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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
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
___________________________________________________________________________
(Address of principal executive offices) (Zip code)
Ronald Robinson
1221 Avenue of the Americas, New York, New York 10020
___________________________________________________________________________
(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: 4/30/04
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, 2004.
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).
<Table>
<Caption>
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
</Table>
Performance Summary as of 4/30/04
<Table>
<Caption>
MUNICIPAL OPPORTUNITY TRUST II
SYMBOL: VOT
- ------------------------------------------------------
AVERAGE ANNUAL BASED ON BASED ON
TOTAL RETURNS NAV MARKET PRICE
Since Inception (06/25/93) 6.50% 5.15%
10-year 7.76 7.37
5-year 6.51 5.83
1-year 2.88 -2.79
6-month 1.18 -5.36
- ------------------------------------------------------
</Table>
Past performance is no guarantee of future results. Investment return, 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.
As a result of recent market activity, current performance may vary from the
figures shown. For more up-to-date information, please visit vankampen.com or
speak with your financial advisor. 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 is unmanaged and does not include any sales
charges or fees. Such costs would lower performance. It is not possible to
invest directly in an index.
1
Trust Report
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2004
Van Kampen Municipal Opportunity Trust II is managed by the adviser's Municipal
Fixed Income team.(1) Current members include Timothy D. Haney, Vice President;
Robert Wimmel, Vice President; and John Reynoldson, Executive Director.
MARKET CONDITIONS
The state of the U.S. economy remained mixed over the six-month period under
review. On the positive side, economic growth continued to be robust, with Gross
Domestic Product growth topping 4 percent in both the last quarter of 2003,
preliminarily, and the first quarter of this year. While this strength in output
has historically triggered fears of rising interest rates, yields remained
stubbornly low across the municipal curve. These low yields were partly the
result of the continued low levels of observed inflation in the U.S. economy.
Unfortunately, they also reflected continuing weakness in the job market, which
remained soft throughout most of the period. The soft job numbers, coupled with
persistently low inflation, led the Federal Open Market Committee (the Fed) to
maintain its accommodative stance throughout the period.
The surprisingly rapid job growth data released in April, coupled with rapidly
rising commodity and high oil prices, led many investors to fear that the Fed
would be forced to raise interest rates earlier than the market initially
expected. As a result, bond yields across all major sectors spiked in April.
Supply of new municipal bonds in calendar 2003 hit record levels as
municipalities moved to take advantage of historically low interest rates. Many
cities and states sought to reduce expenditures by refinancing existing debt and
replacing it with lower-yielding bonds. In other cases, municipalities attempted
to meet current and future funding needs by issuing new debt. This activity
slowed in the first months of 2004.
The low interest rates that prevailed over much of the period also had an impact
on the demand for municipal bonds. Retail and institutional investor activity
slowed as holders of municipal bonds saw little reason to sell bonds purchased
at higher yield levels and reinvest at lower yields. However, the period was
marked by rising activity among non-traditional investors, such as hedge funds
and insurance companies seeking to take advantage of the attractiveness of
municipal bonds relative to some taxable securities. Additionally, investors'
search for yield led to significant outperformance by lower-rated bonds with
greater credit risk. Sectors such as health care, with a preponderance of
lower-rated issues, performed particularly well.
(1)Team members may change without notice at any time.
2
PERFORMANCE ANALYSIS
Closed-end fund returns 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 significantly. On an NAV basis, the trust performed
relatively in line with its benchmark, the Lehman Brothers Municipal Bond Index,
but underperformed on a market-price basis. (See table below.)
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 typically reinvested in longer-term securities, taking
advantage of the difference between short- and longer-term rates. As yields rose
during the period, the prices of bonds declined. The trust's use of leverage
magnified this negative price movement. However, the portfolio saw strong
relative performance from its higher-yielding holdings during the period, which
counterbalanced the effects of leverage and helped to produce a total return at
NAV similar to that of the benchmark, which is not leveraged.
Our analysis of the macroeconomic environment, coupled with the levels of
interest rates near multi-decade lows, led us to believe that interest rates
were more likely to rise than to fall further. As a result, we kept the trust's
duration (a measure of interest-rate sensitivity) below that of its benchmark in
order to limit the potentially damaging impact of any increase in interest
rates. This approach hampered the trust's returns as interest rates fell for
much of the period. That said, the strategy helped cushion returns in the final
weeks of the period when interest rates soared.
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2004
<Table>
<Caption>
- --------------------------------------------------------------
BASED ON LEHMAN BROTHERS
BASED ON NAV MARKET PRICE MUNICIPAL BOND INDEX
1.18% -5.36% 1.19%
- --------------------------------------------------------------
</Table>
Past performance is no guarantee of future results. 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.
