<PAGE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- -----------------------------------------------------------------------------
Interest rates moved higher throughout most of 1994 as the fixed-income
markets focused on the strong pace of economic growth and the risk of higher
inflation. Convinced that growth would be sustained, the Federal Reserve
Board progressively tightened its monetary policy. This led to one of the
most severe bear markets for bonds in recent history. Subsequently, the bond
market began to rally in November based on signs of slower economic growth
and investor anticipation that the Fed's tighter monetary policy was taking
effect.
MUNICIPAL MARKET CONDITIONS
Municipal bond yields, as tracked by The Bond Buyer Revenue Bond Index,*
moved 187 basis points higher over a ten month period from a low of
5.50 percent prior to the central bank's first rate increase in February 1994
to a high of 7.37 percent in November. The municipal market rallied over the
next three months and the Revenue Bond Index yield declined 106 basis points
to 6.31 percent at the end of February 1995. These yield changes were
equivalent to a 22 point drop in price through November 1994 and a subsequent
9 point recovery by February 1995.
The period ended February 28, 1995 was marked by shifts in the balance of
supply and demand in the municipal market. Between February and May 1994,
dealer inventories reached near-record levels as long-term bonds were sold to
pay taxes and increase cash. A semblance of stability returned to the market
between June and August. However, after Labor Day the market was subjected to
another round of bond sales caused by tax-loss selling. Conditions improved
in December as the market anticipated the reinvestment of coupons, bond calls
and maturities in January at a time of scarce supply. This seasonal pattern
more than offset the uncertainty caused by the Orange County, California
bankruptcy filing. On December 6, 1994 Orange County, one of the nations most
affluent areas, was forced to seek court protection when its
pooled-investment fund faced unprecedented losses.
Long-term municipal bonds have outperformed U.S. Treasury bonds since
November. The ratio of Revenue Bond Index yields to 30-year Treasury yields
over the past twelve months began at 87 percent, ranged as high as 92 percent
in November and ended the period at 84 percent. A declining ratio means that
municipal bond prices have been relatively stronger than U.S. Treasury
prices.
The rise in interest rates in 1994 also took its toll on the level of
state and local government debt issuance. For the year, new-issue volume
declined 44 percent to $163 billion. The driving force behind this sharp
decline was the virtual halt in refunding issues, which plummeted 74 percent.
Last year, municipal maturities and bond calls reached $191 billion and
exceeded the supply of new issues coming to market. This marked the first
decline in the outstanding supply of municipal securities. A continuation of
this pattern is expected in 1995 and should strengthen municipal market
conditions. In the first two months of 1995 municipal volume was down
approximately 60 percent compared to the same period last year.
FUND PERFORMANCE
Municipal Income Opportunities Trust II's net asset value (NAV) declined
from $8.74 to $8.66 per share during the fiscal year ended February 28, 1995.
Based on this change and reinvestment of tax-free
- ----------
*The Bond Buyer Revenue Bond Index is an arithmetic average of the yields of
25 selected municipal revenue bonds with 30-year maturities. Credit ratings
of these bonds range from Aa1 to Baa1 by Moody's and AA+ to A-by Standard &
Poor's.
<PAGE>
<PAGE>
dividends totaling $0.60 per share, the Fund's total NAV return for the year
was 7.04 percent. Concurrently, the Fund's market price on the New York Stock
Exchange declined from $8.125 to $8.00 per share. Based on this price change
and reinvestment of dividends, the Fund's total market return for the fiscal
year was 6.36 percent. The Fund began the year trading at a 7.0 percent
discount to NAV and closed at a 7.6 percent discount to NAV. The monthly
dividend was maintained at $0.05 per share during the fiscal year.
Undistributed net investment income, which helps sustain the Fund's dividend,
increased from $0.05 to $0.09 per share.
PORTFOLIO STRUCTURE
Over the course of the fiscal year, eight non-accruing loans representing
4.9 percent of net assets were sold, liquidated or returned to earning status
through restructuring. As of February 28, 1995, six loans or two percent of
net assets were not accruing interest. Nine additional loans which totaled 17
percent of net assets were accruing interest but may have difficulty meeting
future debt-service payments.
