UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-7676
Van Kampen Municipal Opportunity Trust II
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
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(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York 10020
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 10/31
Date of reporting period: 4/30/05
Item 1. Report to Shareholders
The Trust's semi-annual report transmitted to shareholders pursuant to
Rule 30e-1 under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Municipal Opportunity Trust II performed during the semiannual period.
The portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the trust's financial statements and a list of trust investments
as of April 30, 2005.
MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT THE TRUST WILL ACHIEVE ITS INVESTMENT
OBJECTIVE. TRUSTS ARE SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY
THAT THE MARKET VALUES OF SECURITIES OWNED BY THE TRUST WILL DECLINE AND
THAT THE VALUE OF TRUST SHARES MAY THEREFORE BE LESS THAN WHAT YOU PAID
FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS TRUST.
INCOME MAY SUBJECT CERTAIN INDIVIDUALS TO THE FEDERAL ALTERNATIVE MINIMUM
TAX (AMT).
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NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
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NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
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Performance Summary as of 4/30/05
MUNICIPAL OPPORTUNITY TRUST II
SYMBOL: VOT
------------------------------------------------------------
AVERAGE ANNUAL BASED ON BASED ON
TOTAL RETURNS NAV MARKET
Since Inception (06/25/93) 6.87% 5.54%
10-year 8.16 7.93
5-year 9.97 10.28
1-year 10.87 9.89
6-month 3.71 -2.01
------------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
VANKAMPEN.COM OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS, NET
ASSET VALUE (NAV) AND COMMON SHARE MARKET PRICE WILL FLUCTUATE AND TRUST SHARES,
WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
NAV per share is determined by dividing the value of the trust's portfolio
securities, cash and other assets, less all liabilities, by the total number of
common shares outstanding. The common share market price is the price the market
is willing to pay for shares of the trust at a given time. Common share market
price is influenced by a range of factors, including supply and demand and
market conditions. Total return assumes an investment at the beginning of the
period, reinvestment of all distributions for the period in accordance with the
trust's dividend reinvestment plan, and sale of all shares at the end of the
period.
The Lehman Brothers Municipal Bond Index is a broad-based statistical composite
of municipal bonds. The index does not include any expenses, fees or sales
charges, which would lower performance. The index is unmanaged and should not be
considered an investment. It is not possible to invest directly in an index.
1
Trust Report
FOR THE 6-MONTH PERIOD ENDED APRIL 30, 2005
Van Kampen Municipal Opportunity Trust II is managed by the Adviser's Municipal
Fixed Income team.(1) Current members include Timothy D. Haney and Robert
Wimmel, Vice Presidents of the Adviser; and John Reynoldson, Executive Director
of the Adviser.
MARKET CONDITIONS
The six-month period ended April 30, 2005, was characterized by continued
short-term interest rate increases. As crude oil prices reached record highs,
the prospect of rising inflation also cast a shadow. The Federal Open Market
Committee (the "Fed") raised the federal funds target rate 100 basis points
during the period through a series of four "measured" 0.25 percent tightenings
to 2.75 percent by the end of April. Although rates in the short and
intermediate areas of the yield curve shifted upward as the Fed tightened, long-
term interest rates fell as buyers did not seem deterred by the prospect of
rising inflation. As a result, the yield curve (the difference between short and
longer-term yields) flattened and the long end of the municipal market handily
outperformed the shorter end.
The municipal market in total posted positive returns during the period, though
it was not uniformly strong. In contrast to the strong showing by longer-term
bonds, shorter-term municipals were hampered by the Fed's tightening and turned
in a flat to slightly negative showing. Within the investment-grade segment of
the market, yield differentials between BBB-rated and AAA-rated municipal
securities were slightly wider, though BBB-rated securities still outperformed
high grades due to their higher coupons, while securities rated below investment
grade strongly outperformed as investors sought out their higher yields.
The Fed's interest rate hikes did not appear to dampen investors' appetites for
municipal bonds, as net inflows into municipal bond funds topped $290 million
during the period. The supply of new issues was modest during the closing months
of 2004 (the first two months of the period) before soaring in the opening
months of 2005 as long-term issuers rushed to bring securities to market in
anticipation of additional interest rate increases in the near term.
(1)Team members may change without notice at any time.
2
PERFORMANCE ANALYSIS
The trust's return can be calculated based upon either the market price or the
net asset value (NAV) of its shares. NAV per share is determined by dividing the
value of the trust's portfolio securities, cash and other assets, less all
liabilities, by the total number of common shares outstanding, while market
price reflects the supply and demand for the shares. As a result, the two
returns can differ, as they did during the reporting period. On an NAV basis,
the trust outperformed its benchmark index, the Lehman Brothers Municipal Bond
Index. On a market price basis, the trust underperformed its benchmark.
TOTAL RETURNS FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2005
----------------------------------------------------------
BASED ON BASED ON LEHMAN BROTHERS
NAV MARKET PRICE MUNICIPAL BOND INDEX
3.71% -2.01% 1.93%
----------------------------------------------------------
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS, AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. INVESTMENT RETURN, NET ASSET VALUE AND COMMON SHARE MARKET PRICE WILL
FLUCTUATE AND TRUST SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. SEE PERFORMANCE SUMMARY FOR ADDITIONAL PERFORMANCE INFORMATION
AND INDEX DEFINITION.
The trust uses leverage to enhance its dividend to common shareholders. The
trust borrows money at short-term rates through the issuance of preferred
shares. The proceeds are reinvested in longer-term securities, taking advantage
of the difference between short- and longer-term rates. The Fed's policy of
raising interest rates throughout the period made the trust's borrowing activity
more expensive. These expenses, however, were more than offset by the positive
performance of the bonds held by the trust.
As part of an ongoing strategy to position the trust for continued increases in
short-term interest rates, we trimmed exposure to bonds with maturities in the
five- to 15-year range. Our strategy also included adding selectively to the
trust's holdings of bonds with longer maturities but moderate interest rate
characteristics. Finally, we kept the trust's duration (a measure of overall
interest-rate sensitivity) below that of its benchmark.
We continued to focus on relative-value trading between liquid, high-quality
securities to capture relative value opportunities identified by our analysts.
The trust's overall credit exposure remained tilted toward higher-quality
securities, with 84 percent of its exposure at the end of the period in bonds
rated AA or better. We took advantage of what we believed were some compelling
opportunities to add BBB rated securities to the portfolio when our analysts
identified securities with attractive structures and yield characteristics. By
the end of the period, bonds rated BBB represented 5 percent of the portfolio,
an allocation which proved beneficial as the market favored higher-coupon
securities.
3
The trust's portfolio remained well diversified across the major sectors of the
municipal bond market. At the end of the period, the top three sectors in the
portfolio were public education, health care and general purpose.
There is no guarantee the security sectors mentioned will continue to perform
well or be held by the trust in the future.