3
We also adjusted the portfolio's term structure in anticipation of rising
interest rates. Our research showed that the intermediate portion of the curve
offered the most promising total-return potential. As a result, we focused our
purchases on the 15- to 20-year segment of the curve. These securities had the
added appeal of premium coupons and 10-year call dates, which offered attractive
income coupled with limited interest-rate exposure. Our term-structure strategy
also included an attempt to capitalize on a temporary pricing anomaly which
boosted the short-term returns of securities in the ten-year range as they
"rolled down" the yield curve at the end of the calendar year.
While the trust has a high-quality bias overall, its performance benefited from
its holdings of high-yield issues. During the period, municipal-bond investors
responded to the protracted low-rate environment by favoring high-yield bonds,
which caused the yield spreads between higher- and lower-rated bonds to narrow.
(Yield spreads reflect the premium demanded by investors to buy lower-rated
bonds.) As a result, lower-quality bonds outperformed. The portfolio had
approximately 83 percent exposure to bonds rated AA/Aa or higher at the end of
the period.
Our trading activity during the period was below traditional norms because we
wanted to avoid having to reinvest into securities with low yields. That said,
we were able to make selective relative-value trades among securities and
sectors as they moved into and out of fair value. Some of these acquisitions
were funded by the proceeds of bonds that were called away by their issuers
during the period. In other cases, we sold bonds that met their performance
objectives. We reinvested this cash into securities that we believed had more
promising total-return characteristics, including high-grade premium bonds, a
BBB/Baa-rated state-backed California issue, and an A/A-rated health-care
security.
<Table>
TOP 5 SECTORS AS OF 4/30/04 RATINGS ALLOCATION AS OF 4/30/04
General Purpose 19.4% AAA/Aaa 71.7%
Health Care 16.0 AA/Aa 11.4
Public Education 14.0 A/A 10.2
Transportation 10.8 BBB/Baa 5.2
Industrial Revenue 7.0 BB/Ba 0.3
B/B 0.5
Non-Rated 0.7
</Table>
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. All percentages are as a percentage of
long-term investments. Securities are classified by sectors that represent broad
groupings of related industries. Ratings allocations based upon ratings as
issued by Standard and Poor's and Moody's. 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.
4
The trust's portfolio remained well diversified during the period, with its
holdings spread across most major municipal-bond sectors. We believe this
long-standing strategy helps to minimize the risk of over-concentration in any
single sector, while also giving the portfolio exposure to as many potential
sources of return as possible. The three largest sector exposures at the end of
the period were general purpose, health care and public education.
As mentioned above, the portfolio's below-market duration served it well in the
final weeks of the period, when interest rates rose sharply. While it is
impossible to predict how long this trend will hold, we believe that the trust
is well positioned to weather further increases in rates. We look forward to
becoming more active in seeking attractive structures and relative-value trading
opportunities now that rates have moved into a more normal range.
PROXY VOTING POLICIES AND PROCEDURES
A description of the trust's policies and procedures with respect to the
voting of proxies relating to the trust's portfolio securities is
available without charge, upon request, by calling 1-800-847-2424. This
information is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
5
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
MUNICIPAL BONDS 161.4%
ALABAMA 2.5%
$1,000 Birmingham Baptist Med Ctr AL Baptist Hlth Sys
Ser A........................................... 5.875% 11/15/24 $ 1,047,810