As of February 28, 1995, the Fund had net assets in excess of $175
million. The portfolio was diversified among 11 specific municipal sectors
and 59 separate issuers. The two largest municipal sectors were industrial
development/pollution control (24 percent of net assets) and nursing and
health related (24 percent). The average maturity and call protection of the
Fund's long-term holdings were 20 and 7 years, respectively.
LOOKING AHEAD
While economic growth is expected to continue in 1995, the effect of last
year's rise in interest rates is likely to take its toll. By mid-year, we
anticipate that the economy will slow vis-a-vis the rapid pace experienced in
1994 and that inflation will stabilize. Investor demand for municipal
securities should be sustained by significant bond maturities, calls for
redemption and diminished new-issue supply. Changing market conditions, the
pace of accruing and nonaccruing problem loan workouts and bond redemption
activity are among the factors that will determine the Fund's future level of
income and influence the direction of the common stock market price. Even
with the move to higher yields that occurred last year, the Fund still cannot
replace the yield attributable to many older investments that may be called
or sold in the next few years.
The Fund's procedure for reinvestment of all dividends and distributions
on common shares is through purchase in the open market. This method helps to
support the market value of the Fund's shares. In addition, we would like to
remind you that the Trustees have approved a procedure whereby the Fund, when
appropriate, may repurchase shares in the open market or in privately
negotiated transactions at a price not above market value or net asset value,
whichever is lower at the time of purchase. During the fiscal year, the Fund
purchased 517,400 shares of common stock at a weighted average discount of
10.6 percent.
We appreciate your ongoing support of Municipal Income Opportunities Trust
II and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
Charles A. Fiumefreddo
Chairman of the Board
<PAGE>
<PAGE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
PORTFOLIO OF INVESTMENTS February 28, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- --------- ---------- --------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (90.3%)
GENERAL OBLIGATION (1.0%)
$ 2,000 New York City, New York, 1994 Ser D .............................. 5.75 % 08/15/10 $ 1,829,460
- ----------- --------------
EDUCATIONAL FACILITIES REVENUE (0.5%)
1,000 New York State Dormitory Authority, State University Ser 1993 A . 5.25 05/15/15 868,450
- ----------- --------------
HOSPITAL REVENUE (4.6%)
2,000 Corona, California, Vista Hospital System Inc Ser 1992 B COPs ... 9.50 07/01/20 2,160,740
1,885 Illinois Health Facilities Authority, Hinsdale Hospital Ser 1990 C 9.50 11/15/19 2,174,216
1,500 North Central Texas Health Facilities Development Corporation,
University Medical Center Inc Ser 1987 .......................... 7.75 04/01/17 1,521,240
2,000 Tarrant County Health Facilities Development Corporation, Texas,
Community Health Care Foundation Inc ............................ 10.125 04/01/11 2,152,120
- ----------- --------------
7,385 8,008,316
- ----------- --------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (24.4%)
1,450 Metropolitan Washington Airports Authority, District of Columbia,
CaterAir International Corp Ser 1991 (AMT) ...................... 10.125 09/01/11 1,502,041
2,000 Chicago, Illinois, Chicago - O'Hare Intl Airport/American
Airlines Inc Ser 1990 A (AMT) ................................... 7.875 11/01/25 2,060,440
2,600 Holyoke, Massachussetts, McCormack/Partyka Ser 1990 (AMT)(c) .... 4.00 08/15/10 1,560,000
Lapeer Economic Development Corporation, Michigan,