4
RATINGS ALLOCATION AS OF 4/30/05
AAA/Aaa 71.7%
AA/Aa 11.9
A/A 8.9
BBB/Baa 5.4
BB/Ba 0.4
B/B 0.5
NR 1.2
TOP 5 SECTORS AS OF 4/30/05
Public Education 17.7%
Health Care 14.4
General Purpose 14.0
Higher Education 11.3
Transportation 9.2
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 4/30/05
California 16.4%
Illinois 10.7
Colorado 6.2
Indiana 5.7
Texas 5.6
Louisiana 5.0
Missouri 4.8
New York 4.7
New Jersey 3.9
Arizona 3.8
Puerto Rico 3.5
Mississippi 3.0
South Carolina 2.6
Virginia 2.4
Georgia 2.2
Massachusetts 2.2
Michigan 2.0
Nebraska 1.6
Oregon 1.6
Oklahoma 1.5
West Virginia 1.5
Washington 1.4
Pennsylvania 1.3
Rhode Island 1.3
Alabama 1.1
(continued on next page)
5
SUMMARY OF INVESTMENTS BY STATE CLASSIFICATION AS OF 4/30/05
(continued from previous page)
Ohio 1.1
Wisconsin 0.9
Tennessee 0.6
Maryland 0.5
South Dakota 0.5
Minnesota 0.4
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Total Investments 100.0%
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the sectors shown above. Ratings and summary of investments by
state classification are as a percentage of total investments. Sectors are as a
percentage of long-term investments. Securities are classified by sectors that
represent broad groupings of related industries. Van Kampen is a wholly owned
subsidiary of a global securities firm which is engaged in a wide range of
financial services including, for example, securities trading and brokerage
activities, investment banking, research and analysis, financing and financial
advisory services. Rating allocations based upon ratings as issued by Standard
and Poor's and Moody's, respectively.
6
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
Each Van Kampen trust provides a complete schedule of portfolio holdings
in its semiannual and annual reports within 60 days of the end of the
trust's second and fourth fiscal quarters by filing the schedule
electronically with the Securities and Exchange Commission (SEC). The
semiannual reports are filed on Form N-CSRS and the annual reports are
filed on Form N-CSR. Van Kampen also delivers the semiannual and annual
reports to trust shareholders, and makes these reports available on its
public Web site, www.vankampen.com. In addition to the semiannual and
annual reports that Van Kampen delivers to shareholders and makes
available through the Van Kampen public Web site, each trust files a
complete schedule of portfolio holdings with the SEC for the trust's
first and third fiscal quarters on Form N-Q. Van Kampen does not deliver
the reports for the first and third fiscal quarters to shareholders, nor
are the reports posted to the Van Kampen public Web site. You may,
however, obtain the Form N-Q filings (as well as the Form N-CSR and
N-CSRS filings) by accessing the SEC's Web site, http://www.sec.gov. You
may also review and copy them at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the SEC's Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You
can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the Public Reference section of the
SEC, Washington, DC 20549-0102.
You may obtain copies of a trust's fiscal quarter filings by contacting
Van Kampen Client Relations at 1-800-847-2424.
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
The trust's policies and procedures with respect to the voting of proxies
relating to the trust's portfolio securities and information on how the
trust voted proxies relating to portfolio securities during the most
recent twelve-month period ended June 30 is available without charge,
upon request, by visiting our Web site at www.vankampen.com. This
information is also available on the Securities and Exchange Commission's
Web site at http://www.sec.gov.
7
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
MUNICIPAL BONDS 162.5%
ALABAMA 1.8%
$1,000 Birmingham Baptist Med Ctr AL Baptist Hlth
Sys Ser A.................................... 5.875% 11/15/24 $ 1,061,820
1,090 Lee Cnty, AL Sch Wts Ltd Oblig (MBIA Insd)
(a).......................................... 5.000 02/01/17 1,175,870
1,000 Valley, AL Spl Care Fac Fin Auth Rev Lanier
Mem Hosp Ser A............................... 5.600 11/01/16 1,007,340
-------------
3,245,030
-------------
ARIZONA 6.2%
5,000 Arizona Sch Fac Brd Ctf Ser B (Prerefunded @
09/01/13) (FGIC Insd)........................ 5.250 09/01/18 5,628,600
2,235 Arizona Tourism & Sports Auth Tax Rev
Multipurpose Stad Fac Ser A (MBIA Insd)...... 5.375 07/01/21 2,476,872
2,685 South Campus Group LLC AZ Std Hsg Rev AZ St
Univ South Campus Proj (MBIA Insd)........... 5.625 09/01/35 2,975,168
-------------
11,080,640
-------------
CALIFORNIA 26.7%
7,195 Anaheim, CA Pub Fin Auth Lease Rev Cap Apprec
Sub Pub Impt Proj Ser C (FSA Insd)........... * 09/01/21 3,360,569
1,300 Anaheim, CA Pub Fin Auth Lease Rev Pub Impt
Proj Ser C (FSA Insd)........................ 6.000 09/01/16 1,545,674
6,750 California Ed Fac Auth Rev Pepperdine Univ
Ser A Rfdg (FGIC Insd)....................... 5.000 09/01/33 7,055,100
2,000 California St Dept Wtr Res Pwr Ser A......... 6.000 05/01/15 2,304,420
2,345 California St Dept Wtr Res Pwr Supply Rev Ser
A (XLCA Insd)................................ 5.375 05/01/17 2,602,833
2,500 California St Pub Wks Brd Lease Rev Dept of
Mental Hlth Coalinga Ser A................... 5.000 06/01/24 2,616,050
4,600 California St Pub Wks Brd Lease Rev Var Univ
CA Proj Ser A Rfdg (b)....................... 5.500 06/01/10 5,042,152
5,905 California St Pub Wks Brd Lease Rev Var Univ
CA Proj Ser A Rfdg........................... 5.500 06/01/14 6,641,235
5,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev
Cap Apprec Rfdg (MBIA Insd).................. * 01/15/18 2,629,050
2,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev
Sr Lien Ser A (Prerefunded @ 01/01/07)....... 6.500 01/01/32 2,122,500
5,000 Los Angeles, CA Uni Sch Dist Ser A (FSA
Insd)........................................ 5.250 07/01/20 5,534,550
2,465 Los Angeles, CA Uni Sch Dist Ser B (FGIC
Insd)........................................ 5.000 07/01/23 2,607,748
3,070 Washington, CA Uni Sch Dist Yolo Cnty Ser A
(FGIC Insd) (a).............................. 5.250 08/01/20 3,401,069
-------------
47,462,950
-------------
8 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
COLORADO 10.1%
$1,000 Arapahoe Cnty, CO Cap Impt Tr Fd Hwy Rev
