Edgar Filing: EMERGING MARKETS INCOME FUND II INC

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

June 14, 2002

Dear Shareholder:

We are pleased to present the annual report for The Emerging Markets Income Fund
II Inc ("Fund") for the year ended May 31, 2002. In this report, we summarize
what the Fund's portfolio managers believe to be the period's prevailing
economic and market conditions and outline the Fund's strategy. A detailed
summary of the Fund's performance can be found in the appropriate sections that
follow. Also included are a schedule of the Fund's investments as of May 31,
2002 and the Fund's audited financial statements for the year ended May 31,
2002. We hope you find this report to be useful and informative.

PERFORMANCE UPDATE

During the 12-month period, the Fund distributed income dividends to
shareholders totaling $1.65 per share. The table below details the annualized
distribution rate and one-year total return for the Fund based on its May 31,
2002 net asset value ("NAV") per share and the New York Stock Exchange ("NYSE")
closing price per share 1:

Price Annualized 12-Month
Per Share Distribution Rate 2 Total Return 2
------------- ------------------- -------------
$11.63 (NAV) 14.19% 16.69%
$13.88 (NYSE) 11.89% 26.23%

During the period, the Fund generated a total return based on NAV of 16.69%,
assuming reinvestment of these dividends in additional shares of the Fund. In
comparison, the J.P. Morgan Emerging Markets Bond Index Plus ("EMBI+")3 returned
2.08% for the same period. Past performance is not indicative of future results.

----------------
1 The NAV is calculated by subtracting total liabilities from the closing value
of all securities held by the Fund (plus all other assets) and dividing the
results (total net assets) by the total number of the Fund's shares
outstanding. The NAV fluctuates with the changes in the market price of the
securities in which the Fund has invested. However, the price at which an
investor may buy or sell shares of the Fund is at their market (NYSE) price as
determined by supply of and demand for the Fund's shares.
2 Total returns are based on changes in NAV or the market value, respectively.
Total returns assume the reinvestment of all dividends and/or capital gains
distributions in additional shares. Annualized distribution rate is the Fund's
current quarterly income dividend rate, annualized, and then divided by the
NAV or the market value noted in this report. The annualized distribution rate
assumes a current quarterly income dividend rate of $0.4125 for four quarters.
This rate is as of June 30, 2002 and is subject to change. The important
difference between a total return and an annualized distribution rate is that
the total return takes into consideration a number of factors including the
fluctuation of the NAV or the market value during the period reported. The NAV
fluctuation includes the effects of unrealized appreciation or depreciation in
the Fund. Accordingly, since an annualized distribution rate only reflects the
current quarterly income dividend rate for four quarters, it should not be
used as the sole indicator to judge the return you receive from your Fund
investment. Past performance is not indicative of future results.
3 The EMBI+ is a total-return index that tracks the traded market for U.S.
dollar-denominated Brady bonds and other similar sovereign restructured bonds
traded in the emerging markets. Please note that an investor cannot invest
directly in an index.

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

EMERGING MARKETS DEBT OVERVIEW

Developments in Argentina set the tone for emerging markets for the past year.
Lack of improving developments in Argentina continues to weigh on the asset
class, but the country currently does not have the impact on emerging markets it
once did. Argentine debt returned negative 69.60% for the period as measured by
the EMBI+, and it now reflects only 2.2% of the EMBI+ composition, down from 22%
in January 2001. Nonetheless, in what can only be described as a difficult year
for the global financial markets, nearly every country in the Index (17 out of
18) outperformed the composite annual return of the EMBI+, with 14 countries
posting impressive double-digit returns.

For the Fund's most recent fiscal year, U.S. Federal Reserve Board ("Fed")
policymakers were extremely active as they sought to fight the slowing U.S.
economy by lowering interest rates. The policymakers reduced the federal funds
rate ("fed funds rate") 4 over the course of the Fund's fiscal year from 4.00%
in May 2001 to 1.75% in May 2002. The combination of a weak economy, uncertainty
about downside risks, and lower and falling inflation heavily influenced the
Fed's thinking. The three meetings held thus far in 2002 (through May 2002)
appear to have done little to change the Fed's neutral bias on the outlook for
the economy. Accordingly, for the time being the Fed has decided to keep rates
unchanged at 1.75%, a 40-year low.

Oil prices, an important driver of revenues for many emerging market economies,
experienced considerable price volatility during the Fund's annual period. A
number of factors contributed to this volatility, including a global oversupply
of oil, a slump in the aviation industry, a slowing U.S. economy and fears of
disruptions caused by Middle East tensions. Oil prices traded in a wide range,
from $17.45 to $29.36 per barrel, as investors focused on the declining demand
for oil. Prices closed the period at $25.31 per barrel.

Return volatility 5 for emerging market debt increased marginally over the past
12 months but remained below historical levels. The 12-month volatility level
ending May 31, 2002 was 12.86%. These levels gradually increased throughout the
year as the Turkish banking crisis, the September 11th terrorist attacks and the
demise of the Argentine economy all added to the uncertainty in emerging
markets. The market's ability to view problems on a country-by-country basis and
perhaps not extrapolate isolated problems into broader market risks may be a
positive development, illustrating a maturity of the asset class.

LATIN AMERICA

Latin American debt disappointed many investors, returning negative 11.55% for
the year, as measured by the EMBI+. The region was unquestionably affected by
the situation in Argentina. As mentioned, the December 2001 EMBI+ rebalancing of
Argentine debt, in our opinion, will help to

---------------
4 The fed funds rate is the interest rate that banks with excess reserves at a
Federal Reserve district bank charge other banks that need overnight loans.
The fed funds rate often points to the direction of U.S. interest rates.
5 Return volatility is the standard deviation of monthly returns over the period
being measured.

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

alleviate this going forward. Positive performance from Ecuador 34.91%, Peru
33.80%, Panama 10.98%, Venezuela 10.01% and Brazil 8.73% (as measured by the
EMBI+) all contributed to the region's performance. In addition, Mexico, which
the portfolio managers have perceived more recently to be a lower volatility
country by emerging markets debt standards, returned 14.74% for the year, and
was upgraded to investment-grade status by Standard & Poor's Ratings Service 6
from BB+ to BBB-. The portfolio managers expect the performance of the Mexican
economy to continue to be closely linked with the performance of the U.S.
economy.

ECUADORIAN DEBT returned 34.91% for the Fund's annual period as measured by the
EMBI+. This was the second-best performer in the Index. The country, under
President Noboa's administration, continues to post positive Gross Domestic
Product ("GDP") 7 growth and better credit fundamentals, largely due to better
tax collection and higher oil prices. Talks with the International Monetary Fund
("IMF") 8 continued in April, and an agreement to obtain additional financing is
expected in the third quarter.

BRAZILIAN DEBT returned 8.73% for the Fund's annual period as measured by the
EMBI+. The apparent breakaway from Argentine contagion and return to positive
performance was, in the opinion of the portfolio managers, the most convincing
change in the Latin sector this past year. The events in November and December
2001 showed that the historically close relationship between Brazilian and
Argentine securities may have changed. The upcoming Presidential elections in
October may be an important referendum on the reforms achieved by the Cardoso
administration. The portfolio managers believe that the elections will cause
some near-term volatility, but believe that Brazil is well-positioned to
withstand this volatility.

ARGENTINE DEBT returned negative 69.60% for the year as measured by the EMBI+.
This was the worst performance in the Index and was the driving contributor of
poor performance in the Latin American region for the year. The country
continues to be mired in a four-year recession made worse by political turmoil.
Argentina announced a debt moratorium (default) on all external debt obligations
in December 2001. President De la Rua, in the second year of his term, resigned
after last-minute attempts to form a coalition government with the opposition
Peronist Party failed. Although the Argentine government announced a series of
measures to strengthen its embattled economy and move closer to an agreement
with the IMF, much uncertainty remains over how the situation in Argentina will
play out in the third and fourth quarters of 2002. Argentina's ability to reach
a political consensus on a fiscal program may likely shape the economy's
near-term direction. The portfolio managers continue to monitor developments
very closely.

-----------------
6 Standard & Poor's Ratings Service is a major credit rating agency.
7 GDP is a market value of goods and services produced by labor and property in
a given country.
8 The IMF is an organization of 183 countries established to promote
international monetary cooperation, exchange stability, and orderly exchange
arrangements.

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

EASTERN EUROPE/MIDDLE EAST/AFRICA

Non-Latin American countries, which represent approximately 40% of the EMBI+'s
market capitalization, largely outperformed the Latin American region for the
year, returning 35.54%.