Dott Manufacturing Co
2,095 Ser 1989 B (AMT) ................................................ 9.00 11/15/19 2,105,475
2,055 Ser 1989 A (AMT) ................................................ 10.625 11/15/19 2,238,059
Michigan Strategic Fund, Kasle Steel Corp
1,715 Ser 1989 (AMT) .................................................. 9.375 10/01/06 1,875,029
5,207 Ser 1989 (AMT) .................................................. 9.50 10/01/14 5,700,400
1,470 Sanilac County Economic Development Corporation, Michigan,
Dott Manufacturing Co Ser 1989 (AMT) ............................ 10.625 08/15/19 1,577,633
3,000 Claiborne County, Mississippi, Middle South Energy Inc Ser C .... 9.875 12/01/14 3,430,110
6,000 Cleveland, Ohio, Continental Airlines Inc Ser 1990 A (AMT) ...... 9.00 12/01/19 6,086,040
Oklahoma Development Finance Authority, Midway
Environmental Management Co Inc
645 Ser 1990 A (AMT) ................................................ 9.50 09/01/99 651,450
3,105 Ser 1989 B (AMT) ................................................ 9.50 09/01/15 3,105,000
3,000 Pennsylvania Economic Development Financing Authority,
MacMillan Bloedel Ltd Ser 1995 (AMT) ............................ 7.60 12/01/20 3,134,250
3,945 Westmoreland County Industrial Development Authority,
Pennsylvania, Valley Landfill/National Waste Energy Corp
Ser 1989 A (AMT) ................................................ 9.75 08/01/04 4,143,118
3,400 Carroll County Industrial Development Board, Tennessee,
Henry I Siegel Co Inc Ser 1990 (AMT) ............................ 9.90 05/01/00 3,490,372
- ----------- --------------
41,687 42,659,417
- ----------- --------------
MORTGAGE REVENUE - MULTI-FAMILY (11.2%)
Boulder County, Colorado, Village Place at Longmont
3,065 Ser 1989 A (AMT) ................................................ 10.125 07/15/19 3,172,275
10,837 Ser 1989 B (AMT) ................................................ 0.00 07/15/19 917,765
1,500 Dade County Housing Finance Authority, Florida, Arena Square
North & South 1989 Ser 2 (AMT) (a) .............................. 10.25 05/01/19 150,000
3,000 Palm Beach County Housing Authority, Florida, Scattered Sites
Ser 1990 (b) .................................................... 9.75 06/01/20 1,500,000
</TABLE>
<PAGE>
<PAGE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
PORTFOLIO OF INVESTMENTS February 28, 1995 (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- --------- ---------- --------------
<C> <S> <C> <C> <C>
$ 7,000 Eden Prairie, Minnesota, Fountain Place Apts Phase II
Refg Ser A ...................................................... 9.75 % 07/15/19 $ 4,620,000
Memphis Center City Revenue Finance Corporation,
Tennessee, Riverset Apts Phase II Refg
3,810 Ser 1989 A ...................................................... 9.50 10/01/19 2,819,400
28,148 Ser 1989 B (a) .................................................. 0.00 10/01/19 562,970
2,775 San Antonio Housing Finance Corporation, Texas, La Posada
Del Rey Ser 1990 A .............................................. 10.00 02/01/20 2,936,561
Alexandria Redevelopment & Housing Authority, Virginia,
Courthouse Commons Apts
2,000 Ser 1990 A (AMT) ................................................ 10.00 01/01/21 2,055,000
11,039 Ser 1990 B (AMT) ................................................ 0.00 01/01/21 875,424
- ----------- --------------
73,174 19,609,395
- ----------- --------------
MORTGAGE REVENUE - SINGLE FAMILY (3.7%)
3,500 Maine Housing Authority, Purchase Ser 1990 A-4 (AMT) ............ 6.40 11/15/23 3,349,290
2,100 Ohio Housing Finance Authority, GNMA-Backed 1988 Ser B (AMT) .... 8.25 12/15/19 2,257,731
Utah Housing Finance Agency,
515 Ser 1990 A - 2 (AMT) ............................................. 7.80 07/01/10 529,065