E-470 Proj (Prerefunded @ 08/31/05).......... 7.000% 08/31/26 $ 1,044,660
7,500 Arapahoe Cnty, CO Cap Impt Tr Fd Hwy Rev
E-470 Proj Ser C (Prerefunded @ 08/31/05).... * 08/31/26 1,551,450
1,945 Colorado Ed & Cultural Impt Charter Sch
Pinnacle Rfdg (XLCA Insd).................... 5.250 06/01/23 2,081,286
1,000 Colorado Hlth Fac Auth Rev Catholic Hlth
Initiatives Ser A (Escrowed to Maturity)..... 5.500 03/01/32 1,116,660
1,250 Colorado Hlth Fac Auth Rev Hosp Portercare
Adventist Hlth............................... 6.500 11/15/31 1,379,937
1,500 Denver, CO City & Cnty Arpt Rev Ser D
(AMT)........................................ 7.750 11/15/13 1,770,555
3,515 E-470 Pub Hwy Auth CO Rev Cap Apprec Sr Ser B
(MBIA Insd).................................. * 09/01/13 2,511,327
6,160 E-470 Pub Hwy Auth CO Rev Sr Ser A (MBIA
Insd)........................................ 5.000 09/01/21 6,439,294
-------------
17,895,169
-------------
GEORGIA 3.6%
5,000 Clayton Cnty & Clayton Cnty GA Wtr Auth Wtr &
Swr Rev...................................... 5.000 05/01/20 5,415,400
1,000 Richmond Cnty, GA Dev Auth ASU Jaguar Student
Hsg LLC Ser A................................ 5.250 02/01/35 1,033,010
-------------
6,448,410
-------------
ILLINOIS 17.4%
3,750 Bolingbrook, IL Cap Apprec Ser B (MBIA
Insd)........................................ * 01/01/32 887,512
3,365 Chicago, IL Cap Apprec (Prerefunded @
07/01/05) (AMBAC Insd)....................... * 01/01/17 1,612,441
290 Chicago, IL Single Family Mtg Rev Ser A (AMT)
(GNMA Collateralized)........................ 7.000 09/01/27 291,177
40 Chicago, IL Single Family Mtg Rev Ser B (AMT)
(GNMA Collateralized)........................ 7.625 09/01/27 40,551
3,345 Cook Cnty, IL Sch Dist No 100 Berwyn South
Ser D (FSA Insd)............................. 5.500 12/01/23 3,733,321
2,540 Cook Cnty, IL Sch Dist No 122 Oak Lawn Cap
Apprec (FGIC Insd) (a)....................... * 12/01/15 1,608,734
4,500 Cook Cnty, IL Ser A (FGIC Insd).............. 5.500 11/15/31 4,891,860
1,000 Illinois Dev Fin Auth Rev Cmnty Rehab
Providers Fac Ser A.......................... 7.375 07/01/25 1,085,650
2,500 Illinois Fin Auth Rev Northwestern Mem Hosp
Ser A........................................ 5.500 08/15/43 2,680,750
1,325 Illinois Fin Auth Student Hsg Rev MJH Ed
Assistance IV Sr Ser A....................... 5.125 06/01/35 1,329,425
8,000 Illinois St First Ser (FSA Insd)............. 5.250 12/01/19 8,766,560
See Notes to Financial Statements 9
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
ILLINOIS (CONTINUED)
$3,400 Illinois St First Ser (FSA Insd)............. 5.250% 04/01/27 $ 3,648,710
275 Peoria, Moline & Freeport, IL Coll Mtg Ser A
(AMT) (GNMA Collateralized).................. 7.600 04/01/27 279,584
-------------
30,856,275
-------------
INDIANA 9.2%
2,805 Dekalb Eastn High Sch Bldg Corp Ind First Mtg
(FSA Insd)................................... 6.000 01/15/18 3,198,541
4,000 East Chicago, IN Elementary Sch Bldg Corp
First Mtg Ser A.............................. 6.250 07/05/08 4,301,920
3,000 Indiana Hlth Fac Fin Auth Hosp Rev Columbus
Regl Hosp Rfdg (FSA Insd).................... 7.000 08/15/15 3,661,920
2,000 Petersburg, IN Pollutn Ctl Rev IN Pwr & Lt
(AMT)........................................ 5.950 12/01/29 2,079,180
2,850 Southwest Parke Cmnty Sch Bldg First Mtg
(FGIC Insd) (a).............................. 5.250 07/15/21 3,101,883
-------------
16,343,444
-------------
LOUISIANA 8.1%
2,500 Louisiana Loc Govt Environmental Fac Pkg Fac
Corp Garage Proj Ser A (AMBAC Insd).......... 5.375 10/01/31 2,700,250
6,000 New Orleans, LA Rfdg (MBIA Insd)............. 5.125 09/01/21 6,456,900
2,000 New Orleans, LA Rfdg (FGIC Insd)............. 5.500 12/01/21 2,341,140
2,800 Saint Charles Parish, LA Solid Waste Disp Rev
LA Pwr & Lt Co Proj (AMT) (FSA Insd) (b)..... 7.050 04/01/22 2,809,464
-------------
14,307,754
-------------
MARYLAND 0.8%
1,325 Maryland St Hlth & Higher Ed Fac Auth Rev
Civista Med Ctr (Radian Insd)................ 5.000 07/01/37 1,367,214
-------------
MASSACHUSETTS 3.6%
2,000 Massachusetts Muni Whsl Elec Co Proj No 6-A
(MBIA Insd).................................. 5.250 07/01/16 2,184,940
1,000 Massachusetts St Hlth & Ed Fac Auth Rev Saint
Mem Med Ctr Ser A............................ 6.000 10/01/23 1,004,060
2,995 Massachusetts St Wtr Pollutn Abatement Tr
Pool Pgm Bds Ser 10.......................... 5.000 08/01/21 3,223,399
-------------
6,412,399
-------------
MICHIGAN 3.3%
3,000 Detroit, MI City Sch Dist Sch Bldg & Site
Impt Ser A (FGIC Insd)....................... 5.375 05/01/24 3,319,140
1,000 Kent Hosp Fin Auth MI Rev Met Hosp Proj Ser
A............................................ 6.000 07/01/35 1,070,740
1,495 Michigan St Hsg Dev Auth Multi-Family Rev Ltd
Oblig Ser A Rfdg (GNMA Collateralized)....... 6.600 04/01/30 1,526,694
-------------
5,916,574
-------------
10 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
MINNESOTA 0.6%
$1,065 Duluth, MN Econ Dev Auth Hlthcare Fac Rev
Benedictine Hlth Sys Saint Marys............. 5.250% 02/15/33 $ 1,093,212
-------------
MISSISSIPPI 4.9%
2,000 Mississippi Business Fin Corp MS Pollutn Ctl
Rev Sys Energy Res Inc Proj Rfdg............. 5.900 05/01/22 2,027,680
1,900 Mississippi Dev Bk Spl Oblig Cap Proj & Equip
Acquisition Ser A2 (AMBAC Insd).............. 5.000 07/01/24 2,076,282
1,550 Mississippi Dev Bk Spl Oblig Madison Cnty
Hosp Proj (Prerefunded @ 07/01/09)........... 6.400 07/01/29 1,772,968
2,595 Mississippi Dev Bk Spl Oblig MS Ltd Oblig
Hosp Impts (MBIA Insd) (a)................... 5.250 07/01/32 2,755,864
-------------
8,632,794
-------------
MISSOURI 7.8%
2,000 Cape Girardeau Cnty, MO Indl Dev Auth
Hlthcare Fac Rev Southeast MO Hosp Assoc..... 5.625 06/01/27 2,060,620
1,250 Cole Cnty, MO Indl Dev Auth Sr Living Fac Rev
Lutheran Sr Svcs Heisinger Proj.............. 5.500 02/01/35 1,298,450
1,500 Saint Louis Cnty, MO Mtg Rev Ctf Rcpt Ser H
(AMT) (Escrowed to Maturity)................. 5.400 07/01/18 1,686,270
5,855 Saint Louis, MO Arpt Rev Arpt Dev Pgm Ser A
(MBIA Insd).................................. 5.250 07/01/31 6,180,948
2,380 Saint Louis, MO Arpt Rev Cap Impt Pgm Ser A
(MBIA Insd) (a).............................. 5.375 07/01/19 2,609,361
-------------
13,835,649
-------------
NEBRASKA 2.5%
4,260 University NE Univ Rev Lincoln Student Fees &
Fac Ser B.................................... 5.000 07/01/23 4,504,652