1,035 Lee Cnty, AL Sch Wts Ltd Oblig (MBIA Insd)...... 5.000 02/01/16 1,089,244
1,090 Lee Cnty, AL Sch Wts Ltd Oblig (MBIA Insd)...... 5.000 02/01/17 1,139,835
1,000 Valley, AL Spl Care Fac Fin Auth Rev Lanier Mem
Hosp Ser A...................................... 5.600 11/01/16 962,360
-------------
4,239,249
-------------
ARIZONA 6.2%
5,000 Arizona Sch Fac Brd Ctfs Ser B (FGIC Insd)...... 5.250 09/01/18 5,332,100
2,235 Arizona Tourism & Sports Auth Tax Rev
Multipurpose Stad Fac Ser A (MBIA Insd)......... 5.375 07/01/21 2,386,511
2,685 South Campus Group LLC AZ Std Hsg Rev AZ St Univ
South Campus Proj (MBIA Insd)................... 5.625 09/01/35 2,860,733
-------------
10,579,344
-------------
CALIFORNIA 20.7%
7,195 Anaheim, CA Pub Fin Auth Lease Rev Cap Apprec
Sub Pub Impt Proj Ser C (FSA Insd).............. * 09/01/21 2,902,823
1,300 Anaheim, CA Pub Fin Auth Lease Rev Pub Impt Proj
Ser C (FSA Insd)................................ 6.000 09/01/16 1,508,286
2,000 California St Dept Wtr Res Pwr Ser A............ 6.000 05/01/15 2,212,340
2,345 California St Dept Wtr Res Pwr Supply Rev Ser A
(XLCA Insd)..................................... 5.375 05/01/17 2,523,384
2,500 California St Pub Wks Brd Dept Corrections Ser
C............................................... 5.000 06/01/24 2,388,525
4,600 California St Pub Wks Brd Lease Rev Var Univ CA
Proj Ser A Rfdg (a)............................. 5.500 06/01/10 5,083,506
5,905 California St Pub Wks Brd Lease Rev Var Univ CA
Proj Ser A Rfdg................................. 5.500 06/01/14 6,456,468
5,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Cap
Apprec Rfdg (MBIA Insd)......................... * 01/15/18 2,395,950
2,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev Sr
Lien Ser A (Prerefunded @ 01/01/07)............. 6.500 01/01/32 2,225,840
5,000 Los Angeles, CA Uni Sch Dist Ser A (FSA Insd)... 5.250 07/01/20 5,288,500
2,465 Los Angeles, CA Uni Sch Dist Ser B (FGIC
Insd)........................................... 5.000 07/01/23 2,495,492
-------------
35,481,114
-------------
COLORADO 10.2%
1,000 Arapahoe Cnty, CO Cap Impt Tr Fd Hwy Rev E-470
Proj (Prerefunded @ 08/31/05)................... 7.000 08/31/26 1,102,170
7,500 Arapahoe Cnty, CO Cap Impt Tr Fd Hwy Rev E-470
Proj Ser C (Prerefunded @ 08/31/05)............. * 08/31/26 1,532,925
1,945 Colorado Ed & Cultural Impt Charter Sch Pinnacle
Rfdg (XLCA Insd)................................ 5.250 06/01/23 2,000,821
1,000 Colorado Hlth Fac Auth Rev Catholic Hlth
Initiatives Ser A............................... 5.500 03/01/32 1,025,820
</Table>
6 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
COLORADO (CONTINUED)
$1,250 Colorado Hlth Fac Auth Rev Hosp Portercare
Adventist Hlth.................................. 6.500% 11/15/31 $ 1,356,000
1,500 Denver, CO City & Cnty Arpt Rev Ser D........... 7.750 11/15/13 1,787,670
3,515 E-470 Pub Hwy Auth CO Rev Cap Apprec Sr Ser B
(MBIA Insd)..................................... * 09/01/13 2,314,311
6,160 E-470 Pub Hwy Auth CO Rev Sr Ser A (MBIA Insd).. 5.000 09/01/21 6,301,926
-------------
17,421,643
-------------
FLORIDA 3.0%
5,000 Osceola Cnty, FL Trans Rev Osceola Pkwy Proj &
Rfdg (MBIA Insd)................................ 5.000 04/01/22 5,135,600
-------------
ILLINOIS 15.7%
3,750 Bolingbrook, IL Cap Apprec Ser B (MBIA Insd).... * 01/01/32 794,025
3,365 Chicago, IL Cap Apprec (Prerefunded @ 07/01/05)
(AMBAC Insd).................................... * 01/01/17 1,591,611
540 Chicago, IL Single Family Mtg Rev Ser A (AMT)
(GNMA Collateralized)........................... 7.000 09/01/27 542,689
85 Chicago, IL Single Family Mtg Rev Ser B (AMT)
(GNMA Collateralized)........................... 7.625 09/01/27 86,725
2,540 Cook Cnty, IL Sch Dist No 122 Oak Lawn Cap
Apprec (FGIC Insd).............................. * 12/01/15 1,464,437
4,500 Cook Cnty, IL Ser A (FGIC Insd)................. 5.500 11/15/31 4,674,780
1,000 Illinois Dev Fin Auth Rev Cmnty Rehab Providers