380 Ser 1990 A - 2 (AMT) ............................................. 7.875 07/01/22 396,347
- ----------- --------------
6,495 6,532,433
- ----------- --------------
NURSING & HEALTH RELATED FACILITIES REVENUE (23.8%)
2,365 Arkansas Development Finance Authority, Wynwood
Nursing Center Ser 1989 (AMT) ................................... 10.50 11/01/19 2,506,191
Vista, California, Long-Term Care Foundation of America
2,802 Ser 1994 A COPs (d) ............................................. 8.50 01/01/20 2,241,225
369 Ser 1994 B COPs (d) ............................................. 0.00 01/01/20 3,685
1,768 North Miami, Florida, Hallmark Homes for Better Living
Foundation Ser 1990 A (a) ....................................... 10.50 08/01/20 88,403
3,965 Monroe County Development Authority, Georgia, Health
Scholarships Inc Ser 1989 A ..................................... 10.125 09/01/19 3,885,700
2,500 Sterling, Illinois, Hoosier Care Inc Ser 1989 A .................. 9.75 08/01/19 2,684,000
4,000 Iowa Financial Authority, Mercy Health Initiatives Ser 1989 ..... 9.95 07/01/19 4,193,200
3,340 Marion, Iowa, AHF/Kentucky - Iowa Inc Ser 1990 .................... 10.25 01/01/20 3,473,600
1,500 Westside Habilitation Center, Louisiana, Intermediate Care
Facility for the Mentally Retarded Refg Ser 1993 ................ 8.375 10/01/13 1,529,295
1,100 Massachusetts Health & Educational Facilities Authority, Farren
Care Center 1989 Ser A .......................................... 10.375 06/01/10 1,248,225
Massachusetts Industrial Finance Agency,
5,045 Greater Lynn Special Needs Housing Corp & Mental Health
& Retardation Assn 1990 Issue ................................... 9.875 06/01/10 5,425,796
1,330 May Institute for Autistic Children Inc 1990 Issue ............. 9.75 06/01/10 1,423,446
480 Pioneer Valley Living Care Center at Amherst 1990 Issue ........ 7.00 10/01/01 403,200
5,000 Chester County Industrial Development Authority, Pennsylvania,
RHA/PA Nursing Ser 1989 ......................................... 10.125 05/01/19 5,285,150
1,480 Maury County Health & Educational Facilities Board, Tennessee,
Southern Healthcare/Heritage Manor of Monteagle Ser 1990 E ..... 10.50 03/01/20 1,571,005
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 10/01/19 1,890,000
</TABLE>
<PAGE>
<PAGE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
PORTFOLIO OF INVESTMENTS February 28, 1995 (continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- --------- ---------- --------------
<C> <S> <C> <C> <C>
Tarrant County Health Facilities Development Corporation,
Texas, 3927 Foundation Inc
$ 985 Ser 1989 ........................................................ 10.00 % 09/01/99 $ 1,054,492
2,500 Ser 1989 ........................................................ 10.125 09/01/09 2,699,050
- ----------- --------------
42,529 41,605,663
- ----------- --------------
PUBLIC FACILITIES REVENUE (1.9%)
3,000 Geo L Smith II Georgia World Congress Center Authority,
Georgia, Domed Stadium Ser 1990 (AMT) ........................... 7.875 07/01/20 3,277,050
2,360 La Salle County Jail Facilities Finance Corporation, Texas,
Criminal Detention Center (a) ................................... 9.75 08/01/09 24
- ----------- --------------
5,360 3,277,074
- ----------- --------------
RETIREMENT & LIFECARE FACILITIES REVENUE (5.4%)
2,200 Pima County Industrial Development Authority, Arizona, Country
Club of La Cholla Ser 1990 (AMT) ................................ 8.50 07/01/20 2,111,604
1,500 Colorado Health Facilities Authority, Liberty Heights Ser A (a) . 10.00 07/01/19 825,000
1,145 Charlotte Housing Authority, North Carolina, Merrywood Senior
Adult Community Ser 1989 A (AMT) ................................ 9.75 05/01/19 1,145,000