Russian debt, the best performer for the year in the EMBI+, returned 55.17% as
measured by the EMBI+. The Russian economy continues to benefit from high
domestic consumption, abundant foreign reserves and limited external financing
requirements. Positive comments by the government on debt reduction and the
reduction of the 2003 debt hump added momentum to a supportive technical
picture. In May, Fitch IBCA, Duff & Phelps ("Fitch"), the international rating
agency, upgraded the Russian Federation's long-term foreign currency rating to
BB- from B+. Fitch expects that under President Putin's leadership, the Russian
authorities will continue to introduce and implement structural reforms, which
may be vital to raising living standards and diversifying the economy.

Turkish debt returned 29.13% for the year as measured by the EMBI+. Following
the September 11th attacks on the U.S., Turkey's geopolitical location indicated
to some observers that market sentiment would improve toward the country. The
country's strategic importance combined with its improved relations with the IMF
has attracted recent investor interest. The support has contributed to a
resurgence in domestic confidence, a lowering of interest rates and a stronger
currency.

OUTLOOK

This past year has seen a number of positive rating actions for a broad range of
emerging market countries, including Mexico, Korea, Brazil, Malaysia, Turkey,
Russia, Ukraine, Pakistan, Peru and the Philippines. EMBI+ sovereign spreads 9
closed the annual period at 650 basis points over U.S. Treasury securities. The
portfolio managers feel this spread level is attractive given the combination of
strategic inflows into the asset class, the potential for a more robust global
recovery, and the relatively limited external financing needs for key emerging
markets. While emerging market debt has performed relatively well year-to-date
(6.92% through May 31, 2002), the portfolio managers believe the fundamental
outlook for a number of emerging market countries continues to improve.
Accordingly, the portfolio managers remain constructive on the market over the
medium term.

In a continuing effort to provide timely information about the Fund,
shareholders can call toll-free 888-777-0102 Monday through Friday from 8:00
a.m. to 6:00 p.m. EST for the Fund's current net asset value, market price and
other information regarding the Fund's holdings and allocations. For information
concerning your account, please call American Stock Transfer & Trust Company
toll-free at 800-937-5449, or 718-921-8200 if you are calling from within New
York City.

--------------
9 Sovereign bonds are bonds issued by non-U.S. governments. Yield spread is the
difference between yields on securities of the same quality but different
maturities or the difference between yields on securities of the same maturity
but different quality.

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Thank you for your investment in The Emerging Markets Income Fund II Inc. We
look forward to helping you pursue your investment goals in the years to come.

Sincerely,

/s/ Heath B. McLendon /s/ Stephen Treadway

Heath B. McLendon Stephen Treadway
Co-Chairman of the Board Co-Chairman of the Board

/s/ Peter J. Wilby /s/ James E. Craige

Peter J. Wilby James E. Craige
President and Portfolio Manager Executive Vice President
and Portfolio Manager

The information provided in this letter represents the opinions of the portfolio
managers and is not intended to be a forecast of future events, a guarantee of
future results or investment advice. Views expressed are those of the portfolio
managers and may differ from other portfolio managers or the firm as a whole.
Further, there is no assurance that certain securities will remain in or out of
the Fund. Please refer to pages 6 through 9 for a list and percentage breakdown
of the Fund's holdings. Also, please note any discussion of the Fund's holdings
is as of May 31, 2002 and is subject to change.

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Schedule of Investments
May 31, 2002

FACE
AMOUNT SECURITY VALUE
--------------------------------------------------------------------------------------------------
Sovereign Bonds (a) -- 85.8%
Argentina -- 2.7%

Republic of Argentina (b):
$ 2,100,000 Due 11/30/02 ................................................... $ 514,500
26,126,000 Due 4/10/05 .................................................... 7,837,800
2,075,000 Zero coupon due 10/15/03 ....................................... 1,193,125
------------
9,545,425
------------
Brazil -- 26.3%
Federal Republic of Brazil:
5,300,000 14.500% due 10/15/09 ........................................... 5,292,050
552,000 12.750% due 1/15/20 ............................................ 469,200
7,000,000 8.875% due 4/15/24 ............................................. 4,399,500
18,243,000 12.250% due 3/6/30 ............................................. 14,927,335
4,575,000 11.000% due 8/17/40 ............................................ 3,360,337
85,490,639 C Bond, 8.000% due 4/15/14 ..................................... 64,198,127
329,412 NMB, Series L, 3.125% due 4/15/09 (c) .......................... 253,030
------------
92,899,579
------------
Bulgaria -- 4.0%
Republic of Bulgaria:
13,550,000 8.250% due 1/15/15 ............................................. 13,363,687
800,000 FLIRB, Series A, 2.8125% due 7/28/12 (c) ....................... 744,000
------------
14,107,687
------------

Colombia -- 2.3%
Republic of Colombia:
970,000 8.700% due 2/15/16 ............................................. 784,488
7,470,000 11.750% due 2/25/20 ............................................ 7,423,312
------------
8,207,800
------------
Costa Rica -- 0.3%
800,000 Republic of Costa Rica, 9.995% due 8/1/20 (d) .................... 912,000
------------
Ecuador -- 4.9%
Republic of Ecuador:
8,425,000 12.000% due 11/15/12 ........................................... 6,367,194
15,284,000 5.000% due 8/15/30 (c) ......................................... 7,913,291
6,220,000 5.000% due 8/15/30 (c)(d) ...................................... 3,220,405
------------
17,500,890
------------
Jamaica -- 0.2%
500,000 Government of Jamaica, 12.750% due 9/1/07 (d) .................. 581,250
------------

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SEE NOTES TO FINANCIAL STATEMENTS.

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T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Schedule of Investments (continued)
May 31, 2002

FACE
AMOUNT SECURITY VALUE
--------------------------------------------------------------------------------------------------

Mexico -- 5.1%
United Mexican States:
$ 1,350,000 10.375% due 2/17/09 ............................................ $ 1,581,188
1,620,000 7.500% due 1/14/12 ............................................. 1,646,730
13,775,000 8.125% due 12/30/19 ............................................ 13,785,331
700,000 11.500% due 5/15/26 ............................................ 919,100
------------
17,932,349
------------
Peru -- 4.7%
Republic of Peru:
15,000,000 9.125% due 2/21/12 ............................................. 14,295,000
1,285,000 FLIRB, 4.000% due 3/7/17 (c) ................................... 921,586
1,920,600 PDI Bond, 4.500% due 3/7/17 (c) ................................ 1,490,865
------------
16,707,451
------------
Philippines -- 4.9%
Republic of the Philippines:
2,000,000 9.375% due 1/18/17 ............................................. 2,121,300
9,325,000 9.875% due 1/15/19 ............................................. 9,791,250
1,360,000 10.625% due 3/16/25 ............................................ 1,492,600
3,750,000 FRN, 5.040% due 6/18/04 (c) .................................... 3,871,875
------------
17,277,025
------------
Russia -- 16.8%
Russian Government:
8,375,000 12.750% due 6/24/28 ............................................ 10,337,890
68,475,000 5.000% due 3/31/30 (c) ......................................... 49,088,016
50 5.000% due 3/31/30 (c)(d) ...................................... 36
------------
59,425,942
------------
Turkey -- 7.7%
Republic of Turkey:
1,800,000 12.375% due 6/15/09 ............................................ 1,910,250
9,000,000 11.750% due 6/16/10 ............................................ 9,270,000
7,350,000 11.500% due 1/23/12 ............................................ 7,515,375
8,600,000 11.875% due 1/15/30 ............................................ 8,567,750
------------
27,263,375
------------
Uruguay -- 3.0%
Republic of Uruguay:
5,700,000 7.875% due 3/25/09 ............................................. 4,104,000
2,600,000 8.750% due 6/22/10 ............................................. 1,979,250
3,947,368 DCB, Series B, 2.875% due 2/19/07 (c) .......................... 3,217,105
1,411,764 NMB, 3.000% due 2/19/06 (c) .................................... 1,178,823
------------
10,479,178
------------

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SEE NOTES TO FINANCIAL STATEMENTS.