-------------
NEW JERSEY 6.4%
1,000 New Jersey Econ Dev Auth Rev Cigarette Tax... 5.500 06/15/31 1,045,540
5,000 New Jersey Econ Dev Auth Rev Sch Fac Constr
Ser I........................................ 5.000 09/01/23 5,266,600
1,000 New Jersey Hlthcare Fac Fin Auth Rev Gen Hosp
Ctr at Passaic (Escrowed to Maturity) (FSA
Insd)........................................ 6.000 07/01/06 1,020,850
4,000 Salem Cnty, NJ Indl Pollutn Ctl Fin Auth Rev
Pollutn Ctl Pub Svc Elec & Gas Ser A (AMT)
(MBIA Insd).................................. 5.450 02/01/32 4,033,320
-------------
11,366,310
-------------
NEW YORK 7.6%
3,250 New York City Hlth & Hosp Corp Rev Hlth Sys
Ser A (AMBAC Insd)........................... 5.000 02/15/11 3,539,088
5,000 New York City Ser A1 (Prerefunded @
08/01/05).................................... 6.375 08/01/10 5,098,700
See Notes to Financial Statements 11
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
NEW YORK (CONTINUED)
$1,520 New York St Dorm Auth Rev Insd John T Mather
Mem Hosp (Connie Lee Insd) (a)............... 6.500% 07/01/09 $ 1,714,682
3,000 New York City Muni Wtr Fin Auth Wtr & Sew Sys
Rev Ser A (AMBAC Insd)....................... 5.000 06/15/35 3,133,200
-------------
13,485,670
-------------
OHIO 1.8%
1,000 Cuyahoga Cnty, OH Hosp Fac Rev Canton Inc
Proj......................................... 7.500 01/01/30 1,124,720
1,040 Lorain Cnty, OH Hosp Rev EMH Regl Med Ctr
Rfdg (AMBAC Insd)............................ 7.750 11/01/13 1,085,687
950 Strongsville, OH (Prerefunded @ 12/01/06).... 6.700 12/01/11 1,025,611
-------------
3,236,018
-------------
OKLAHOMA 2.4%
1,000 Tulsa Cnty, OK Pub Fac Auth Cap Impt Rev
(AMBAC Insd)................................. 6.250 11/01/22 1,140,730
2,960 Tulsa, OK Indl Auth Hosp Rev Hillcrest Med
Ctr Proj Rfdg (Escrowed to Maturity) (Connie
Lee Insd) (a)................................ 6.250 06/01/07 3,156,070
-------------
4,296,800
-------------
OREGON 2.7%
700 Oregon St Vets Welfare Ser 76A............... 6.050 10/01/28 707,973
3,580 Yamhill Cnty, OR Sch Dist No 029J Newburg
(Prerefunded @ 06/15/12) (MBIA Insd)......... 5.250 06/15/21 4,015,221
-------------
4,723,194
-------------
PENNSYLVANIA 2.1%
4,500 Erie, PA Sch Dist Cap Apprec Rfdg (FSA
Insd)........................................ * 09/01/20 2,213,325
1,500 Pennsylvania Econ Dev Fin Auth Res Recovery
Rev Colver Proj Ser D (AMT).................. 7.050 12/01/10 1,535,205
-------------
3,748,530
-------------
RHODE ISLAND 2.1%
3,475 Rhode Island St Econ Dev Corp Arpt Rev Ser A
Rfdg (AMT) (FSA Insd)........................ 5.000 07/01/17 3,666,994
-------------
SOUTH CAROLINA 4.2%
3,115 Greenville, SC Impt & Rfdg (MBIA Insd) (a)... 5.250 04/01/21 3,398,652
3,750 South Carolina Jobs Econ Dev Auth Indl Rev
Elec & Gas Co Proj Ser B (AMT) (AMBAC Insd).. 5.450 11/01/32 3,989,025
-------------
7,387,677
-------------
SOUTH DAKOTA 0.8%
1,375 Deadwood, SD Ctf Partn (ACA Insd)............ 6.375 11/01/20 1,477,919
-------------
TENNESSEE 0.9%
1,300 Johnson City, TN Hlth & Ed Fac Brd Hosp Rev
First Mtg Ser A Rfdg (MBIA Insd)............. 7.500 07/01/25 1,635,751
-------------
12 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
TEXAS 9.1%
$2,335 Beaumont, TX Wtrwks & Swr Sys (Prerefunded @
09/01/10) (FGIC Insd)........................ 6.250% 09/01/14 $ 2,655,082
2,000 Brazos Cnty, TX Hlth Fac Dev Oblig Grp....... 5.375 01/01/32 2,049,280
1,190 Brazos River Auth TX Pollutn Ctl Rev TXU Elec
Co Proj Ser C Rfdg (AMT)..................... 5.750 05/01/36 1,292,352
5,000 Houston, TX Util Sys Rev Comb First Lien Ser
A (FSA Insd)................................. 5.250 05/15/20 5,443,800
1,000 Mesquite, TX Hlth Fac Dev Corp Retirement Fac
Christian Care Ctr Ser A..................... 7.625 02/15/28 1,048,840
1,500 Metropolitan Hlth Fac Dev Corp TX Wilson N
Jones Mem Hosp Proj.......................... 7.250 01/01/31 1,529,580
2,000 Texas St Wtr Fin Assistance.................. 5.500 08/01/35 2,139,620
-------------
16,158,554
-------------
UTAH 0.0%
50 Utah St Hsg Fin Agy Single Family Mtg Sr
Issue Ser B-2 (AMT) (FHA/VA Gtd)............. 6.500 07/01/15 50,220
-------------
VIRGINIA 3.9%
2,000 Fairfax Cnty, VA Ctf Partn................... 5.300 04/15/23 2,163,540
1,500 Henrico Cnty, VA Indl Dev Auth Pub Fac Lease
Rev Henrico Cnty Regl Jail Proj (Prerefunded
@ 08/01/05).................................. 6.500 08/01/10 1,544,970
1,380 Richmond, VA Indl Dev Auth Govt Fac Rev Bonds
(AMBAC Insd) (a)............................. 5.000 07/15/14 1,521,491
1,465 Richmond, VA Indl Dev Auth Govt Fac Rev Bonds
(AMBAC Insd)................................. 5.000 07/15/17 1,615,045
-------------
6,845,046
-------------
WASHINGTON 2.2%
700 Quinault Indian Nation, WA Quinault Beach Ser
A Rfdg & Impt (ACA Insd)..................... 5.800 12/01/15 743,638
3,000 Spokane, WA Pub Fac Dist Hotel Motel & Sales
Use Tax (MBIA Insd).......................... 5.250 09/01/33 3,196,530
-------------
3,940,168
-------------
WEST VIRGINIA 2.5%
500 Harrison Cnty, WV Cnty Cmnty Solid Waste Disp
Rev West PA Pwr Co Ser C (AMT) (AMBAC Insd).. 6.750 08/01/24 511,565
3,750 West Virginia Univ Rev Impt Univ Proj Ser C
(FGIC Insd).................................. 5.000 10/01/34 3,938,138
-------------
4,449,703
-------------
WISCONSIN 1.5%
2,490 Wisconsin St Hlth & Ed Fac Auth Rev Bellin
Mem Hosp (AMBAC Insd)........................ 6.625 02/15/08 2,643,658
-------------
See Notes to Financial Statements 13
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED) continued
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
--------------------------------------------------------------------------------------------
PUERTO RICO 5.7%
$8,000 Puerto Rico Comwlth Hwy & Trans Auth Hwy Rev
Ser Y Rfdg (FSA Insd)........................ 6.250% 07/01/21 $ 10,155,440
-------------
TOTAL INVESTMENTS 162.5%
(Cost $269,792,710)....................................................... 288,669,818
OTHER ASSETS IN EXCESS OF LIABILITIES 2.3%................................. 4,014,070
PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (64.8%)................. (115,038,326)
-------------
NET ASSETS APPLICABLE TO COMMON SHARES 100.0%.............................. $ 177,645,562
=============
Percentages are calculated as a percentage of net assets applicable to common
shares.