2,000 Lorain County, Ohio, Laurel Lakes Ser 1993 ....................... 7.125 12/15/18 1,906,380
Chesterfield County Industrial Development Authority, Virginia,
Brandermill Woods Proj #4 (c)
5,750 Ser 1991 A ...................................................... 4.00 07/01/16 3,450,000
800 Ser 1991 A ...................................................... 0.00 07/01/17 16,000
800 Ser 1991 A ...................................................... 0.00 07/01/18 16,000
800 Ser 1991 A ...................................................... 0.00 07/01/19 16,000
800 Ser 1991 A ...................................................... 0.00 07/01/20 16,000
800 Ser 1991 A ...................................................... 0.00 07/01/21 16,000
- ----------- --------------
16,595 9,517,984
- ----------- --------------
TAX ALLOCATION (7.3%)
1,180 Bridgeview, Illinois, Tax Increment Refg Ser 1995 ................ 9.00 01/01/11 1,189,464
6,060 Carol Stream, Illinois, Carol Pointe Ser 1990 A .................. 9.50 01/15/10 6,496,987
1,500 Hodgkins, Illinois, Ser 1991 ..................................... 9.50 12/01/09 1,638,390
1,125 Madison Heights Tax Increment Finance Authority, Michigan,
Ser 1991 ........................................................ 8.50 03/15/01 1,163,408
2,044 Muskegon Downtown Development Authority, Michigan,
Ltd Oblig 1989 Ser A - 1 (d) ..................................... 9.75 06/01/18 2,328,665
- ----------- --------------
11,909 12,816,914
- ----------- --------------
REFUNDED (6.5%)
2,305 Bedford Park, Illinois, First Lien Ser 1990 (Prerefunded) ....... 9.70 01/01/10 2,791,908
4,000 Hodgkins, Illinois, Second Lien Ser 1990 (Prerefunded) .......... 9.50 12/15/09 4,865,200
3,040 Illinois Health Facilities Authority, Hinsdale Hospital Ser 1990
C (Prerefunded) .................................................. 9.50 11/15/19 3,732,664
- ----------- --------------
9,345 11,389,772
- ----------- --------------
217,479 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $162,340,448) .................................... 158,114,878
- ----------- --------------
</TABLE>
<PAGE>
<PAGE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
PORTFOLIO OF INVESTMENTS February 28, 1995 (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- --------- ---------- --------------
<C> <S> <C> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATIONS (7.0%)
$ 3,000 Louisiana Offshore Terminal Authority, LOOP Inc
Ser 1992 A (Tender 03/01/95) .................................... 3.80*% 09/01/08 $ 3,000,000
3,800 Harris County Health Facilities Development Corporation,
Texas, St Luke's Episcopal Hospital 1992 A (Tender 03/01/95) 3.75* 02/15/21 3,800,000
5,400 Washington Health Care Facilities Authority, Fred Hutchinson
Cancer Hospital Ser A (Tender 03/01/95) 3.80* 01/01/18 5,400,000
- ----------- --------------
12,200 TOTAL SHORT-TERM OBLIGATIONS
- -----------
(IDENTIFIED COST $12,200,000) .................... 12,200,000
--------------
$229,679 TOTAL INVESTMENTS (IDENTIFIED COST $174,540,448) (E) .......... 97.3% 170,314,878
===========
OTHER ASSETS IN EXCESS OF LIABILITIES ......................... 2.7 4,723,428
----- --------------
NET ASSETS .................................................... 100.0% $175,038,306
===== ==============
<FN>
- ---------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Variable or floating rate securities. Coupon rate shown reflects current
rate.
(a) Bond in default, non-income producing.
(b) Bond in default.
(c) Bond restructured.
(d) Resale is restricted to qualified institutional investors.
(e) The aggregate cost for federal income tax purposes is $174,989,348; the
aggregate gross unrealized appreciation is $8,764,769, and the aggregate
gross unrealized depreciation is $13,439,239, resulting in net unrealized
depreciation of $4,674,470.