PAGE 7

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Schedule of Investments (continued)
May 31, 2002

FACE
AMOUNT SECURITY VALUE
--------------------------------------------------------------------------------------------------

Venezuela -- 2.9%
Republic of Venezuela:
$ 2,654,000 13.625% due 8/15/18 ............................................ $ 2,438,362
9,090,804 NMB, Series A, 3.000% due 12/18/05 (c) (including 55,335 rights) 7,715,820
------------
10,154,182
------------
Total Sovereign Bonds (Cost -- $303,613,724) ................... 302,994,133
------------
Loan Participations (a)(e) -- 6.1%
Jamaica -- 0.5%
1,718,750 Government of Jamaica, Tranche B, 4.4375% due 11/15/04 (c)
(J.P. Morgan Chase & Co.) ...................................... 1,667,187
------------

Morocco -- 5.0%
Kingdom of Morocco (c):
19,023,241 Tranche A, 2.750% due 1/5/09 (Morgan Stanley Emerging Markets,
Inc., J.P. Morgan Chase & Co., CS First Boston Corp.) ........ 17,572,719
352,924 Tranche B, 2.750% due 1/1/04 (Morgan Stanley Emerging
Markets, Inc.) ............................................... 322,926
------------
17,895,645
------------

Russia -- 0.6%
3,000,000 Russian Government, Foreign Trade Obligation (b)(f)
(Bank of America) ............................................ 2,077,500
------------
Total Loan Participations (Cost -- $21,861,105) ................ 21,640,332
------------
Corporate Bonds (a) -- 4.6%
Mexico -- 4.6%
PEMEX Project Funding Master Trust:
10,200,000 9.125% due 10/13/10 ............................................ 11,128,200
5,000,000 8.000% due 11/15/11 ............................................ 5,112,500
------------
Total Corporate Bonds (Cost -- $15,893,366) .................... 16,240,700
------------

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SEE NOTES TO FINANCIAL STATEMENTS.

PAGE 8

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Schedule of Investments (continued)
May 31, 2002

WARRANTS SECURITY VALUE
--------------------------------------------------------------------------------------------------

Warrants (a)(f) -- 0.0%
2,000 APP China Group Ltd. (Exercise price of $7.8375 per share
expiring 3/15/05. Each warrant exercisable for 12.914 shares
of common stock.) (Cost -- $0) ............................... $ 0
------------

FACE
AMOUNT
------------
Repurchase Agreements -- 3.5%
$ 6,002,000 Greenwich Capital Markets, Inc., 1.760% due 6/3/02; Proceeds at
maturity -- $6,002,880; (Fully collateralized by U.S. Treasury
Notes, 4.375% due 5/15/07; Market value -- $6,124,646) ......... 6,002,000
6,500,000 UBS PaineWebber Inc., 1.770% due 6/3/02; Proceeds at maturity --
$6,500,959; (Fully collateralized by U.S. Treasury Bonds,
7.500% due 11/15/16; Market value -- $6,630,088) ............... 6,500,000
------------
Total Repurchase Agreements (Cost -- $12,502,000) ................ 12,502,000
------------
Total Investments -- 100% (Cost -- $353,870,195*) ................ $353,377,165
============

(a) All securities segregated as collateral pursuant to a loan agreement.
(b) Security is currently in default.
(c) Rate shown reflects current rate on instruments with variable rate or step
coupon rates.
(d) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institutional buyers.

(e) Participation interest was acquired through the financial institutions
indicated parenthetically.
(f) Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.

Abbreviations used in this schedule:
------------------------------------
C Bond -- Capitalization Bond.
DCB -- Debt Conversion Bond.
FLIRB -- Front Loaded Interest Reduction Bond.
FRN -- Floating Rate Note.
NMB -- New Money Bond.
PDI -- Past Due Interest.

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SEE NOTES TO FINANCIAL STATEMENTS.

PAGE 9

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Statement of Assets and Liabilities
May 31, 2002

Assets:
Investments, at value (Cost -- $353,870,195)....................................... $353,377,165
Foreign currency, at value (Cost -- $129,592)...................................... 36,268
Cash............................................................................... 318
Receivable for securities sold..................................................... 26,875,244
Interest receivable................................................................ 7,004,559
Prepaid expenses................................................................... 76,338
------------
TOTAL ASSETS....................................................................... 387,369,892
------------

Liabilities:
Loan payable (Note 4).............................................................. 100,000,000
Payable for securities purchased................................................... 9,110,701
Loan interest payable.............................................................. 529,881
Management fee payable ............................................................ 281,984
Accrued expenses................................................................... 228,016
------------
TOTAL LIABILITIES.................................................................. 110,150,582
------------
TOTAL NET ASSETS..................................................................... $277,219,310
============

Net Assets:
Common stock ($0.001 par value, 100,000,000 shares authorized;
23,839,945 shares outstanding)................................................... $ 23,840
Capital paid in excess of par value ............................................... 328,448,007
Overdistributed net investment income.............................................. (2,663,332)
Accumulated net realized loss from security transactions, options and
foreign currencies .............................................................. (48,002,851)
Net unrealized depreciation of investments and foreign currencies.................. (586,354)
------------
TOTAL NET ASSETS..................................................................... $277,219,310
============

Net Asset Value, per share ($277,219,310 / 23,839,945 shares)........................ $11.63
======

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SEE NOTES TO FINANCIAL STATEMENTS.

PAGE 10

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Statement of Operations
For the Year Ended May 31, 2002

INCOME:
Interest (includes discount accretion of $7,989,748)............................... $ 44,226,941
------------

EXPENSES:
Interest expense (Note 4).......................................................... 4,403,616
Management fee (Note 2)............................................................ 3,178,344
Shareholder communications......................................................... 120,285
Custody............................................................................ 116,170
Loan fees.......................................................................... 103,279
Audit and legal.................................................................... 99,665
Listing fees....................................................................... 32,063
Directors' fees ................................................................... 31,190
Shareholder and system servicing fees.............................................. 24,125
Other............................................................................. 6,363
------------
TOTAL EXPENSES..................................................................... 8,115,100
------------
NET INVESTMENT INCOME................................................................ 36,111,841
------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
OPTIONS AND FOREIGN CURRENCIES (NOTES 3, 8 AND 9):

Realized Gain (Loss) From:
Security transactions (excluding short-term securities).......................... (389,045)
Options written.................................................................. 243,400
Foreign currency transactions.................................................... (8,394)
------------
NET REALIZED LOSS.................................................................. (154,039)
------------

Change in Net Unrealized Depreciation From:
Security transactions ........................................................... 5,619,683
Foreign currency transactions.................................................... (100,343)
------------
DECREASE IN NET UNREALIZED DEPRECIATION............................................ 5,519,340
------------
NET GAIN ON INVESTMENTS, OPTIONS AND FOREIGN CURRENCIES ............................. 5,365,301
------------
Increase in Net Assets From Operations .............................................. $ 41,477,142
============

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PAGE 11

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Statements of Changes in Net Assets
For the Years Ended May 31,

2002 2001
-----------------------------------------------------------------------------------------------------

OPERATIONS:
Net investment income ............................................. $ 36,111,841 $ 41,328,073
Net realized gain (loss) .......................................... (154,039) 26,800,386
(Increase) decrease in net unrealized depreciation ................ 5,519,340 (13,291,512)
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS ............................ 41,477,142 54,836,947
------------ ------------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................................. (39,076,504) (38,751,801)
------------ ------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS ......... (39,076,504) (38,751,801)
------------ ------------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued on reinvestment of dividends
(252,550 and 127,564 shares issued, respectively) ............... 2,921,032 1,752,961
------------ ------------
INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ............ 2,921,032 1,752,961
------------ ------------
INCREASE IN NET ASSETS .............................................. 5,321,670 17,838,107

NET ASSETS:
Beginning of year ................................................. 271,897,640 254,059,533
------------ ------------
END OF YEAR* ...................................................... $277,219,310 $271,897,640
============ ============
* Includes undistributed (overdistributed) net investment income of: $ (2,663,332) $ 4,072,736
============ ============

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SEE NOTES TO FINANCIAL STATEMENTS.