* Zero coupon bond
(a) The Trust owns 100% of the bond issuance.
(b) All or a portion of these securities have been physically segregated in
connection with open futures contracts.
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corp.
AMT--Alternative Minimum Tax
Connie Lee--Connie Lee Insurance Co.
FGIC--Financial Guaranty Insurance Co.
FHA/VA--Federal Housing Administration/Department of Veterans Affairs
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Investors Assurance Corp.
Radian--Radian Asset Assurance
XLCA--XL Capital Assurance Inc.
14 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
April 30, 2005 (Unaudited)
ASSETS:
Total Investments (Cost $269,792,710)....................... $288,669,818
Receivables:
Interest.................................................. 4,331,297
Investments Sold.......................................... 1,702,440
Variation Margin on Futures............................... 133,000
Other....................................................... 1,773
------------
Total Assets............................................ 294,838,328
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 1,525,965
Custodian Bank............................................ 132,150
Investment Advisory Fee................................... 131,365
Income Distributions--Common Shares....................... 24,486
Other Affiliates.......................................... 11,870
Trustees' Deferred Compensation and Retirement Plans........ 259,673
Accrued Expenses............................................ 68,931
------------
Total Liabilities....................................... 2,154,440
Preferred Shares (including accrued distributions).......... 115,038,326
------------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $177,645,562
============
NET ASSET VALUE PER COMMON SHARE ($177,645,562 divided by
11,681,272 shares outstanding)............................ $ 15.21
============
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
shares authorized, 11,681,272 shares issued and
outstanding).............................................. $ 116,813
Paid in Surplus............................................. 158,834,539
Net Unrealized Appreciation................................. 18,567,417
Accumulated Undistributed Net Investment Income............. 700,288
Accumulated Net Realized Loss............................... (573,495)
------------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $177,645,562
============
PREFERRED SHARES ($.01 par value, authorized 100,000,000
shares, 4,600 issued with liquidation preference of
$25,000 per share)........................................ $115,000,000
============
NET ASSETS INCLUDING PREFERRED SHARES....................... $292,645,562
============
See Notes to Financial Statements 15
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended April 30, 2005 (Unaudited)
INVESTMENT INCOME:
Interest.................................................... $ 7,123,503
-----------
EXPENSES:
Investment Advisory Fee..................................... 795,775
Preferred Share Maintenance................................. 167,491
Trustees' Fees and Related Expenses......................... 25,201
Legal....................................................... 18,616
Custody..................................................... 10,563
Other....................................................... 92,018
-----------
Total Expenses.......................................... 1,109,664
-----------
NET INVESTMENT INCOME....................................... $ 6,013,839
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 284,720
Futures................................................... 639,790
-----------
Net Realized Gain........................................... 924,510
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 18,646,927
-----------
End of the Period:
Investments............................................. 18,877,108
Futures................................................. (309,691)
-----------
18,567,417
-----------
Net Unrealized Depreciation During the Period............... (79,510)
-----------
NET REALIZED AND UNREALIZED GAIN............................ $ 845,000
===========
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $(1,000,772)
===========
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
OPERATIONS................................................ $ 5,858,067
===========
16 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2005 OCTOBER 31, 2004
------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 6,013,839 $ 12,061,565
Net Realized Gain/Loss.................................. 924,510 (1,448,280)
Net Unrealized Appreciation/Depreciation During the
Period................................................ (79,510) 3,754,771
Distributions to Preferred Shareholders:
Net Investment Income................................. (1,000,772) (1,202,014)
------------ ------------
Change in Net Assets Applicable to Common Shares from
Operations............................................ 5,858,067 13,166,042
Distributions to Common Shareholders:
Net Investment Income................................. (5,414,015) (11,359,554)
------------ ------------
NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES
FROM INVESTMENT ACTIVITIES............................ 444,052 1,806,488
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of the Period................................. 177,201,510 175,395,022
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $700,288 and $1,101,236,
respectively)......................................... $177,645,562 $177,201,510
============ ============
See Notes to Financial Statements 17
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
SIX MONTHS
ENDED
APRIL 30, ------------------
2005 2004 2003
--------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................... $ 15.17 $ 15.02 $ 15.01
------- ------- -------
Net Investment Income.................................... .52 1.03 1.08
Net Realized and Unrealized Gain/Loss.................... .07 .19 .02
Common Share Equivalent of Distributions Paid to
Preferred Shareholders:
Net Investment Income................................ (.09) (.10) (.10)
------- ------- -------
Total from Investment Operations........................... .50 1.12 1.00
Distributions Paid to Common Shareholders:
Net Investment Income................................ (.46) (.97) (.99)
------- ------- -------
NET ASSET VALUE, END OF THE PERIOD......................... $ 15.21 $ 15.17 $ 15.02
======= ======= =======
Common Share Market Price at End of the Period............. $ 13.33 $ 14.07 $ 14.20
Total Return (b)........................................... -2.01%* 6.12% 10.27%
Net Assets Applicable to Common Shares at End of the Period
(In millions)............................................ $ 177.6 $ 177.2 $ 175.4
Ratio of Expenses to Average Net Assets Applicable to
Common Shares (c)........................................ 1.27% 1.42% 1.44%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (c).......................... 6.86% 6.87% 7.11%
Portfolio Turnover......................................... 7%* 21% 35%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net Assets Including
Preferred Shares (c)..................................... .77% .86% .87%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (d).......................... 5.72% 6.19% 6.46%
SENIOR SECURITIES:
Total Preferred Shares Outstanding......................... 4,600 4,600 4,600
Asset Coverage Per Preferred Share (e)..................... $63,627 $63,528 $63,132
Involuntary Liquidating Preference Per Preferred Share..... $25,000 $25,000 $25,000
Average Market Value Per Preferred Share................... $25,000 $25,000 $25,000
* Non-Annualized
(a)As required, effective November 1, 2001, the Trust has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the period ended October 31, 2002 was to increase net investment
income per share by $.01, decrease net realized and unrealized gains and
losses per share by $.01 and increase the ratio of net investment income to
average net asset applicable to common shares by .03% Per share, ratios and
supplemental data for the periods prior to October 31, 2002 have not been
restated to reflect this change in presentation.