</TABLE>
- -----------------------------------------------------------------------------
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
February 28, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Arizona ........... 1.2%
Arkansas .......... 1.4
California ........ 2.5
Colorado .......... 2.8
District of
Columbia .......... 0.9
Florida ........... 1.0
Georgia ........... 4.1
Illinois ............ 15.8%
Iowa ................ 4.4
Louisiana ........... 2.6
Maine ............... 1.9
Massachusetts ....... 5.7
Michigan ............ 9.7
Minnesota ........... 2.6
Mississippi ......... 2.0%
New York ............ 1.5
North Carolina ...... 0.7
Ohio ................ 5.9
Oklahoma ............ 2.1
Pennsylvania ........ 7.2
Tennessee ........... 5.9
Texas ............... 8.1%
Utah ................ 0.5
Virginia ............ 3.7
Washington .......... 3.1
-------
Total ............... 97.3%
=======
- ---------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
<PAGE>
<PAGE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
Financial Statements
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $174,540,448) ......... $170,314,878
Receivable for:
Interest ............................... 3,657,936
Investments sold ....................... 2,380,864
Prepaid expenses and other assets ...... 31,939
--------------
TOTAL ASSETS .......................... 176,385,617
--------------
LIABILITIES:
Payable for:
Investment advisory fee ................ 75,549
Administration fee ..................... 45,329
Payable to bank ......................... 1,116,914
Accrued expenses and other payables .... 109,519
--------------
TOTAL LIABILITIES ..................... 1,347,311
--------------
NET ASSETS:
Paid-in-capital ......................... 189,084,661
Net unrealized depreciation ............. (4,225,570)
Accumulated undistributed net investment
income ................................. 1,909,768
Accumulated net realized loss ........... (11,730,553)
--------------
NET ASSETS ............................ $175,038,306
==============
NET ASSET VALUE PER SHARE, 20,220,307
shares outstanding (unlimited shares
authorized of $.01 par value) .......... $ 8.66
==============
</TABLE>
STATEMENT OF OPERATIONS For the year ended
February 28, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ........................ $15,007,486
-------------
EXPENSES
Investment advisory fee ............... 873,714
Administration fee .................... 524,229
Professional fees ..................... 154,093
Transfer agent fees and expenses ..... 83,258
Registration fees ..................... 32,282
Trustees' fees and expenses ........... 30,581
Shareholder reports and notices ...... 24,275
Organizational expenses ............... 2,804
Other ................................. 32,622
-------------
TOTAL EXPENSES ....................... 1,757,858
-------------
NET INVESTMENT INCOME ................ 13,249,628
-------------
NET REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized loss ..................... (8,933,636)
Net change in unrealized depreciation 5,599,806
-------------
NET LOSS ............................. (3,333,830)
-------------
NET INCREASE ......................... $ 9,915,798
=============
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
FEBRUARY 28, 1995 FEBRUARY 28, 1994
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ................................................... $ 13,249,628 $ 13,210,042
Net realized loss ....................................................... (8,933,636) (2,795,645)
Net change in unrealized depreciation ................................... 5,599,806 (5,926,523)
------------------ ------------------
Net increase ........................................................... 9,915,798 4,487,874
------------------ ------------------
Dividends to shareholders from net investment income ..................... (12,359,552) (12,442,624)
Net decrease from transactions in shares of beneficial interest ......... (3,854,229) --
------------------ ------------------
Net increase (decrease) ................................................ (6,297,983) (7,954,750)
NET ASSETS:
Beginning of period ...................................................... 181,336,289 189,291,039
------------------ ------------------
END OF PERIOD (including undistributed net investment income of
$1,909,768 and $1,019,692, respectively) ................................ $175,038,306 $181,336,289
================== ==================
</TABLE>
See Notes to Financial Statements
<PAGE>
<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, as a diversified, closed-end management investment company. The
Fund was organized as a Massachusetts business trust on March 8, 1989 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 Trustees. The
pricing service has informed the Fund that in valuing the Fund's portfolio
securities, it uses both a computerized 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. When market quotations are not readily available, including
circumstances under which it is determined by the Adviser that sale or bid
prices are not reflective of a security's market value, 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 debt 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). Short-term debt securities having a maturity date of more than
sixty days at time of purchase are valued on a mark-to-market basis until
sixty days prior to maturity and thereafter at amortized cost based on their
value on the 61st day. Short-term debt securities having a maturity date of
sixty days or less at the time of purchase are valued at amortized cost.
B. Accounting for Investments -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. Discounts and premiums on securities purchased are amortized over the
life of the respective securities. 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 reclassification. 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 -- Dean Witter InterCapital Inc. (the
"Investment Adviser") paid the organizational expenses of the Fund in the
amount of $42,522 which were fully amortized as of June 30, 1994.