PAGE 12

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Statement of Cash Flows
For the Year Ended May 31, 2002

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Purchases of long-term portfolio investments ...................................... $(835,304,993)
Proceeds from disposition of long-term portfolio investments and principal paydowns 854,996,902
Net sales of short-term portfolio investments ..................................... (11,849,229)
-------------
7,842,680

Net investment income ............................................................. 36,111,841
Accretion of discount on investments .............................................. (7,989,748)
Amortization of premium on investments ............................................ 122,923
Net change in receivables/payables related to operations .......................... 104,494
-------------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES ................................... 36,192,190
-------------

CASH FLOWS USED BY FINANCING ACTIVITIES:
Cash dividends paid ............................................................... (39,076,504)
Proceeds from reinvestment of dividends ........................................... 2,921,032
-------------
NET CASH FLOWS USED BY FINANCING ACTIVITIES ....................................... (36,155,472)
-------------

NET INCREASE IN CASH ................................................................ 36,718
Payable to bank, Beginning of year .................................................. (132)
-------------
CASH, END OF YEAR ................................................................... $ 36,586
=============

------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 13

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Notes to Financial Statements

Note 1. Organization and Significant Accounting Policies

The Emerging Markets Income Fund II Inc ("Fund") was incorporated in Maryland on
April 27, 1993 and is registered as a non-diversified, closed-end, management
investment company under the Investment Company Act of 1940, as amended. The
Board of Directors authorized 100 million shares of $0.001 par value common
stock. The Fund's primary investment objective is to seek high current income.
As a secondary objective, the Fund seeks capital appreciation. In pursuit of
these objectives, the Fund under normal conditions invests at least 80% of its
net assets plus any borrowings for investment purposes in debt securities of
government and government related issuers located in emerging market countries
(including participations in loans between governments and financial
institutions), and of entities organized to restructure the outstanding debt of
such issuers, and in debt securities of corporate issuers located in emerging
market countries.

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with accounting principles generally accepted in the
United States of America ("GAAP"). The preparation of financial statements in
accordance with GAAP requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results may differ from those estimates.

(a) SECURITIES VALUATION. In valuing the Fund's assets, all securities and
options for which market quotations are readily available are valued (i) at the
last sale price prior to the time of determination if there was a sale on the
date of determination, (ii) at the mean between the last current bid and asked
price if there was no sales price on such date and bid and asked quotations are
available, and (iii) at the bid price if there was no sales price on such date
and only bid quotations are available. Publicly traded foreign government debt
securities are typically traded internationally in the over-the-counter market,
and are valued at the mean between the last current bid and asked price as of
the close of business of that market. However, where the spread between bid and
asked price exceeds five percent of the par value of the security, the security
is valued at the bid price. Securities may also be valued by independent pricing
services which use prices provided by market-makers or estimates of market
values obtained from yield data relating to instruments or securities with
similar characteristics. Short-term investments having a maturity of 60 days or
less are valued at amortized cost, unless the Board of Directors determines that
such valuation does not constitute fair value. Securities for which reliable
quotations are not readily available and all other securities and assets are
valued at fair value as determined in good faith by, or under procedures
established by, the Board of Directors.

(b) SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
recorded on the trade date. Interest income is accrued on a daily basis. Market
discount or premium on securities purchased is accreted or amortized,
respectively, on an effective yield basis over the life of the security. The
Fund uses the specific identification method for determining realized gain or
loss on investments sold.

(c) FOREIGN CURRENCY TRANSLATION. The books and records of the Fund are
maintained in U.S. dollars. Portfolio securities and other assets and
liabilities denominated in foreign currencies are

PAGE 14

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Notes to Financial Statements (continued)

translated into U.S. dollar amounts at the date of valuation using the 12:00
noon rate of exchange reported by Reuters. Purchases and sales of portfolio
securities and income and expense items denominated in foreign currencies are
translated into U.S. dollars at rates of exchange prevailing on the respective
dates of such transactions. Net realized gains and losses on foreign currency
transactions represent net gains and losses from sales and maturities of forward
currency contracts, disposition of foreign currencies, currency gains and losses
realized between the trade and settlement dates on securities transactions and
the difference between the amount of net investment income accrued and the U.S.
dollar equivalent amount actually received. The Fund does not isolate that
portion of gains and losses on investments which is due to changes in foreign
exchange rates from that which is due to changes in market prices of the
securities. Such fluctuations are included with the net realized and unrealized
gain or loss from investments. However, pursuant to U.S. federal income tax
regulations, certain net foreign exchange gains/losses included in realized
gain/loss are included in or are a reduction of ordinary income for federal
income tax purposes.

(d) FEDERAL INCOME TAXES. It is the Fund's intention to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income and capital
gains, if any, to its shareholders. Therefore, no federal income tax or excise
tax provision is required.

(e) REPURCHASE AGREEMENTS. When entering into repurchase agreements, it is the
Fund's policy to take possession, through its custodian, of the underlying
collateral and to monitor its value at the time the arrangement is entered into
and during the term of the repurchase agreement to ensure that it equals or
exceeds the repurchase price. In the event of default of the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances, in the
event of default or bankruptcy by the other party to the agreement, realization
and/or retention of the collateral may be subject to legal proceedings.

(f) DISTRIBUTION OF INCOME AND GAINS. The Fund declares and pays distributions
to shareholders quarterly from net investment income. Net realized gains, if
any, in excess of loss carryovers are expected to be distributed annually.
Dividends and distributions to shareholders are recorded on the ex-dividend
date. The amount of dividends and distributions from net investment income and
net realized gains are determined in accordance with federal income tax
regulations, which may differ from GAAP due primarily to differences in the
treatment of foreign currency gains/losses and deferral of wash sales incurred
by the Fund. 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
income 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 distributions 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 tax return of capital.

(g) FORWARD FOREIGN CURRENCY CONTRACTS. A forward foreign currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. The contract is

PAGE 15

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Notes to Financial Statements (continued)

marked to market to reflect the change in the currency exchange rate. The change
in market value is recorded by the Fund as an unrealized gain or loss. The Fund
records a realized gain or loss on delivery of the currency or at the time the
forward foreign currency contract is extinguished (compensated) by entering into
a closing transaction prior to delivery. This gain or loss, if any, is included
in net realized gain (loss) on foreign currency transactions.

(h) OPTION CONTRACTS. When the Fund writes or purchases a call or a put option,
an amount equal to the premium received or paid by the Fund is recorded as a
liability or asset, the value of which is marked-to-market to reflect the
current market value of the option. When the option expires, the Fund realizes a
gain or loss equal to the amount of the premium received or paid. When the Fund
enters into a closing transaction by purchasing or selling an offsetting option,
it realizes a gain or loss without regard to any unrealized gain or loss on the
underlying security. When a written call option is exercised, the Fund realizes
a gain or loss from the sale of the underlying security and the proceeds from
such sale are increased by the premium originally received on the option. If a
written put option is exercised, the amount of the premium received reduces the
cost of the security that the Fund purchased upon exercise of the option.

(i) CASH FLOW INFORMATION. The Fund invests in securities and distributes
dividends from net investment income and net realized gains from investment
transactions which are paid in cash. These activities are reported in the
Statement of Changes in Net Assets. Additional information on cash receipts and
cash payments is presented in the Statement of Cash Flows. For the year ended
May 31, 2002, the Fund paid interest expense of $4,148,098.

(j) YEAR END TAX RECLASSIFICATIONS. The character of income and gains to be
distributed are determined in accordance with income tax regulations which may
differ from GAAP. At May 31, 2002, reclassifications were made to the capital
accounts of the Fund to reflect permanent book/tax differences and income and
gains available for distributions under income tax regulations. Net investment
income, net realized loss and net assets were not affected by this change.

(k) CHANGE IN ACCOUNTING POLICY. In November 2000, the American Institute of
Certified Public Accountants ("AICPA") issued a revised version of the AICPA
Audit and Accounting Guide for Investment Companies ("Guide"). This revised
version is effective for financial statements issued for fiscal years beginning
after December 15, 2000. The revised Guide requires the Fund to amortize premium
and accrete all discounts on all fixed-income securities. The Fund adopted this
requirement June 1, 2001. This change does not affect the Fund's net asset
value, but does change the classification of certain amounts in the statement of
operations. For the year ended May 31, 2002, interest income decreased by
$122,923, net realized loss decreased by $79,986 and the change in net
unrealized depreciation of investments increased by $42,937. In addition, the
Fund recorded adjustments to increase the cost of securities and increase
accumulated undistributed net investment income by $3,107 to reflect the
cumulative effect of this change up to the date of the adoption.

Note 2. Management and Advisory Fees and Other Transactions

The Fund has entered into a management agreement with PIMCO Funds Advisors LLC
("Investment Manager"), an indirect wholly-owned subsidiary of Allianz Dresdner

PAGE 16

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Notes to Financial Statements (continued)

Asset Management of America L.P., formerly known as PIMCO Advisors L.P., a
wholly-owned subsidiary of Allianz AG, pursuant to which the Investment Manager,
among other things, supervises the Fund's investment program and monitors the
performance of the Fund's service providers.