(b)Total return assumes an investment at the common share market price at the
beginning of the period indicated, reinvestment of all distributions for the
period in accordance with the Trust's dividend reinvestment plan, and sale of
all shares at the closing common share market price at the end of the period
indicated.
(c)Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(d)Ratios reflect the effect of dividend payments to preferred shareholders.
(e)Calculated by subtracting the Trust's total liabilities (not including the
preferred shares) from the Trust's total assets and dividing this by the
number of preferred shares outstanding.
18
Year Ended October 31,
-----------------------------------------------------------------------------------------
2002 (a) 2001 2000 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------
$ 14.91 $ 13.77 $ 13.28 $ 15.08 $ 14.51 $ 13.88 $ 13.72 $ 12.20
------- ------- -------- -------- -------- -------- -------- --------
1.09 1.10 1.13 1.12 1.12 1.13 1.14 1.15
.06 1.11 .54 (1.82) .57 .60 .12 1.55
(.13) (.31) (.40) (.32) (.34) (.35) (.35) (.38)
------- ------- -------- -------- -------- -------- -------- --------
1.02 1.90 1.27 (1.02) 1.35 1.38 .91 2.32
(.92) (.76) (.78) (.78) (.78) (.75) (.75) (.80)
------- ------- -------- -------- -------- -------- -------- --------
$ 15.01 $ 14.91 $ 13.77 $ 13.28 $ 15.08 $ 14.51 $ 13.88 $ 13.72
======= ======= ======== ======== ======== ======== ======== ========
$ 13.80 $ 13.36 $11.8125 $11.5625 $14.0625 $12.6875 $ 11.625 $ 11.375
10.36% 20.07% 9.19% -12.84% 17.23% 16.02% 8.98% 16.07%
$ 175.3 $ 174.2 $ 160.8 $ 155.1 $ 176.1 $ 169.5 $ 162.1 $ 160.2
1.55% 1.76% 1.85% 1.79% 1.79% 1.83% 1.90% 1.94%
7.44% 7.66% 8.44% 7.68% 7.54% 8.04% 8.31% 8.85%
44% 45% 22% 25% 13% 23% 37% 58%
.93% 1.04% 1.06% 1.06% 1.08% 1.08% 1.10% 1.10%
6.54% 5.48% 5.48% 5.50% 5.20% 5.56% 5.77% 5.88%
4,600 4,600 4,600 4,600 2,300 2,300 2,300 2,300
$63,114 $62,863 $ 59,963 $ 58,717 $126,569 $123,694 $120,481 $119,666
$25,000 $25,000 $ 25,000 $ 25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
$25,000 $25,000 $ 25,000 $ 25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
See Notes to Financial Statements 19
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2005 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Municipal Opportunity Trust II (the "Trust") is registered as a
diversified, closed-end management investment company under the Investment
Company Act of 1940 (the "1940 Act"), as amended. The Trust's investment
objective is to provide a high level of current income exempt from federal
income tax, consistent with preservation of capital. The Trust intends to invest
substantially all of its assets in municipal securities rated investment grade
at the time of investment. The Trust commenced investment operations on June 25,
1993.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services or dealers are valued at
fair value using procedures established in good faith by the Board of Trustees.
Futures contracts are valued at the settlement price established each day on the
exchange on which they are traded. Short-term securities with remaining
maturities of 60 days or less are valued at amortized cost, which approximates
market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when-issued" or "delayed delivery"
basis with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
segregate assets with the custodian having an aggregate value at least equal to
the amount of the when-issued or delayed delivery purchase commitments until
payment is made. At April 30, 2005, the Trust had no when-issued and delayed
delivery purchase commitments.
C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond
premium is amortized and discount is accreted over the expected life of each
applicable security.
D. FEDERAL INCOME TAXES It is the Trust's policy to comply with the requirements
of Subchapter M of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Trust intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward for eight years following the
year of the loss and offset such losses against any future realized capital
gains. At October 31, 2004, the Trust had an
20
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2005 (UNAUDITED) continued
accumulated capital loss carryforward for tax purposes of $1,963,921, which will
expire according to the following schedule.
AMOUNT EXPIRATION
$197,774.................................................... October 31, 2005
$500,047.................................................... October 31, 2007
$374,118.................................................... October 31, 2008
$891,982.................................................... October 31, 2012
At April 30, 2005 the cost and related gross unrealized appreciation and
depreciation are as follows:
Cost of investments for tax purposes........................ $269,653,266
============
Gross tax unrealized appreciation........................... $ 19,184,429
Gross tax unrealized depreciation........................... (167,877)
------------
Net tax unrealized appreciation on investments.............. $ 19,016,552
============
E. DISTRIBUTION OF INCOME AND GAINS The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually on a pro rata basis to common and preferred
shareholders. Distributions from net realized gains for book purposes may
include short-term capital gains and a portion of futures gains, which are
included as ordinary income for tax purposes.
The tax character of distributions paid during the year ended October 31,
2004 was as follows:
Distributions paid from:
Ordinary income........................................... $132,494
Long-term capital gain.................................... -0-
--------
$132,494
========
As of October 31, 2004, the components of distributable earnings on a tax
basis were as follows:
Undistributed ordinary income............................... $101,509
Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of the deferral of losses relating to wash sale
transactions.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen Asset
Management (the "Adviser") provides investment advice and facilities to the
Trust for an annual fee payable monthly of .55% of the average daily net assets
of the Trust. Effective November 1, 2004, the investment advisory fee was
reduced from .60% to .55%.
For the six months ended April 30, 2005, the Trust recognized expenses of
approximately $8,300 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, of which a trustee of the Trust is a partner of such
firm and he and his law firm provide legal services as legal counsel to the
Trust.
21
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2005 (UNAUDITED) continued
Under separate Accounting Services and Legal Services agreements, the
Adviser provides accounting and legal services to the Trust. The Adviser
allocates the cost of such services to each trust. For the six months ended
April 30, 2005, the Trust recognized expenses of approximately $19,200
representing Van Kampen Investments Inc.'s or its affiliates' (collectively "Van
Kampen") cost of providing accounting and legal services to the Trust, which are
reported as part of "Other" and "Legal" expenses, respectively, in the Statement
of Operations.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
also officers of Van Kampen.