Fac Ser A....................................... 7.375 07/01/25 1,069,450
4,305 Illinois Hlth Fac Auth Rev OSF Hlthcare Sys
Rfdg............................................ 6.000 11/15/10 4,416,026
8,000 Illinois St First Ser (FSA Insd)................ 5.250 12/01/19 8,448,160
3,400 Illinois St First Ser (FSA Insd)................ 5.250 04/01/27 3,472,930
420 Peoria, Moline & Freeport, IL Coll Mtg Ser A
(AMT) (GNMA Collateralized)..................... 7.600 04/01/27 430,748
-------------
26,991,581
-------------
INDIANA 9.5%
2,805 Dekalb Eastn High Sch Bldg Corp Ind First Mtg
(FSA Insd)...................................... 6.000 01/15/18 3,174,166
4,000 East Chicago, IN Elementary Sch Bldg Corp First
Mtg Ser A....................................... 6.250 07/05/08 4,473,960
3,000 Indiana Hlth Fac Fin Auth Hosp Rev Columbus Regl
Hosp Rfdg (FSA Insd)............................ 7.000 08/15/15 3,632,760
2,000 Petersburg, IN Pollutn Ctl Rev IN Pwr & Lt
(AMT)........................................... 5.950 12/01/29 2,010,040
2,850 Southwest Parke Cmnty Sch Bldg First Mtg (FGIC
Insd) (b)....................................... 5.250 07/15/21 2,991,075
-------------
16,282,001
-------------
</Table>
See Notes to Financial Statements 7
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
KENTUCKY 1.9%
$3,000 Kentucky St Ppty & Bldg Commn Proj No 79
(Prerefunded @ 10/01/13) (MBIA Insd)............ 5.125% 10/01/19 $ 3,298,470
-------------
LOUISIANA 8.1%
2,500 Louisiana Loc Govt Envir Fac Pkg Fac Corp Garage
Proj Ser A (AMBAC Insd)......................... 5.375 10/01/31 2,581,650
6,000 New Orleans, LA Rfdg (MBIA Insd)................ 5.125 09/01/21 6,210,240
2,000 New Orleans, LA Rfdg (FGIC Insd)................ 5.500 12/01/21 2,216,640
2,800 Saint Charles Parish, LA Solid Waste Disp Rev LA
Pwr & Lt Co Proj (AMT) (FSA Insd) (a)........... 7.050 04/01/22 2,811,480
-------------
13,820,010
-------------
MASSACHUSETTS 6.8%
2,000 Massachusetts Muni Whsl Elec Co Proj No 6-A
(MBIA Insd)..................................... 5.250 07/01/16 2,130,960
5,000 Massachusetts St Cons Ln Ser E (Prerefunded @
01/01/13) (FSA Insd)............................ 5.250 01/01/20 5,471,050
1,000 Massachusetts St Hlth & Ed Fac Auth Rev Saint
Mem Med Ctr Ser A............................... 6.000 10/01/23 930,140
3,065 Massachusetts St Hsg Fin Agy Hsg Rev Insd Rental
Ser A Rfdg (AMT)................................ 6.600 07/01/14 3,130,989
-------------
11,663,139
-------------
MICHIGAN 3.8%
3,000 Detroit, MI City Sch Dist Sch Bldg & Site Impt
Ser A (FGIC Insd)............................... 5.375 05/01/24 3,139,410
1,000 Hillsdale, MI Hosp Fin Auth Hosp Rev Hillsdale
Cmnty Hlth Ctr.................................. 5.250 05/15/26 877,820
1,495 Michigan St Hsg Dev Auth Multi-Family Rev Ltd
Oblig Ser A Rfdg (GNMA Collateralized).......... 6.600 04/01/30 1,540,209
1,000 Michigan St Strategic Fd Ltd Oblig Rev Detroit
Edison Poll Ctl Ser B Rfdg (AMT)................ 5.650 09/01/29 1,010,850
-------------
6,568,289
-------------
MINNESOTA 1.1%
2,000 Duluth, MN Econ Dev Auth Hlthcare Fac Rev
Benedictine Hlth Sys Saint Marys................ 5.250 02/15/33 1,960,540
-------------
MISSISSIPPI 4.9%
2,000 Mississippi Business Fin Corp MS Pollutn Ctl Rev
Sys Energy Res Inc Proj Rfdg.................... 5.900 05/01/22 2,010,920
2,000 Mississippi Dev Bk Spl Oblig Cap Proj & Equip
Acquisition Ser A2 (AMBAC Insd)................. 5.000 07/01/24 2,021,460
1,550 Mississippi Dev Bk Spl Oblig Madison Cnty Hosp
Proj (Prerefunded @ 07/01/09)................... 6.400 07/01/29 1,819,359
2,595 Mississippi Dev Bk Spl Oblig MS Ltd Oblig Hosp
Impts (MBIA Insd)............................... 5.250 07/01/32 2,633,484
-------------
8,485,223
-------------
</Table>
8 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
MISSOURI 7.1%
$2,000 Cape Girardeau Cnty, MO Indl Dev Auth Hlthcare
Fac Rev Southeast MO Hosp Assoc................. 5.625% 06/01/27 $ 2,021,880