2. INVESTMENT ADVISORY AGREEMENT -- Pursuant to an Investment 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
<PAGE>
<PAGE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
NOTES TO FINANCIAL STATEMENTS (continued)
- -----------------------------------------------------------------------------
weekly net assets. Under the terms of the Advisory Agreement, in addition to
managing the Fund's investments, 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 with
Dean Witter Services Company Inc. (the "Administrator"), the Fund pays an
administration fee, calculated weekly and payable monthly, by applying the
annual rate of 0.30% to the Fund's average weekly net assets. Under the terms
of the Administration Agreement, the Administrator maintains certain of the
Fund'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 Fund who are
employees of the Administrator. The Administrator also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended February 28, 1995 aggregated
$7,442,455 and $19,336,255, respectively. Dean Witter Trust Company, an
affiliate of the Investment Adviser and Administrator, is the Fund's transfer
agent. At February 28, 1995, the Fund had transfer agent fees and expenses
payable of approximately $12,000.
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, 1995, included in Trustees' fees and expenses in the
Statement of Operations amounted to $8,163. At February 28, 1995, the Fund
had an accrued pension liability of $48,062 which is included in accrued
expenses in the Statement of Assets and Liabilities.
5. FEDERAL INCOME TAX STATUS -- At February 28, 1995, the Fund had net capital
loss carryovers of approximately $10,485,000 of which $4,000 will be
available through February 28, 2002 and $10,481,000 will be available through
February 28, 2003 which may be used to offset future capital gains to the
extent provided by regulations. 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 $1,246,000 during
fiscal 1995. As of February 28, 1995, the Fund had temporary book/tax
differences primarily attributable to post-October losses.
6. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
CAPITAL PAID
PAR VALUE OF IN EXCESS OF
SHARES SHARES PAR VALUE
------------ -------------- --------------
<S> <C> <C> <C>
Balance, February 28, 1993 and February 28, 1994 20,737,707 $207,378 $192,731,512
Treasury shares purchased and retired (weighted
average discount 10.58%)* ...................... (517,400) (5,174) (3,849,055)
------------ -------------- --------------
Balance, February 28, 1995 ...................... 20,220,307 $202,204 $188,882,457
============ ============== ==============
<FN>
- ----------
* The Trustees have voted to retire the shares purchased.
</TABLE>
7. DIVIDENDS -- The Fund has declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
AMOUNT PER
DECLARATION DATE SHARE RECORD DATE PAYABLE DATE
- -------------------- ----------- -------------- --------------
<S> <C> <C> <C>
February 28, 1995 $0.05 March 10, 1995 March 24, 1995
March 28, 1995 $0.05 April 7, 1995 April 21, 1995
</TABLE>
<PAGE>
<PAGE>
MUNICIPAL INCOME OPPORTUNITIES TRUST II
NOTES TO FINANCIAL STATEMENTS (continued)
- -----------------------------------------------------------------------------
8. SELECTED QUARTERLY FINANCIAL DATA -- (unaudited)
<TABLE>
<CAPTION>
QUARTERS ENDED
2/28/95 11/30/94 8/31/94 5/31/94
----------------------- ------------------- ------------------- ------------------
PER PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
-------------- ------- --------- -------- --------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ... $4,180 $0.20 $ 3,514 $ 0.16 $ 3,682 $ 0.18 $ 3,631 $ 0.18
Net investment income ..... 3,748 0.18 3,090 0.15 3,231 0.16 3,181 0.15
Net realized and unrealized
gain (loss) ............... 7,044 0.34 (5,053) (0.21) (2,334) (0.11) (2,991) (0.14)
</TABLE>
<TABLE>
<CAPTION>
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
gain (loss) ............... (3,326) (0.16) (1,855) (0.09) 2,326 0.11 (5,867) (0.28)
<FN>
- ----------
* Totals expressed in thousands.