The Trust has implemented deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable upon retirement for a
ten-year period and are based upon each trustee's years of service to the Trust.
The maximum annual benefit per trustee under the plan is $2,500.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $22,569,042 and $21,497,734,
respectively.
4. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
The Trust may invest up to 15% of its net assets in "inverse floating rate
obligations." The inverse floating rate obligations in which the Trust may
invest are typically created through a division of a fixed-rate municipal
obligation into two separate instruments, a short-term obligation and a
long-term obligation. The interest rate on the short-term obligation is set at
periodic auctions. The interest rate on the long-term obligation which the Trust
may purchase is the rate the issuer would have paid on the fixed-income
obligation, (i) plus the difference between such fixed rate and the rate on the
short-term obligation, if the short-term rate is lower than the fixed rate; or
(ii) minus such difference if the interest rate on the short-term obligation is
higher than the fixed rate. These securities have varying degrees of liquidity
and the market value of such securities generally will fluctuate in response to
changes in market rates of interest to a greater extent than the value of an
equal principal amount of a fixed rate security having similar credit quality,
redemption provisions and maturity. These securities tend to underperform the
market for fixed rate bonds in a rising interest rate environment, but tend to
outperform the market for fixed rate bonds when interest rates decline or remain
relatively stable. Although volatile, inverse floating rate obligations
typically offer the potential for yields exceeding the yields available on fixed
rate bonds with comparable credit quality, coupon, call provisions and maturity.
These securities usually permit the investor to convert the floating rate
security counterpart to a fixed rate (normally adjusted downward), and this
optional conversion feature may provide a partial hedge against rising rates if
exercised at an opportune time.
In order to seek to manage the interest rate exposure of the Trust's
portfolio in a changing interest rate environment, the Trust may purchase or
sell financial futures contracts or engage in transactions involving interest
rate swaps, caps, floors or collars. The Trust
22
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2005 (UNAUDITED) continued
expects to enter into these transactions primarily as a hedge against
anticipated interest rate or fixed-income market changes, for duration
management or for risk management purposes, but may also enter into these
transactions to generate additional income. All of the Trust's portfolio
holdings, including derivative instruments, are marked to market each day with
the change in value reflected in the unrealized appreciation/depreciation. Upon
disposition, a realized gain or loss is recognized accordingly, except when
exercising a call option contract or taking delivery of a security underlying a
futures contract. In this instance, the recognition of gain or loss is postponed
until the disposal of the security underlying the futures contract.
During the period, the Trust invested in futures contracts, a type of
derivative. A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The Trust
generally invests in exchange traded futures on U.S. Treasury Bonds and Notes
and typically closes the contract prior to delivery date. These contracts are
generally used to manage the Trust's effective maturity and duration. Upon
entering into futures contracts, the Trust maintains an amount of cash or liquid
securities with a value equal to a percentage of the contract amount with either
a future commission merchant pursuant to rules and regulations promulgated under
the 1940 Act, as amended, or with its custodian in an account in the broker's
name. This amount is known as initial margin. During the period the futures
contract is open, payments are received from or made to the broker based upon
changes in the value of the contract (the variation margin). The risk of loss
associated with a futures contract is in excess of the variation margin
reflected on the Statement of Assets and Liabilities.
Transactions in futures contracts for the six months ended April 30, 2005,
were as follows:
CONTRACTS
Outstanding at October 31, 2004............................. 647
Futures Opened.............................................. 1,184
Futures Closed.............................................. (1,299)
------
Outstanding at April 30, 2005............................... 532
======
The futures contracts outstanding as of April 30, 2005 and the descriptions
and unrealized appreciation/depreciation are as follows:
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
U.S. Treasury Notes 5-Year Futures June 2005 (Current
Notional Value of $108,453 per contract).................. 532 $(309,691)
=== =========
5. PREFERRED SHARES
As of April 30, 2005, the Trust has outstanding 4,600 Auction Preferred Shares
("APS") in three series. Series A and B each contain 1,600 shares while Series C
contains 1,400 shares. Dividends are cumulative and the dividend rates are
generally reset every 7 days through an auction process. The average rate in
effect on April 30, 2005 was 2.493%. During the six months ended April 30, 2005,
the rates ranged from 1.000% to 2.650%.
23
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2005 (UNAUDITED) continued
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees are included as a component of "Preferred Share
Maintenance" expense in the Statement of Operations.
The APS are redeemable at the option of the Trust in whole or in part at the
liquidation value of $25,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests and the APS are subject to
mandatory redemption if the tests are not met.
6. INDEMNIFICATIONS
The Trust enters into contracts that contain a variety of indemnifications. The
Trust's maximum exposure under these arrangements is unknown. However, the Trust
has not had prior claims or losses pursuant to these contracts and expects the
risk of loss to be remote.
24
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
DIVIDEND REINVESTMENT PLAN
The Trust offers a dividend reinvestment plan (the "Plan") pursuant to which
Common Shareholders may elect to have dividends and capital gains distributions
reinvested in Common Shares of the Trust. The Trust declares dividends out of
net investment income, and will distribute annually net realized capital gains,
if any. Common Shareholders may join or withdraw from the Plan at any time.
If you decide to participate in the Plan, State Street Bank and Trust
Company, as your Plan Agent, will automatically invest your dividends and
capital gains distributions in Common Shares of the Trust for your account.
HOW TO PARTICIPATE
If you wish to participate and your shares are held in your own name, call
1-800-341-2929 for more information and a Plan brochure. If your shares are held
in the name of a brokerage firm, bank, or other nominee, you should contact your
nominee to see if it would participate in the Plan on your behalf. If you wish
to participate in the Plan, but your brokerage firm, bank or nominee is unable
to participate on your behalf, you should request that your shares be
re-registered in your own name which will enable your participation in the Plan.
HOW THE PLAN WORKS
Participants in the Plan will receive the equivalent in Common Shares valued
on the valuation date, generally at the lower of market price or net asset
value, except as specified below. The valuation date will be the dividend or
distribution payment date or, if that date is not a trading day on the national
securities exchange or market system on which the Common Shares are listed for
trading, the next preceding trading day. If the market price per Common Share on
the valuation date equals or exceeds net asset value per Common Share on that
date, the Trust will issue new Common Shares to participants valued at the
higher of net asset value or 95% of the market price on the valuation date. In
the foregoing situation, the Trust will not issue Common Shares under the Plan
below net asset value. If net asset value per Common Share on the valuation date
exceeds the market price per Common Share on that date, or if the Board of
Trustees should declare a dividend or capital gains distribution payable to the
Common Shareholders only in cash, participants in the Plan will be deemed to
have elected to receive Common Shares from the Trust valued at the market price
on that date. Accordingly, in this circumstance, the Plan Agent will, as agent
for the participants, buy the Trust's Common Shares in the open market for the
participants' accounts on or shortly after the payment date. If, before the Plan
Agent has completed its purchases, the market price exceeds the net asset value
per share of the Common Shares, the average per share purchase price paid by the
Plan Agent may exceed the net asset value
25
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
DIVIDEND REINVESTMENT PLAN continued
of the Trust's Common Shares, resulting in the acquisition of fewer Common
Shares than if the dividend or distribution had been paid in Common Shares
issued by the Trust. All reinvestments are in full and fractional Common Shares
and are carried to three decimal places.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan as
applied to any dividend or distribution paid subsequent to written notice of the
changes sent to all Common Shareholders of the Trust at least 90 days before the
record date for the dividend or distribution. The Plan also may be amended or
terminated by the Plan Agent by at least 90 days written notice to all Common
Shareholders of the Trust.