The Investment Manager and the Fund have entered into an investment advisory and
administration agreement with Salomon Brothers Asset Management Inc ("Investment
Adviser"), a wholly-owned subsidiary of Salomon Smith Barney Holdings Inc.,
which is a subsidiary of Citigroup Inc. ("Citigroup"), pursuant to which the
Investment Adviser provides investment advisory and administrative services to
the Fund. The Investment Adviser is responsible on a day-to-day basis for the
management of the Fund's portfolio in accordance with the Fund's investment
objectives and policies and for making decisions to buy, sell, or hold
particular securities and is responsible for day-to-day administration of the
Fund.

The Fund pays the Investment Manager a monthly fee at an annual rate of 1.20% of
the Fund's average weekly net assets for its services, out of which the
Investment Manager pays the Investment Adviser a monthly fee at an annual rate
of 0.70% of the Fund's average weekly net assets for its services.

At May 31, 2002 the Investment Adviser owned 4,849 shares of the Fund. Certain
officers and/or directors of the Fund are officers and/or directors of the
Investment Manager or the Investment Adviser.

All officers and two directors of the Fund are employees of the Investment
Manager and/or the Investment Adviser.

Note 3. Portfolio Activity

For the year ended May 31, 2002, the aggregate cost of purchases and proceeds
from sales of investments (including maturities, but excluding short-term
securities) were as follows:

Purchases ................................................ $840,369,440
============
Sales .................................................... $788,651,211
============

At May 31, 2002, the aggregate gross unrealized appreciation and depreciation of
investments for Federal income tax purposes were substantially as follows:

Gross unrealized appreciation ............................ $ 24,169,152
Gross unrealized depreciation ............................ (24,662,182)
------------
Net unrealized depreciation .............................. $ (493,030)
============

Note 4. Loan

The Fund had outstanding a $100,000,000 loan pursuant to a secured loan
agreement with ING Barings (U.S.) Capital LLC which matured on November 20,
2001.

PAGE 17

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Notes to Financial Statements (continued)

At May 31, 2002, the Fund had a $110,000,000 loan available pursuant to a
revolving credit and security agreement of which the Fund had $100,000,000
outstanding with CXC LLC, an affiliate of Citigroup, a commercial paper conduit
issuer for which Citicorp North America, Inc. acts as administrative agent. The
loans generally bear interest at a variable rate based on the weighted average
interest rates of the underlying commercial paper or LIBOR, plus any applicable
margin. Securities held by the Fund are subject to a lien, granted to the
lenders, to the extent of the borrowing outstanding and any additional expenses.

Note 5. Loan Participations/Assignments

The Fund invests in fixed and floating rate loans arranged through private
negotiations between a foreign sovereign entity and one or more financial
institutions ("lenders"). The Fund's investment in any such loan may be in the
form of a participation in or an assignment of the loan. At May 31, 2002, the
total cost of the Fund's loan participations was $21,861,105.

In connection with purchasing loan participations, the Fund generally will have
no right to enforce compliance by the borrower with the terms of the loan
agreement relating to the loan, nor any rights of set-off against the borrower,
and the Fund may not benefit directly from any collateral supporting the loan in
which it has purchased the participation. As a result, the Fund will assume the
credit risk of both the borrower and the lender that is selling the
participation. In the event of the insolvency of the lender selling the
participation, the Fund may be treated as a general creditor of the lender and
may not benefit from any set-off between the lender and the borrower.

When the Fund purchases assignments from lenders, the Fund will acquire direct
rights against the borrower on the loan, except that under certain circumstances
such rights may be more limited than those held by the assigning lender.

The Fund may have difficulty disposing of participations/assignments because the
market for certain instruments may not be highly liquid.

Note 6. "When and If" Issued Bonds

"When and if" issued bonds are recorded as investments in the Fund's portfolio
and marked-to-market to reflect the current value of the bonds. When the Fund
sells a "when and if" issued bond, an unrealized gain or loss is recorded equal
to the difference between the selling price and purchase cost of the bond.
Settlement of trades (i.e., receipt and delivery) of the "when and if" issued
bond is contingent upon the successful issuance of such bond. In the event its
sponsor is unable to successfully issue the security, all trades in "when and
if" issued bonds become null and void, and, accordingly, the Fund will reverse
any gain or loss recorded on such transactions.

At May 31, 2002, the Fund did not hold any "when and if" issued bonds.

Note 7. Credit and Market Risk

The yields of emerging market debt obligations reflect, among other things,
perceived credit risk. The Fund's investment in securities rated below
investment grade typically involves risks not associated with higher rated
securities including, among others, overall greater risk of timely and
ultimate payment of interest and principal, greater market price volatility and
less liquid secondary market trading. The consequences of political, social,
economic or diplomatic changes may have

PAGE 18

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Notes to Financial Statements (continued)

disruptive effects on the market prices
of investments held by the Fund. The Fund's investment in non-dollar-denominated
securities may also result in foreign currency losses caused by devaluations and
exchange rate fluctuations. At May 31, 2002, the Fund has a concentration of
risk in sovereign debt of emerging market countries.

Note 8. Option Contracts

The Fund may from time to time enter into option contracts. Premiums paid when
put or call options are purchased by the Fund, represent investments, which are
marked-to-market daily. When a purchased option expires, the Fund will realize a
loss in the amount of the premium paid. When the Fund enters into a closing
sales transaction, the Fund will realize a gain or loss depending on whether the
proceeds from the closing sales transaction are greater or less than the premium
paid for the option. When the Fund exercises a put option, it will realize a
gain or loss from the sale of the underlying security and the proceeds from such
sale will be decreased by the premium originally paid. When the Fund exercises a
call option, the cost of the security which the Fund purchases upon exercise
will be increased by the premium originally paid.

At May 31, 2002, the Fund did not hold any purchased call or put option
contracts.

When the Fund writes a call or put option, an amount equal to the premium
received by the Fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Fund realizes a gain
equal to the amount of the premium received.

When the Fund enters into a closing purchase transaction, the Fund realizes a
gain or loss depending upon whether the cost of the closing transaction is
greater or less than the premium originally received, without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is eliminated. When a written call option is exercised the proceeds
of the security sold will be increased by the premium originally received. When
a written put option is exercised, the amount of the premium originally received
will reduce the cost of the security which the Fund purchased upon exercise.
When written index options are exercised, settlement is made in cash.

The Fund enters into options for hedging purposes. The risk associated with
purchasing options is limited to the premium originally paid. The risk in
writing a covered call option is that the Fund gives up the opportunity to
participate in any increase in the price of the underlying security beyond the
exercise price. The risk in writing a put option is that the Fund is exposed to
the risk of loss if the market price of the underlying security declines.

The following written put option transactions occurred during the year ended May
31, 2002:

Number of
Contracts Premium
--------- ---------
Options written, outstanding at May 31, 2001 ........ 1,120 $ 985,200
Options canceled in closing purchase transactions ... (1,120) (985,200)
--------- ---------
Options written, outstanding at May 31, 2002 ........ -- $ 0
--------- ---------

PAGE 19

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Notes to Financial Statements (continued)

Note 9. Forward Foreign Currency Contracts

The Fund enters into forward foreign currency contracts to facilitate settlement
of foreign currency denominated portfolio transactions or to manage foreign
currency exposure associated with foreign currency denominated securities.
Forward foreign currency contracts involve elements of market risk in excess of
the amount reflected in the Statement of Assets and Liabilities. The Fund bears
the risk of an unfavorable change in the foreign exchange rate underlying the
forward foreign currency contract. Risks may also arise upon entering into these
contracts from the potential inability of the counterparties to meet the terms
of their contracts.

At May 31, 2002, the Fund did not have any open forward foreign currency
contracts.

Note 10. Dividend Subsequent to May 31, 2002

On May 3, 2002, the Board of Directors of the Fund declared a common stock
dividend of $0.4125 per share from net investment income. The dividend was
payable on June 28, 2002 to shareholders of record June 18, 2002.