1,500 Saint Louis Cnty, MO Mtg Rev Ctf Rcpt Ser H
(AMT) (Escrowed to Maturity).................... 5.400 07/01/18 1,626,270
5,855 St Louis, MO Arpt Rev Arpt Dev Pgm Ser A (MBIA
Insd)........................................... 5.250 07/01/31 5,943,645
2,380 St Louis, MO Arpt Rev Cap Impt Pgm Ser A (MBIA
Insd)........................................... 5.375 07/01/19 2,533,439
-------------
12,125,234
-------------
NEBRASKA 2.5%
4,260 University NE Univ Rev Lincoln Student Fees &
Fac Ser B....................................... 5.000 07/01/23 4,306,690
-------------
NEVADA 2.1%
3,500 Clark Cnty, NV Arpt Rev Sub Lien Ser B (FGIC
Insd)........................................... 5.250 07/01/34 3,543,505
-------------
NEW JERSEY 4.5%
1,000 New Jersey Hlthcare Fac Fin Auth Rev Gen Hosp
Ctr at Passaic (Escrowed to Maturity) (FSA
Insd)........................................... 6.000 07/01/06 1,067,530
4,000 Salem Cnty, NJ Indl Pollutn Ctl Fin Auth Rev
Pollutn Ctl Pub Svc Elec & Gas Ser A (AMT)...... 5.450 02/01/32 4,036,600
2,500 Secaucus, NJ Muni Util Auth Swr Rev Ser A Rfdg.. 6.000 12/01/08 2,613,300
-------------
7,717,430
-------------
NEW YORK 10.3%
3,250 New York City Hlth & Hosp Corp Rev Hlth Sys Ser
A (AMBAC Insd).................................. 5.000 02/15/11 3,515,720
2,500 New York City Ser A............................. 7.000 08/01/04 2,535,450
1,870 New York City Ser A1............................ 6.375 08/01/10 2,002,433
3,130 New York City Ser A1 (Prerefunded @ 08/01/05)... 6.375 08/01/10 3,351,667
1,000 New York St Dorm Auth Rev City Univ Third Gen
Res Ser 2 (Prerefunded @ 07/01/04) (MBIA
Insd)........................................... 6.250 07/01/19 1,008,580
1,520 New York St Dorm Auth Rev Insd John T Mather Mem
Hosp (Connie Lee Insd).......................... 6.500 07/01/09 1,758,336
500 New York St Energy Res & Dev Auth St Service
Contract Rev Ser B.............................. 5.500 04/01/05 518,120
3,000 New York St Urban Dev Corp Rev Personal Income
Tax Ser C-1..................................... 5.000 03/15/33 2,965,920
-------------
17,656,226
-------------
OHIO 2.5%
1,000 Cuyahoga Cnty, OH Hosp Fac Rev Canton Inc Proj.. 7.500 01/01/30 1,101,400
1,000 Franklin Cnty, OH Hosp Rev Holy Cross Hlth Sys
Ser B Rfdg (MBIA Insd).......................... 5.250 06/01/08 1,022,910
</Table>
See Notes to Financial Statements 9
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
OHIO (CONTINUED)
$1,040 Lorain Cnty, OH Hosp Rev EMH Regl Med Ctr Rfdg
(AMBAC Insd).................................... 7.750% 11/01/13 $ 1,147,890
950 Strongsville, OH (Prerefunded @ 12/01/06)....... 6.700 12/01/11 1,080,406
-------------
4,352,606
-------------
OKLAHOMA 2.6%
1,000 Tulsa Cnty, OK Pub Fac Auth Cap Impt Rev (AMBAC
Insd)........................................... 6.250 11/01/22 1,150,800
2,960 Tulsa, OK Indl Auth Hosp Rev Hillcrest Med Ctr
Proj Rfdg (Escrowed to Maturity) (Connie Lee
Insd)........................................... 6.250 06/01/07 3,296,108
-------------
4,446,908
-------------
OREGON 2.8%
980 Oregon St Vets Welfare Ser 76A.................. 6.050 10/01/28 1,012,565
3,580 Yamhill Cnty, OR Sch Dist No 029J Newburg (MBIA
Insd)........................................... 5.250 06/15/21 3,767,055
-------------
4,779,620
-------------
PENNSYLVANIA 4.6%
4,680 Erie, PA Sch Dist Cap Apprec Rfdg (FSA Insd).... * 09/01/20 2,052,414
2,500 Harrisburg, PA Res Gtd Sub Ser D-2 (FSA Insd)... 5.000 12/01/33 2,655,600
1,500 Pennsylvania Econ Dev Fin Auth Res Recovery Rev
Colver Proj Ser D (AMT)......................... 7.050 12/01/10 1,553,655
295 Pennsylvania Hsg Fin Agy Single Family Ser 56A
(AMT) (FHA/VA Gtd).............................. 6.150 10/01/27 303,611
1,315 State Pub Sch Bldg Auth PA Sch Rev Burgettstown
Sch Dist Ser D (Prerefunded @ 02/01/05) (MBIA
Insd)........................................... 6.450 02/01/10 1,365,641
-------------
7,930,921
-------------
RHODE ISLAND 2.9%
4,975 Rhode Island St Econ Dev Corp Arpt Rev Ser A