</TABLE>
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FEBRUARY 28,
----------------------------------------------------------
1995 (A) 1994 (A) 1993 (A) 1992* (A) 1991 (A)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 8.74 $ 9.13 $ 9.23 $ 9.28 $ 9.34
----------- ----------- ----------- ----------- -----------
Net investment income .................... 0.64 0.63 0.67 0.73 0.75
Net realized and unrealized loss ........ (0.12) (0.42) (0.08) -- (0.06)
----------- ----------- ----------- ----------- -----------
Total from investment operations ........ 0.52 0.21 0.59 0.73 0.69
----------- ----------- ----------- ----------- -----------
Less dividends and distributions from:
Net investment income ................... (0.60) (0.60) (0.68) (0.78) (0.74)
Net realized gain ....................... -- -- (0.01) -- (0.01)
----------- ----------- ----------- ----------- -----------
Total dividends and distributions ....... (0.60) (0.60) (0.69) (0.78) (0.75)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ........... $ 8.66 $ 8.74 $ 9.13 $ 9.23 $ 9.28
========== ========== ========== ========== ==========
Market value, end of period .............. $ 8.00 $ 8.125 $ 8.75 $ 9.875 $ 9.375
========== ========== ========== ============ ===========
TOTAL INVESTMENT RETURN+ ................. 6.36% (0.36)% (4.42)% 14.42 % 9.87 %
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $175,038 $181,336 $189,291 $194,251 $190,386
Ratios to average net assets:
Expenses ................................ 1.01% 1.01 % 1.11% 1.06 % 1.06 %
Net investment income ................... 7.60% 7.13 % 7.42% 7.87 % 7.99 %
Portfolio turnover rate .................. 5 % 6 % 3 % 5 % 34 %
<FN>
- ----------
* For the year ended February 29.
+ Total investment return is based upon the current market value on the
last day of each period reported. Dividends and distributions are assumed
to be reinvested at prices obtained under the Fund's dividend
reinvestment plan. Total investment return does not reflect sales charges
or brokerage commissions.
(a) The per share amounts were computed using an average number of shares
outstanding during the period.
</TABLE>
See Notes to Financial Statements
<PAGE>
<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, 1995, 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 February 28,
1995 by correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 13, 1995
=============================================================================
1995 FEDERAL TAX NOTICE (unaudited)
During the year ended February 28, 1995, the Fund paid to the 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>
<PAGE>
TRUSTEES
- -----------------------------------------------
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
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
INDEPENDENT ACCOUNTANTS
- ---------------------------------------------------
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT ADVISER
- -----------------------------------------------------
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
MUNICIPAL
INCOME
OPPORTUNITIES
TRUST II
ANNUAL REPORT
FEBRUARY 28, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000847593
<NAME> MUNICIPAL INCOME OPPORTUNITIES TRUST II
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-START> FEB-28-1994
<PERIOD-END> FEB-28-1995
<INVESTMENTS-AT-COST> 174,540,448
<INVESTMENTS-AT-VALUE> 170,314,878
<RECEIVABLES> 6,038,800
<ASSETS-OTHER> 31,939
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 176,385,617
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,347,311
<TOTAL-LIABILITIES> 1,347,311
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 189,084,661
<SHARES-COMMON-STOCK> 20,220,307
<SHARES-COMMON-PRIOR> 20,737,707
<ACCUMULATED-NII-CURRENT> 1,909,768
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (11,730,553)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4,225,570)
<NET-ASSETS> 175,038,306
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15,007,486
<OTHER-INCOME> 0
<EXPENSES-NET> 1,757,858
<NET-INVESTMENT-INCOME> 13,249,628
<REALIZED-GAINS-CURRENT> (8,933,636)
<APPREC-INCREASE-CURRENT> (5,599,806)
<NET-CHANGE-FROM-OPS> 9,915,798
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12,359,552
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 517,400
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (6,297,983)
<ACCUMULATED-NII-PRIOR> 1,019,692
<ACCUMULATED-GAINS-PRIOR> (2,796,917)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 873,714
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,757,858
<AVERAGE-NET-ASSETS> 174,264,137
<PER-SHARE-NAV-BEGIN> 8.74
<PER-SHARE-NII> .64
<PER-SHARE-GAIN-APPREC> (.12)
<PER-SHARE-DIVIDEND> (.60)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.66
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