Note 11. Capital Loss Carryforward

At May 31, 2002, the Fund had, for Federal income tax purposes, a capital loss
carryforward of approximately $46,516,000, available to offset future capital
gains. To the extent that these carryforward losses are used to offset capital
gains, it is probable that any gains so offset will not be distributed. The
amount and expiration of the carryforwards are indicated below. Expiration
occurs on May 31 of the year indicated:

2007 2008 2010
----------- ----------- --------
Carryforward Amounts ..... $34,476,000 $11,811,000 $229,000

PAGE 20

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Financial Highlights

Data for a share of common stock outstanding throughout the year ended May 31,
unless otherwise noted:

2002 2001 2000 1999 1998
-------------------------------------------------------------------------------------------------------

NET ASSET VALUE, BEGINNING OF YEAR..... $11.53 $10.84 $ 9.71 $15.03 $17.19
------ ------ ------ ------ ------
INCOME (LOSS) FROM OPERATIONS:
Net investment income (1)........... 1.37 1.80 1.36 1.78 1.68
Net realized and unrealized
gain (loss) (1)................... 0.37 0.54 1.41 (4.45) (0.86)
------ ------ ------ ------ ------
Total Income (Loss) From Operations.... 1.74 2.34 2.77 (2.67) 0.82
------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net investment income............... (1.65) (1.65) (1.65) (1.80) (1.59)
Net realized gains.................. -- -- -- (0.88) (1.39)
------ ------ ------ ------ ------
Total Distributions.................... ( 1.65) ( 1.65) (1.65) (2.68) (2.98)
------ ------ ------ ------ ------
INCREASE IN NET ASSET VALUE
DUE TO SHARES ISSUED ON
REINVESTMENT OF DIVIDENDS........... 0.01 -- 0.01 0.03 --
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR........... $11.63 $11.53 $10.84 $ 9.71 $15.03
====== ====== ======= ====== ======
MARKET VALUE, END OF YEAR.............. $13.88 $12.65 $10.8125 $11.875 $15.4375
====== ====== ======== ======= ========
TOTAL RETURN, BASED ON MARKET
PRICE PER SHARE (2)................. 26.23% 35.06% 5.83% (0.43)% 17.51%

RATIOS TO AVERAGE NET ASSETS:
Total expenses, including interest
expense........................... 3.06% 4.55% 4.45% 4.00% 3.14%
Total expenses, excluding interest
expense (operating expenses)...... 1.40% 1.37% 1.39% 1.35% 1.35%
Net investment income (1)........... 13.60% 15.41% 13.52% 17.52% 10.16%

SUPPLEMENTAL DATA:
Net assets, end of year (000s)...... $277,219 $271,898 $254,060 $225,007 $335,080
Portfolio turnover rate ............ 233% 225% 93% 148% 136%
Loan outstanding, end of year (000s) $100,000 $100,000 $100,000 $100,000 $100,000
Asset coverage (000s)............... $377,219 $371,898 $354,010 $325,507 $435,080
Asset coverage for loan outstanding 377% 372% 354% 326% 435%
Weighted average loan (000s)........ $100,000 $100,000 $100,000 $100,000 $100,000
Weighted average interest rate
on loans.......................... 4.40% 8.55% 7.55% 6.11% 6.46%

---------------------------------------------------------------------------------------------------------------

(1) Without the adoption of the change in the accounting method discussed in
Note 1, for the year ended May 31, 2002, the ratio of net investment income
to average net assets would have been 13.65%. Per share, ratios and
supplemental data for the periods prior to June 1, 2001 have not been
restated to reflect this change in presentation. In addition, the impact of
this change to net investment income and net realized and unrealized gain
per share was less than $0.01.

(2) For the purposes of this calculation, dividends are assumed to be reinvested
at prices obtained under the Fund's dividend reinvestment plan and the
broker commission paid to purchase or sell a share is excluded.

PAGE 21

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Report of Independent Accountants

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
THE EMERGING MARKETS INCOME FUND II INC

In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations, of
changes in net assets and of cash flows and the financial highlights present
fairly, in all material respects, the financial position of The Emerging Markets
Income Fund II Inc ("Fund") at May 31, 2002, the results of its operations and
cash flows for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, 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 at May 31, 2002 by correspondence with the custodian and brokers,
provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
July 24, 2002

PAGE 22

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Additional Stockholder Information (unaudited)

RESULTS OF ANNUAL MEETING OF STOCKHOLDERS

The Fund held its Annual Meeting of Stockholders on November 13, 2001 for the
purpose of voting upon the election of Stephen Treadway as Class III Director of
the Fund, to serve until the 2003 Annual Meeting of Stockholders, and the
election of Leslie H. Gelb and Dr. Riordan Roett as Class I Directors of the
Fund, to serve until the 2004 Annual Meeting of Stockholders. The following
table provides information concerning the matter voted upon at the Meeting.

1. Election of Directors

Nominees Votes For Votes Against Votes Withheld Abstentions
--------- ---------------- ---------------- ---------------- ----------------

Leslie H. Gelb 22,166,140 0 312,957 0
Dr. Riordan Roett 22,206,948 0 272,149 0
Stephen Treadway 22,207,159 0 271,938 0

At May 31, 2002, in addition to Leslie H. Gelb, Dr. Riordan Roett and Stephen
Treadway, the other Directors of the Fund were as follows:

Heath B. McLendon
Jeswald W. Salacuse

--------------

CHANGE IN INVESTMENT POLICY

The Board of Directors of the Fund approved certain changes to the Fund's
management policies in connection with Rule 35d-1 under the Investment Company
Act of 1940. Under normal conditions, the Fund will invest at least 80% of its
net assets plus any borrowings for investment purposes in debt securities of
government and government-related issuers located in emerging market countries
(including participations in loans between governments and financial
institutions), and of entities organized to restructure outstanding debt of such
issuers, and in debt securities of corporate issuers located in emerging market
countries. Previously, the Fund's management policies stated that the Fund would
invest at least 65% of its assets in such securities. In addition, the Fund has
adopted a policy to provide the stockholders of the Fund with at least 60 days
prior notice of any changes to the investment policy adopted if such notice is
required by Rule 35d-1.

PAGE 23

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Additional Information (unaudited)

INFORMATION ABOUT DIRECTORS AND OFFICERS

The business and affairs of The Emerging Markets Income Fund II Inc ("Fund") are
managed under the direction of the Board of Directors. Information pertaining to
the Directors and Officers of the Fund is set forth below.

NUMBER OF
PORTFOLIOS ADVISED
BY SBAM,(2)
SBAM AND PIMCO
ADVISORS,(3) AND
PIMCO ADVISORS(4)
TERM OF PRINCIPAL AND OVERSEEN BY
POSITION(S) OFFICE(1) AND OCCUPATION(S) DIRECTOR OTHER
HELD WITH LENGTH OF DURING PAST (INCLUDING DIRECTORSHIPS
NAME, ADDRESS, AND AGE FUND(1) TIME SERVED 5 YEARS THE FUND) HELD BY DIRECTOR
---------------------------------------------------------------------------------------------------------

NON-INTERESTED

DIRECTORS:

Leslie H. Gelb Director and Since President, 4(2) Britannica.com;
The Council on Member of 1994 The Council on 6(3) Director of 2
Foreign Relations the Audit Foreign Relations; 0(4) registered
58 East 68th Street Committee, formerly, Columnist, investment
New York, NY 10021 Class I Deputy Editorial companies advised
Age 64 Page Editor and by Advantage
Editor, Op-Ed Page, Advisers, Inc.
The New York ("Advantage")
Times

Riordan Roett Director and Since Professor and 4(2) The Latin America
The Johns Hopkins University Member of 1995 Director, Latin 6(3) Equity Fund, Inc.
1740 Massachusetts Ave. NW the Audit America Studies 0(4)
Washington, DC 20036 Committee, Program, Paul H.
Age 63 Class I Nitze School of
Advanced
International
Studies, The Johns
Hopkins University

Jeswald W. Salacuse Director and Since Henry J. Braker 4(2) Director of 2
Tufts University Member of 1994 Professor of 6(3) registered
The Fletcher School of Law the Audit Commercial Law 1(4) investment
& Diplomacy Committee, and formerly Dean, companies advised
Packard Avenue Class II The Fletcher by Advantage
Medford, MA 02155 School of Law &
Age 64 Diplomacy, Tufts
University

PAGE 24

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Additional Information (unaudited) (continued)

NUMBER OF
PORTFOLIOS ADVISED
BY SBAM,(2)
SBAM AND PIMCO
ADVISORS,(3) AND
PIMCO ADVISORS(4)
TERM OF P RINCIPAL AND OVERSEEN BY
POSITION(S) OFFICE(1) AND OCCUPATION(S) DIRECTOR OTHER
HELD WITH LENGTH OF DURING PAST (INCLUDING DIRECTORSHIPS
NAME, ADDRESS, AND AGE FUND(1) TIME SERVED 5 YEARS THE FUND) HELD BY DIRECTOR
---------------------------------------------------------------------------------------------------------

INTERESTED DIRECTORS:

Heath B. McLendon Director and Since Managing Director 185(2) None
Salomon Smith Barney Inc. Co-Chairman, 1998 of Salomon Brothers 6(3)
125 Broad Street, 9th Floor Class II Asset Management 0(4)
New York, NY 10004 Inc ("SBAM") and
Age 69 Salomon Smith
Barney Inc. ("SSB");
Chairman, President,
Chief Executive Officer
and Director of Smith
Barney Fund
Management LLC
("SBFM") and Travelers
Investment Adviser,
Inc. ("TIA");
Director of the
Travelers Investment
Management Company
and Citi Fund
Management Inc.