Rfdg (AMT) (FSA Insd)........................... 5.000 07/01/17 5,052,013
-------------
SOUTH CAROLINA 4.1%
3,115 Greenville, SC Impt & Rfdg (MBIA Insd).......... 5.250 04/01/21 3,274,457
3,750 South Carolina Jobs Econ Dev Auth Indl Rev Elec
& Gas Co Proj Ser B (AMT) (AMBAC Insd).......... 5.450 11/01/32 3,847,162
-------------
7,121,619
-------------
SOUTH DAKOTA 0.9%
1,375 Deadwood, SD Ctf Partn (ACA Insd)............... 6.375 11/01/20 1,464,636
-------------
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 1,603,303
-------------
TEXAS 7.5%
2,335 Beaumont, TX Wtrwks & Swr Sys (FGIC Insd)....... 6.250 09/01/14 2,684,503
2,000 Brazos Cnty, TX Hlth Fac Dev Oblig Grp.......... 5.375 01/01/32 1,985,600
</Table>
10 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
$1,500 Brazos River Auth TX Pollutn Ctl Rev Adj TXU
Elec Co Proj Ser C Rfdg (AMT)................... 5.750% 05/01/36 $ 1,585,995
2,000 Harris Cnty, TX Hlth Fac Dev Corp Hosp Rev
Hermann Hosp Proj (Prerefunded @ 10/01/04) (MBIA
Insd)........................................... 6.375 10/01/24 2,062,040
1,000 Mesquite, TX Hlth Fac Dev Corp Retirement Fac
Christian Care Ctr Ser A........................ 7.625 02/15/28 1,044,790
1,500 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones
Mem Hosp Proj................................... 7.250 01/01/31 1,415,415
2,000 Texas St Wtr Fin Assistance..................... 5.500 08/01/35 2,065,560
-------------
12,843,903
-------------
UTAH 0.1%
125 Utah St Hsg Fin Agy Single Family Mtg Sr Issue
Ser B-2 (AMT) (FHA/VA Gtd)...................... 6.500 07/01/15 125,823
-------------
VIRGINIA 4.1%
2,000 Fairfax Cnty, VA Ctfs Partn..................... 5.300 04/15/23 2,061,920
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 1,623,285
1,380 Richmond, VA Indl Dev Auth Govt Fac Rev Bonds
(AMBAC Insd).................................... 5.000 07/15/14 1,480,878
1,715 Richmond, VA Indl Dev Auth Govt Fac Rev Bonds
(AMBAC Insd).................................... 5.000 07/15/17 1,826,887
-------------
6,992,970
-------------
WASHINGTON 2.2%
700 Quinault Indian Nation, WA Quinault Beach Ser A
Rfdg & Impt (ACA Insd).......................... 5.800 12/01/15 735,343
3,000 Spokane, WA Pub Fac Dist Hotel Motel & Sales Use
Tax (MBIA Insd)................................. 5.250 09/01/33 3,069,060
-------------
3,804,403
-------------
WEST VIRGINIA 1.7%
500 Harrison Cnty, WV Cnty Cmnty Solid Waste Disp
Rev West PA Pwr Co Ser C (AMT).................. 6.750 08/01/24 515,790
2,215 West Virginia St Wtr Dev Auth Wtr Dev Rev Ln Pgm
II Ser A (Prerefunded @ 11/01/04) (FSA Insd).... 6.750 11/01/33 2,320,589
-------------
2,836,379
-------------
WISCONSIN 1.6%
2,490 Wisconsin St Hlth & Ed Fac Auth Rev Bellin Mem
Hosp (AMBAC Insd)............................... 6.625 02/15/08 2,756,978
-------------
</Table>
See Notes to Financial Statements 11
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- --------------------------------------------------------------------------------------------
PUERTO RICO 5.6%
$8,000 Puerto Rico Comwlth Hwy & Trans Auth Hwy Rev Ser
Y Rfdg (FSA Insd)............................... 6.250% 07/01/21 $ 9,645,280
-------------
TOTAL LONG-TERM INVESTMENTS 165.0%
(Cost $271,397,327)....................................................... 283,032,650
SHORT-TERM INVESTMENTS 1.4%
(Cost $2,400,000)......................................................... 2,400,000
-------------
TOTAL INVESTMENTS 166.4%
(Cost $273,797,327)....................................................... 285,432,650
OTHER ASSETS IN EXCESS OF LIABILITIES 0.6%................................. 1,139,133
PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (67.0%)................. (115,013,448)
-------------
NET ASSETS APPLICABLE TO COMMON SHARES 100.0%.............................. $ 171,558,335
=============
</Table>
* Zero coupon bond
(a) All or a portion of these securities have been physically segregated in
connection with open futures contracts.
