NET ASSETS:
Paid-in-capital........................................ 192,938,890
Accumulated net realized loss on
investments........................................... (2,796,917)
Net unrealized depreciation on investments............. (9,825,376)
Accumulated undistributed net
investment income..................................... 1,019,692
------------
NET ASSETS........................................ $181,336,289
============
NET ASSET VALUE PER SHARE, 20,737,707
shares outstanding (unlimited shares
authorized of $.01 par value)......................... $8.74
=====
<CAPTION>
===============================================================================
STATEMENT OF OPERATIONS
For the year ended February 28, 1994
===============================================================================
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME ...................................... $15,081,156
-----------
EXPENSES
Investment advisory fee (Note 2)...................... 926,777
Administration fee (Note 3)........................... 555,962
Professional fees..................................... 123,457
Transfer agent fees and expenses
(Note 4)............................................. 111,453
Shareholder reports and notices (Note 4).............. 61,843
Trustees' fees and expenses (Note 4).................. 32,311
Registration fees..................................... 31,715
Organizational expenses (Note 1)...................... 8,457
Other................................................. 19,139
-----------
TOTAL EXPENSES.................................... 1,871,114
-----------
NET INVESTMENT INCOME............................. 13,210,042
-----------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS (Note 1):
Net realized loss on investments...................... (2,795,645)
Net change in unrealized depreciation
on investments...................................... (5,926,523)
-----------
NET LOSS ON INVESTMENTS............................. (8,722,168)
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS......................... $ 4,487,874
===========
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
==================================================================================================================================
<CAPTION>
For the year For the year
ended ended
February 28, 1994 February 28, 1993
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income............................................... $ 13,210,042 $ 14,094,261
Net realized (loss) gain on investments............................. (2,795,645) 130,117
Net change in unrealized depreciation on investments................ (5,926,523) (2,467,013)
------------ ------------
Net increase in net assets resulting from operations............... 4,487,874 11,757,365
------------ ------------
Dividends and distributions to shareholders from:
Net investment income............................................... (12,442,624) (14,148,918)
Net realized gain on investments.................................... --0-- (124,843)
------------ ------------
(12,442,624) (14,273,761)
------------ ------------
Net decrease from transactions in shares of beneficial interest
(Note 6)............................................................. --0-- (2,443,696)
------------ ------------
Total decrease...................................................... (7,954,750) (4,960,092)
NET ASSETS:
Beginning of period.................................................. 189,291,039 194,251,131
------------ ------------
END OF PERIOD (including undistributed net investment income
of $1,019,692 and $252,274, respectively)........................... $181,336,289 $189,291,039
============ ============
See Notes to Financial Statements
</TABLE>
<PAGE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
NOTES TO FINANCIAL STATEMENTS
===============================================================================
1. ORGANIZATION AND ACCOUNTING POLICIES--Municipal Income Opportunities
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 8, 1989 as a Massachusetts business trust
and commenced operations on June 30, 1989.
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 on fixed income securities. 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 except where collection is not
expected.
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 Former Administrator paid the
organizational expenses of the Fund in the amount of $42,522. The Fund
reimbursed the Former Administrator for such expenses which are being
amortized by the straight-line method over a period not to exceed five
years from the commencement of operations.
2. INVESTMENT ADVISORY AGREEMENT--Pursuant to an Investment Advisory Agreement
(the "Advisory Agreement") with Dean Witter InterCapital Inc. (the "Investment
Adviser"), the Fund pays its Investment Adviser an advisory fee, calculated
weekly and payable monthly, by applying the annual rate of 0.50% to the Fund's
average weekly net assets.
<PAGE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
NOTES TO FINANCIAL STATEMENTS (continued)
===============================================================================
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--Through December 31, 1993, pursuant to an
Administration Agreement with Dean Witter InterCapital Inc. (the "Former
Administrator"), the Fund paid an administration fee, calculated weekly and
payable monthly, by applying the annual rate of 0.30% to the Fund's average
weekly net assets. On January 1, 1994, the Administration Agreement between the
Former Administrator and the Fund had been terminated and a new Administration
Agreement had been entered into between Dean Witter Services Company Inc. (the
"Administrator"), a wholly-owned subsidiary of the Former Administrator, and
the Fund. The nature and scope of the services being provided to the Fund or
any fees being paid by the Fund under the new Agreement are identical to those
of the previous Agreement.
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 February 28, 1994, excluding short-term investments, aggregated
$11,697,215 and $9,861,959, 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 February 28, 1994, included in Trustees' fees and expenses in
the Statement of Operations, amounted to $11,637. At February 28, 1994, the
Fund had an accrued pension liability of $40,659 which is included in accrued
expenses in the Statement of Assets and Liabilities.
Dean Witter Trust Company, an affiliate of the Investment Adviser and
Administrator, is the Fund's transfer agent. At February 28, 1994, the Fund had
transfer agent fees and expenses payable of $18,999.
Bowne & Co., Inc. is an affiliate of the Fund by virtue of a common
Fund Trustee and Director of Bowne & Co., Inc. During the year ended February
28, 1994, the Fund paid Bowne & Co., Inc. $4,989 for printing of shareholder
reports.
5. FEDERAL INCOME TAX STATUS--At February 28, 1994, the Fund had a net capital
loss carryover of approximately $3,800 which will be available through February
28, 2002 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 Fund's
next taxable year. The Fund incurred and will elect to defer net capital losses
of approximately $2,793,000 during fiscal 1994. To the extent that these loss
carryovers are used to offset future capital gains, it is probable that the
gains so offset will not be distributed to shareholders. The Fund had temporary
book/tax differences primarily attributable to Post-October losses.