Stephen Treadway Director and Since Managing Director of 0(2) None
PIMCO Funds Co-Chairman, 2000 Allianz Dresdner 6(3)
Distributors LLC Class III Asset Management 56(4)
2187 Atlantic Street, Suite 100 of America L.P.
Stamford, CT 06902 ("ADAMA") (formerly,
Age 54 PIMCO Advisors L.P.);
Managing Director
and Chief Executive
Officer of PIMCO
Funds Distributors
LLC ("PFD") since
May 1996; Managing
Director and Chief
Executive Officer,
PIMCO Advisors

OFFICERS:

Peter J. Wilby President Since Managing Director N/A N/A
SSB 2002 of SSB and SBAM
388 Greenwich Street since January 1996
New York, NY 10013 Executive Vice 1994-
Age 43 President 2002

PAGE 25

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Additional Information (unaudited) (continued)

Lewis E. Daidone Chief Since Managing Director N/A N/A
SSB Administrative 2002 of SSB; Chief
125 Broad Street, 11th Floor Officer Financial Officer of
New York, NY 10004 the Smith Barney
Age 44 Executive Vice Since Mutual Funds;
President and 1998- Director and Senior
Treasurer 2002 Vice President of
SBFM and TIA

Irving P. David Chief Financial Since Director of SSB N/A N/A
SSB Officer and 2002
125 Broad Street, 10th Floor Treasurer
New York, NY 10004
Age 41 Controller Since
May-July
2002

James E. Craige Executive Vice Since Managing Director N/A N/A
SSB President 1999 of SSB and SBAM
388 Greenwich Street since December
New York, NY 10013 1998; Director of
Age 34 SSB and SBAM
since January 1998
and Vice President
of SSB and SBAM
from May 1992 to
January 1998

Thomas K. Flanagan Executive Vice Since Managing Director N/A N/A
SSB President 1994 of SSB and SBAM
388 Greenwich Street since December 1998;
New York, NY 10013 Prior to December
Age 49 1998, Director of
SSB and SBAM

Newton B. Schott, Jr. Executive Vice Since Chief N/A N/A
PFD President 1997 Administrative
2187 Atlantic Street, Suite 100 Officer, Managing
Stamford, CT 06902 Director and General
Age 60 Counsel of PFD and
Managing Director
and Chief Legal
Officer of
PIMCO Advisors

PAGE 26

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Additional Information (unaudited) (continued)

Brian S. Shlissel Executive Since Senior Vice N/A N/A
PIMCO Funds Advisors LLC Vice President 2002 President of ADAMA
1345 Avenue of the Americas since July 1999; Vice
New York, NY 10105 President of Mitchell
Age 37 Hutchins Asset
Management
(1993-1999)

Frances M. Guggino Controller Since Vice President, N/A N/A
SSB 2002 Citigroup Asset
125 Broad Street, 10th Floor Management
New York, NY 10004
Age 40

Christina T. Sydor Secretary Since Managing Director N/A N/A
SSB 1998 of SSB; General
300 First Stamford Place Counsel and
Stamford, CT 06902 Secretary of
Age 51 SBFM and TIA

----------------
(1) The Fund's Board of Directors is divided into three classes: Class I, Class
II and Class III. The terms of office of the Class I, II and III Directors
expire at the Annual Meetings of Stockholders in the year 2004, year 2002
and year 2003, respectively, or thereafter in each case when their
respective successors are duly elected and qualified. The Fund's executive
officers are chosen each year at the first meeting of the Fund's Board of
Directors following the Annual Meeting of Stockholders, to hold office until
the meeting of the Board following the next Annual Meeting of Stockholders
and until their successors are duly elected and qualified.
(2) Number of portfolios advised by SBAM or affiliates of SBAM.
(3) Number of portfolios advised by both SBAM or affiliates of SBAM and PIMCO
Funds Advisors LLC ("PIMCO Advisors") or affiliates of PIMCO Advisors.
(4) Number of portfolios advised by PIMCO Advisors or affiliates of PIMCO
Advisors.

PAGE 27

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Form of Terms and Conditions of Amended and Restated Dividend Reinvestment and
Cash Purchase Plan (unaudited)

Pursuant to certain rules of the Securities and Exchange Commission, the
following additional disclosure is provided.

Each shareholder holding shares of common stock ("Shares") of The Emerging
Markets Income Fund II Inc ("Fund") will be deemed to have elected to be a
participant in the Amended and Restated Dividend Reinvestment and Cash Purchase
Plan ("Plan"), unless the shareholder specifically elects in writing (addressed
to the Agent at the address below or to any nominee who holds Shares for the
shareholder in its name) to receive all income dividends and distributions of
capital gains in cash, paid by check, mailed directly to the record holder by or
under the direction of American Stock Transfer & Trust Company as the Fund's
dividend-paying agent ("Agent"). A shareholder whose Shares are held in the name
of a broker or nominee who does not provide an automatic reinvestment service
may be required to take such Shares out of "street name" and register such
Shares in the shareholder's name in order to participate, otherwise dividends
and distributions will be paid in cash to such shareholder by the broker or
nominee. Each participant in the Plan is referred to herein as a "Participant."
The Agent will act as Agent for each Participant, and will open accounts for
each Participant under the Plan in the same name as their Shares are registered.

Unless the Fund declares a dividend or distribution payable only in the form of
cash, the Agent will apply all dividends and distributions in the manner set
forth below.

If, on the determination date, the market price per Share equals or exceeds the
net asset value per Share on that date (such condition, a "market premium"), the
Agent will receive the dividend or distribution in newly issued Shares of the
Fund on behalf of Participants. If, on the determination date, the net asset
value per Share exceeds the market price per Share (such condition, a "market
discount"), the Agent will purchase Shares in the open-market. The determination
date will be the fourth New York Stock Exchange trading day (a New York Stock
Exchange trading day being referred to herein as a "Trading Day") preceding the
payment date for the dividend or distribution. For purposes herein, "market
price" will mean the average of the highest and lowest prices at which the
Shares sell on the New York Stock Exchange on the particular date, or if there
is no sale on that date, the average of the closing bid and asked quotations.

Purchases made by the Agent will be made as soon as practicable commencing on
the Trading Day following the determination date and terminating no later than
30 days after the dividend or distribution payment date except where temporary
curtailment or suspension of purchase is necessary to comply with applicable
provisions of federal securities law; provided, however, that such purchases
will, in any event, terminate on the earlier of (i) 60 days after the dividend
or distribution payment date amd (ii) the Trading Day Prior to the "ex-dividend"
date next succeeding the dividend or distribution paymentor distribution payment
date.

PAGE 28

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Form of Terms and Conditions of Amended and Restated Dividend Reinvestment and
Cash Purchase Plan (unaudited) (continued)

If (i) the Agent has not invested the full dividend amount in open-market
purchases by the date specified in paragraph 4 above as the date on which such
purchases must terminate or (ii) a market discount shifts to a market premium
during the purchase period, then the Agent will cease making open-market
purchases and will receive the uninvested portion of the dividend amount in
newly issued Shares (x) in the case of (i) above, at the close of business on
the date the Agent is required to terminate making open-market purchases as
specified in paragraph 4 above or (y) in the case of (ii) above, at the close of
business on the date such shift occurs; but in no event prior to the payment
date for the dividend or distribution.

In the event that all or part of a dividend or distribution amount is to be paid
in newly issued Shares, such Shares will be issued to Participants in accordance
with the following formula: (i) if, on the valuation date, the net asset value
per Share is less than or equal to the market price per Share, then the newly
issued Shares will be valued at net asset value per Share on the valuation date;
provided, however, that if the net asset value is less than 95% of the market
price on the valuation date, then such Shares will be issued at 95% of the
market price and (ii) if, on the valuation date, the net asset value per Share
is greater than the market price per Share, then the newly issued Shares will be
issued at the market price on the valuation date. The valuation date will be the
dividend or distribution payment date, except that with respect to Shares issued
pursuant to paragraph 5 above, the valuation date will be the date such Shares
are issued. If a date that would otherwise be a valuation date is not a Trading
Day, the valuation date will be the next preceding Trading Day.