COSTS OF THE PLAN
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by the Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. No other charges will be made to participants for reinvesting
dividends or capital gains distributions, except for certain brokerage
commissions, as described above.
TAX IMPLICATIONS
You will receive tax information annually for your personal records and to
help you prepare your federal income tax return. The automatic reinvestment of
dividends and capital gains distributions does not relieve you of any income tax
which may be payable on dividends or distributions.
RIGHT TO WITHDRAW
Plan participants may withdraw at any time by calling 1-800-341-2929 or by
writing State Street Bank and Trust Company, P.O. Box 8200, Boston, MA
02266-8200. If you withdraw, you will receive, without charge, a share
certificate issued in your name for all full Common Shares credited to your
account under the Plan and a cash payment will be made for any fractional Common
Share credited to your account under the Plan. You may again elect to
participate in the Plan at any time by calling 1-800-341-2929 or writing to the
Trust at:
Van Kampen Funds Inc.
Attn: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
26
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
BOARD OF TRUSTEES, OFFICERS AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN* - Chairman
SUZANNE H. WOOLSEY
OFFICERS
MITCHELL M. MERIN
President and Chief Executive Officer
RONALD E. ROBISON
Executive Vice President and
Principal Executive Officer
JOSEPH J. MCALINDEN
Executive Vice President and
Chief Investment Officer
AMY R. DOBERMAN
Vice President
STEPHANIE V. CHANG
Vice President and Secretary
JOHN L. SULLIVAN
Chief Compliance Officer
JAMES W. GARRET
Chief Financial Officer and Treasurer
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02110
TRANSFER AGENT
EQUISERVE TRUST COMPANY, N.A.
P.O. Box 43011
Providence, Rhode Island 02940-3011
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
27
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY
We are required by federal law to provide you with a copy of our Privacy
Policy annually.
The following Policy applies to current and former individual clients of Van
Kampen Investments Inc., Van Kampen Asset Management, Van Kampen Advisors Inc.,
Van Kampen Funds Inc., Van Kampen Investor Services Inc. and Van Kampen Exchange
Corp., as well as current and former individual investors in Van Kampen mutual
funds, unit investment trusts, and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other
non-individual clients or account holders, nor is this Policy applicable to
individuals who are either beneficiaries of a trust for which we serve as
trustee or participants in an employee benefit plan administered or advised by
us. This Policy is, however, applicable to individuals who select us to be a
custodian of securities or assets in individual retirement accounts, 401(k)
accounts, 529 Educational Savings Accounts, accounts subject to the Uniform
Gifts to Minors Act, or similar accounts.
Please note that we may amend this Policy at any time, and will inform you
of any changes to this Policy as required by law.
WE RESPECT YOUR PRIVACY
We appreciate that you have provided us with your personal financial
information. We strive to maintain the privacy of such information while we help
you achieve your financial objectives. This Policy describes what non-public
personal information we collect about you, why we collect it, and when we may
share it with others.
We hope this Policy will help you understand how we collect and share
non-public personal information that we gather about you. Throughout this
Policy, we refer to the non-public information that personally identifies you or
your accounts as "personal information."
1. WHAT PERSONAL INFORMATION DO WE COLLECT ABOUT YOU?
To serve you better and manage our business, it is important that we collect and
maintain accurate information about you. We may obtain this information from
applications and other forms you submit to us, from your dealings with us, from
consumer reporting agencies, from our Web sites and from third parties and other
sources.
For example:
-- We may collect information such as your name, address, e-mail address,
telephone/fax numbers, assets, income and investment objectives through
applications and other forms you submit to us.
-- We may obtain information about account balances, your use of
account(s) and the types of products and services you prefer to receive
from us through your dealings and transactions with us and other
sources.
-- We may obtain information about your creditworthiness and credit
history from consumer reporting agencies.
-- We may collect background information from and through third-party
vendors to verify representations you have made and to comply with
various regulatory requirements.
-- If you interact with us through our public and private Web sites, we
may collect information that you provide directly through online
communications (such as an e-mail address). We may also collect
information about your Internet service provider, your domain name,
your computer's operating system and Web browser,
(continued on back)
VAN KAMPEN
AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY continued
your use of our Web sites and your product and service preferences,
through the use of "cookies." "Cookies" recognize your computer each
time you return to one of our sites, and help to improve our sites'
content and personalize your experience on our sites by, for example,
suggesting offerings that may interest you. Please consult the Terms of
Use of these sites for more details on our use of cookies.
2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?
To provide you with the products and services you request, to serve you better
and to manage our business, we may disclose personal information we collect
about you to our affiliated companies and to non-affiliated third parties as
required or permitted by law.
A. INFORMATION WE DISCLOSE TO OUR AFFILIATED COMPANIES. We do not disclose
personal information that we collect about you to our affiliated companies
except to enable them to provide services on our behalf or as otherwise required
or permitted by law.
B. INFORMATION WE DISCLOSE TO THIRD PARTIES. We do not disclose personal
information that we collect about you to non-affiliated third parties except to
enable them to provide services on our behalf, to perform joint marketing
agreements with other financial institutions, or as otherwise required or
permitted by law. For example, some instances where we may disclose information
about you to non-affiliated third parties include: for servicing and processing
transactions, to offer our own products and services, to protect against fraud,
for institutional risk control, to respond to judicial process or to perform
services on our behalf. When we share personal information with these companies,
they are required to limit their use of personal information to the particular
purpose for which it was shared and they are not allowed to share personal
information with others except to fulfill that limited purpose.
3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE
COLLECT ABOUT YOU?
We maintain physical, electronic and procedural security measures to help
safeguard the personal information we collect about you. We have internal
policies governing the proper handling of client information. Third parties that
provide support or marketing services on our behalf may also receive personal
information, and we require them to adhere to confidentiality standards with
respect to such information.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
Copyright (C)2005 Van Kampen Funds Inc. All rights reserved.
Member NASD/SIPC.
VOT SAR 6/05 RN05-01324P-Y04/05
(VAN KAMPEN INVESTMENTS LOGO)
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. Schedule of Investments.
Please refer to Item #1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures
(a) The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Trust in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case
of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a) Code of Ethics -- Not applicable for semi-annual reports.
(b)(1) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(b)(2) A certification for the Principal Financial Officer of the registrant is
attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen Municipal Opportunity Trust II
By: /s/ Ronald E. Robison
---------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: June 16, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
---------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: June 16, 2005
By: /s/ James W. Garrett
--------------------
Name: James W. Garrett
Title: Principal Financial Officer
Date: June 16, 2005