<PAGE>
<TABLE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
NOTES TO FINANCIAL STATEMENTS (continued)
==================================================================================================================================
<CAPTION>
6. SHARES OF BENEFICIAL INTEREST--Transactions in shares of beneficial interest were as follows:
Capital
Par Value Paid in
of Excess of
Shares Shares Par Value
------ ------ ---------
<S> <C> <C> <C>
Balance, February 29, 1992................................................. 21,039,707 $210,398 $195,172,427
Treasury shares purchased and retired (weighted
average discount 9.47%)*.................................................. (302,000) (3,020) (2,440,676)
---------- -------- ------------
Balance, February 28, 1993 and February 28, 1994........................... 20,737,707 $207,378 $192,731,751
========== ======== ============
<FN>
- ------------
* The Trustees have voted to retire the shares repurchased.
<CAPTION>
7. DIVIDENDS--The Fund has declared the following dividends from net investment income--
Declaration Amount Record Payable
Date Per Share Date Date
---- ---------- ---- ----
<S> <C> <C> <C>
March 1, 1994 $0.05 March 11, 1994 March 25, 1994
March 29, 1994 $0.05 April 8, 1994 April 22, 1994
<CAPTION>
8. SELECTED QUARTERLY FINANCIAL DATA--(unaudited)
Quarters Ended*
------------------------------------------------------------------------------
2/28/94 11/30/93 8/31/93 5/31/93
--------------- --------------- --------------- ---------------
Per Per Per Per
Total Share Total Share Total Share Total Share
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ..................... $3,481 $0.17 $3,817 $0.18 $4,039 $0.20 $3,744 $0.18
Net investment income........................ 3,002 0.14 3,364 0.16 3,560 0.17 3,284 0.16
Net realized and unrealized
(loss) gain on investments.................. (3,326) (0.16) (1,855) (0.09) 2,326 0.11 (5,867) (0.28)
<CAPTION>
Quarters Ended*
------------------------------------------------------------------------------
2/28/93 11/30/92 8/31/92 5/31/92
--------------- --------------- --------------- ---------------
Per Per Per Per
Total Share Total Share Total Share Total Share
----- ---- ----- ---- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ..................... $3,862 $0.19 $4,020 $0.19 $4,011 $0.20 $4,302 $0.20
Net investment income........................ 3,350 0.15 3,502 0.17 3,464 0.17 3,778 0.18
Net realized and unrealized
gain (loss) on investments.................. 3,724 0.20 (1,260) (0.05) (3,284) (0.16) (1,517) (0.07)
<FN>
- ------------
* Totals expressed in thousands of dollars.
</TABLE>
<PAGE>
<TABLE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
FINANCIAL HIGHLIGHTS
==================================================================================================================================
Selected data and ratios for a share of beneficial interest outstanding throughout each period:
<CAPTION>
For the period
For the year ended February 28, June 30, 1989*
-------------------------------------------------- through
1994 1993 1992** 1991 February 28, 1990
---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............. $ 9.13 $ 9.23 $ 9.28 $ 9.34 $ 9.30
------- ------- ------- ------ ------
Net investment income........................... 0.63 0.67 0.73 0.75 0.39
Net realized and unrealized gain
(loss) on investments.......................... (0.42) (0.08) -0- (0.06) 0.01
------- ------- ------- ------ ------
Total from investment operations................. 0.21 0.59 0.73 0.69 0.40
------- ------- ------- ------ ------
Less dividends, distributions and
other charges:
Dividends from net investment income............ (0.60) (0.68) (0.78) (0.74) (0.34)
Distributions to shareholders................... -0- (0.01) -0- (0.01) -0-
Offering costs charged against capital.......... -0- -0- -0- -0- (0.02)
------- ------- ------- ------ ------
Total dividends, distributions and
other charges................................... (0.60) (0.69) (0.78) (0.75) (0.36)
------- ------- ------- ------ ------
Net asset value, end of period................... $ 8.74 $ 9.13 $ 9.23 $ 9.28 $ 9.34
======= ======= ======= ====== ======
Market value, end of period...................... $ 8.125 $ 8.75 $ 9.875 $9.375 $ 9.25
======= ======= ======= ====== ======
TOTAL INVESTMENT RETURN+.......................... (0.36%) (4.42%) 14.42% 9.87% (4.15%)(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)......... $181,336 $189,291 $194,251 $190,386 $189,980
Ratio of expenses to average net assets.......... 1.01% 1.11% 1.06% 1.06% 1.07% (2)
Ratio of net investment income to
average net assets.............................. 7.13% 7.42% 7.87% 7.99% 6.26% (2)
Portfolio turnover rate.......................... 6% 3% 5% 34% 0%
<FN>
- ------------
* Commencement of operations.
** For the year ended February 29, 1992.
+ 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
</TABLE>
===============================================================================
1994 FEDERAL TAX NOTICE (unaudited)
During the year ended February 28, 1994, the Fund paid to shareholders $0.60
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.
===============================================================================
<PAGE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
REPORT OF INDEPENDENT ACCOUNTANTS
===============================================================================
To the Shareholders and Trustees of Municipal Income Opportunities 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 Opportunities
Trust II (the "Fund") at February 28, 1994, 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 four years
in the period then ended and for the period June 30, 1989 (commencement of
operations) through February 28, 1990, 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 February 28, 1994 by correspondence with
the custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York
April 6, 1994
<PAGE>
TRUSTEES
- ----------------------------------------
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
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
DEAN WITTER
MUNICIPAL
INCOME
OPPORTUNITIES
TRUST II
Annual Report
February 28, 1994