(b) Security purchased on a when-issued or delayed delivery basis.
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.
XLCA--XL Capital Assurance Inc.
12 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
April 30, 2004 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $273,797,327)....................... $285,432,650
Cash........................................................ 382,249
Receivables:
Interest.................................................. 4,335,856
Investments Sold.......................................... 25,302
Other....................................................... 2,056
------------
Total Assets............................................ 290,178,113
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 2,992,073
Investment Advisory Fee................................... 142,352
Variation Margin on Futures............................... 126,484
Income Distributions--Common Shares....................... 32,393
Administrative Fee........................................ 11,863
Other Affiliates.......................................... 11,521
Trustees' Deferred Compensation and Retirement Plans........ 224,325
Accrued Expenses............................................ 65,319
------------
Total Liabilities....................................... 3,606,330
Preferred Shares (including accrued distributions).......... 115,013,448
------------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $171,558,335
============
NET ASSET VALUE PER COMMON SHARE ($171,558,335 divided by
11,681,272 shares outstanding)............................ $ 14.69
============
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............................................. 159,178,268
Net Unrealized Appreciation................................. 12,807,623
Accumulated Undistributed Net Investment Income............. 1,370,531
Accumulated Net Realized Loss............................... (1,914,900)
------------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $171,558,335
============
PREFERRED SHARES ($.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....................... $286,558,335
============
</Table>
See Notes to Financial Statements 13
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended April 30, 2004 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $ 7,341,083
-----------
EXPENSES:
Investment Advisory Fee..................................... 874,815
Preferred Share Maintenance................................. 169,446
Administrative Fee.......................................... 72,900
Trustees' Fees and Related Expenses......................... 49,867
Legal....................................................... 15,960
Custody..................................................... 9,168
Other....................................................... 94,041
-----------
Total Expenses.......................................... 1,286,197
-----------
NET INVESTMENT INCOME....................................... $ 6,054,886
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 798,861
Futures................................................... (2,320,393)
-----------
Net Realized Loss........................................... (1,521,532)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 14,892,156
End of the Period:
Investments............................................. 11,635,323
Futures................................................. 1,172,300
-----------
12,807,623
-----------
Net Unrealized Depreciation During the Period............... (2,084,533)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(3,606,065)
===========
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $ (532,704)
===========
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
OPERATIONS................................................ $ 1,916,117
===========
</Table>
14 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
-----------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 6,054,886 $ 12,544,025
Net Realized Gain/Loss.................................. (1,521,532) 3,881,454
Net Unrealized Depreciation During the Period........... (2,084,533) (3,662,840)
Distributions to Preferred Shareholders:
Net Investment Income................................. (532,704) (1,144,837)
------------ ------------
Change in Net Assets Applicable to Common Shares from
Operations............................................ 1,916,117 11,617,802
Distributions to Common Shareholders:
Net Investment Income................................. (5,752,804) (11,534,733)
------------ ------------
NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES
FROM INVESTMENT ACTIVITIES............................ (3,836,687) 83,069
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of the Period................................. 175,395,022 175,311,953
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $1,370,531 and $1,601,153,
respectively)......................................... $171,558,335 $175,395,022
============ ============
</Table>
See Notes to Financial Statements 15
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.