Participants have the option of making additional cash payments to the Agent,
monthly, in a minimum amount of $250, for investment in Shares. The Agent will
use all such funds received from Participants to purchase Shares in the open
market on or about the first business day of each month. To avoid unnecessary
cash accumulations, and also to allow ample time for receipt and processing by
the Agent, Participants should send in voluntary cash payments to be received by
the Agent approximately 10 days before an applicable purchase date specified
above. A Participant may withdraw a voluntary cash payment by written notice, if
the notice is received by the Agent not less than 48 hours before such payment
is to be invested.

Purchases by the Agent pursuant to paragraphs 4 and 7 above may be made on any
securities exchange on which the Shares are traded, in the over-the-counter
market or in negotiated transactions, and may be on such terms as to price,
delivery and otherwise as the Agent shall determine. Funds held by the Agent
uninvested will not bear interest, and it is understood that, in any event, the
Agent shall have no liability in connection with any inability to purchase
Shares within the time periods herein provided, or with the timing of any
purchases effected. The Agent shall have no responsibility as to the value of
the Shares acquired for the Participant's account. The Agent may

PAGE 29

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Form of Terms and Conditions of Amended and Restated Dividend Reinvestment and
Cash Purchase Plan (unaudited) (continued)

commingle amounts of all Participants to be used for open-market purchases of
Shares and the price per Share allocable to each Participant in connection with
such purchases shall be the average price (including brokerage commissions) of
all Shares purchased by the Agent.

The Agent will maintain all Participants' accounts in the Plan and will furnish
written confirmations of all transactions in each account, including information
needed by Participants for personal and tax records. The Agent will hold Shares
acquired pursuant to the Plan in noncertificated form in the Participant's name
or that of its nominee, and each Participant's proxy will include those Shares
purchased pursuant to the Plan. The Agent will forward to Participants any proxy
solicitation material and will vote any Shares so held for Participants only in
accordance with the proxy returned by Participants to the Fund. Upon written
request, the Agent will deliver to Participants, without charge, a certificate
or certificates for the full Shares.

The Agent will confirm to Participants each acquisition made for their
respective accounts as soon as practicable but not later than 60 days after the
date thereof. Although Participants may from time to time have an undivided
fractional interest (computed to three decimal places) in a Share of the Fund,
no certificates for fractional shares will be issued. Dividends and
distributions on fractional shares will be credited to each Participant's
account. In the event of termination of a Participant's account under the Plan,
the Agent will adjust for any such undivided fractional interest in cash at the
market value of the Fund's Shares at the time of termination less the pro rata
expense of any sale required to make such an adjustment.

Any share dividends or split shares distributed by the Fund on Shares held by
the Agent for Participants will be credited to their respective accounts. In the
event that the Fund makes available to Participants rights to purchase
additional Shares or other securities, the Shares held for Participants under
the Plan will be added to other Shares held by the Participants in calculating
the number of rights to be issued to Participants.

The Agent's service fee for handling capital gains distributions or income
dividends will be paid by the Fund. Participants will be charged a pro rata
share of brokerage commissions on all open-market purchases.

Participants may terminate their accounts under the Plan by notifying the Agent
in writing. Such termination will be effective immediately if notice is received
by the Agent not less than 10 days prior to any dividend or distribution record
date; otherwise such termination will be effective on the first Trading Day
after the payment date for such dividend or distribution with respect to any
subsequent dividend or distribution. The Plan may be amended or terminated by
the Fund as applied to any voluntary cash payments made and any income dividend
or capital gains distribution paid subsequent to written notice of the change or
termination sent to Participants at least 30

PAGE 30

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Form of Terms and Conditions of Amended and Restated Dividend Reinvestment and
Cash Purchase Plan (unaudited) (continued)

days prior to the record date for the income dividend or capital gains
distribution. The Plan may be amended or terminated by the Agent, with the
Fund's prior written consent, on at least 30 dayswritten notice to Participants.
Notwithstanding the preceding two sentences, the Agent or the Fund may amend or
supplement the Plan at any time or times when necessary or appropriate to comply
with applicable law or rules or policies of the Securities and Exchange
Commission or any other regulatory authority. Upon any termination, the Agent
will cause a certificate or certificates for the full Shares held by each
Participant under the Plan and cash adjustment for any fraction to be delivered
to each Participant without charge.

Any amendment or supplement shall be deemed to be accepted by each Participant
unless, prior to the effective date thereof, the Agent receives written notice
of the termination of the Participant's account under the Plan. Any such
amendment may include an appointment by the Agent in its place and stead of a
successor Agent under these terms and conditions, with full power and authority
to perform all or any of the acts to be performed by the Agent under these terms
and conditions. Upon any such appointment of an Agent for the purpose of
receiving dividends and distributions, the Fund will be authorized to pay to
such successor Agent, for each Participant's account, all dividends and
distributions payable on Shares of the Fund held in each Participant's name or
under the Plan for retention or application by such successor Agent as provided
in these terms and conditions.

In the case of Participants, such as banks, broker-dealers or other nominees,
which hold Shares for others who are beneficial owners ("Nominee Holders"), the
Agent will administer the Plan on the basis of the number of Shares certified
from time to time by each Nominee Holder as representing the total amount
registered in the Nominee Holder's name and held for the account of beneficial
owners who are to participate in the Plan.

The Agent shall at all times act in good faith and use its best efforts within
reasonable limits to insure the accuracy of all services performed under this
Agreement and to comply with applicable law, but assumes no responsibility and
shall not be liable for loss or damage due to errors unless such error is caused
by its negligence, bad faith, or willful misconduct or that of its employees.

All correspondence concerning the Plan should be directed to the Agent at 59
Maiden Lane, New York, New York 10038.

--------------------
The report is transmitted to the shareholders of the Fund for their information.
This is not a prospectus, circular or representation intended for use in the
purchase of shares of the Fund or any securities mentioned in this report.

Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock in the open market.

PAGE 31

T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C

Directors
LESLIE H. GELB
President, The Council
on Foreign Relations
HEATH B. MCLENDON
Co-Chairman of the Board;
Managing Director, Salomon
Smith Barney Inc.
President and Director, Smith Barney Fund
Management LLC and Travelers Investment
Adviser, Inc.
RIORDAN ROETT
Professor and Director,
Latin American Studies Program,
Paul H. Nitze School of Advanced
International Studies,
The Johns Hopkins University
JESWALD W. SALACUSE
Henry J. Braker Professor of
Commercial Law and formerly Dean,
The Fletcher School of Law & Diplomacy,
Tufts University
STEPHEN TREADWAY
Co-Chairman of the Board;
Managing Director, Allianz Dresdner
Asset Management of America L.P.
Managing Director and
Chief Executive Officer,
PIMCO Funds Distributors LLC
CHARLES F. BARBER, Emeritus
Consultant; formerly Chairman,
ASARCO Inc.

Officers
HEATH B. MCLENDON
Co-Chairman of the Board
STEPHEN TREADWAY
Co-Chairman of the Board
PETER J. WILBY
President
LEWIS E. DAIDONE
Chief Administrative Officer
IRVING P. DAVID
Chief Financial Officer andTreasurer
JAMES E. CRAIGE
Executive Vice President
THOMAS K. FLANAGAN
Executive Vice President
NEWTON B. SCHOTT, JR.
Executive Vice President
BRIAN S. SHLISSEL
Executive Vice President
FRANCES M. GUGGINO
Controller
CHRISTINA T. SYDOR
Secretary

========================================
The Emerging Markets Income Fund II Inc
125 Broad Street
10th Floor, MF-2
New York, New York 10004
Telephone 1-888-777-0102

INVESTMENT MANAGER
PIMCO Funds Advisors LLC
1345 Avenue of the Americas
New York, NY 10105

INVESTMENT ADVISER
Salomon Brothers Asset Management Inc
388 Greenwich Street
New York, New York 10013

CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

DIVIDEND DISBURSING AND TRANSFER AGENT
American Stock Transfer &Trust Company
59 Maiden Lane
New York, New York 10038

INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036

LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017

NEW YORK STOCK EXCHANGE SYMBOL
EDF

(This page intentionally left blank.)

The Emerging Markets
Income Fund II Inc

Annual Report
May 31, 2002

Salomon Brothers Asset Management

American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038

EDFANN 5/02

FIRST-CLASS MAIL
U.S. POSTAGE
PAID
BROOKLYN, NY
PERMIT No. 1726