<Table>
<Caption>
SIX MONTHS
ENDED
APRIL 30, -------------------
2004 2003 2002 (a)
---------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD................... $ 15.02 $ 15.01 $ 14.91
------- ------- -------
Net Investment Income.................................... .52 1.08 1.09
Net Realized and Unrealized Gain/Loss.................... (.31) .02 .06
Common Share Equivalent of Distributions Paid to
Preferred Shareholders:
Net Investment Income.................................... (.05) (.10) (.13)
Net Realized Gain........................................ -0- -0- -0-
------- ------- -------
Total from Investment Operations........................... .16 1.00 1.02
Distributions Paid to Common Shareholders:
Net Investment Income.................................... (.49) (.99) (.92)
Net Realized Gain........................................ -0- -0- -0-
------- ------- -------
NET ASSET VALUE, END OF THE PERIOD......................... $ 14.69 $ 15.02 $ 15.01
======= ======= =======
Common Share Market Price at End of the Period............. $ 12.99 $ 14.20 $ 13.80
Total Return (b)........................................... -5.36%* 10.27% 10.36%
Net Assets Applicable to Common Shares at End of the Period
(In millions)............................................ $ 171.6 $ 175.4 $ 175.3
Ratio of Expenses to Average Net Assets Applicable to
Common Shares (c)........................................ 1.45% 1.44% 1.55%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (c).......................... 6.83% 7.11% 7.44%
Portfolio Turnover......................................... 6%* 35% 44%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net Assets Including
Preferred Shares (c)..................................... .88% .87% .93%
Ratio of Net Investment Income to Average Net Assets
Applicable to Common Shares (d).......................... 6.23% 6.46% 6.54%
SENIOR SECURITIES:
Total Preferred Shares Outstanding......................... 4,600 4,600 4,600
Asset Coverage Per Preferred Share (e)..................... $62,298 $63,132 $63,114
Involuntary Liquidating Preference Per Preferred Share..... $25,000 $25,000 $25,000
Average Market Value Per Preferred Share................... $25,000 $25,000 $25,000
</Table>
* 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 assets 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.
16
<Table>
<Caption>
YEAR ENDED OCTOBER 31,
- -----------------------------------------------------------------------------------------
2001 2000 1999 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------
$ 13.77 $ 13.28 $ 15.08 $ 14.51 $ 13.88 $ 13.72 $ 12.20 $ 15.58
------- -------- -------- -------- -------- -------- -------- --------
1.10 1.13 1.12 1.12 1.13 1.14 1.15 1.11
1.11 .54 (1.82) .57 .60 .12 1.55 (3.28)
(.31) (.40) (.32) (.34) (.35) (.35) (.38) (.25)
-0- -0- -0- -0- -0- -0- -0- (.01)
------- -------- -------- -------- -------- -------- -------- --------
1.90 1.27 (1.02) 1.35 1.38 .91 2.32 (2.43)
(.76) (.78) (.78) (.78) (.75) (.75) (.80) (.90)
-0- -0- -0- -0- -0- -0- -0- .05
------- -------- -------- -------- -------- -------- -------- --------
$ 14.91 $ 13.77 $ 13.28 $ 15.08 $ 14.51 $ 13.88 $ 13.72 $ 12.20
======= ======== ======== ======== ======== ======== ======== ========
$ 13.36 $11.8125 $11.5625 $14.0625 $12.6875 $ 11.625 $ 11.375 $ 10.50
20.07% 9.19% -12.84% 17.23% 16.02% 8.98% 16.07% -24.59%
$ 174.2 $ 160.8 $ 155.1 $ 176.1 $ 169.5 $ 162.1 $ 160.2 $ 142.5
1.76% 1.85% 1.79% 1.79% 1.83% 1.90% 1.94% 1.82%
7.66% 8.44% 7.68% 7.54% 8.04% 8.31% 8.85% 7.95%
45% 22% 25% 13% 23% 37% 58% 115%
1.04% 1.06% 1.06% 1.08% 1.08% 1.10% 1.10% 1.06%
5.48% 5.48% 5.50% 5.20% 5.56% 5.77% 5.88% 6.11%
4,600 4,600 4,600 2,300 2,300 2,300 2,300 2,300
$62,863 $ 59,963 $ 58,717 $126,569 $123,694 $120,481 $119,666 $111,967
$25,000 $ 25,000 $ 25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
$25,000 $ 25,000 $ 25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
</Table>
See Notes to Financial Statements 17
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (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. Effective November 30, 2003, the Trust's investment adviser, Van Kampen
Investment Advisory Corp. merged into its affiliate, Van Kampen Asset
Management.
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, 2004, the Trust had $2,992,073 of 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 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, 2003, the Trust had an accumulated capital loss
carryforward for tax purposes of $1,415,668, which will expire
18
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) continued
between October 31, 2004 and October 31, 2008. Of this amount, $343,729 will
expire on October 31, 2004.
At April 30, 2004 the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $273,657,689
============
Gross tax unrealized appreciation........................... $ 12,704,930
Gross tax unrealized depreciation........................... (929,969)
------------
Net tax unrealized appreciation on investments.............. $ 11,774,961
============
</Table>
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,
2003 was as follows:
<Table>
Distributions paid from:
Ordinary income........................................... $12,965
Long-term capital gain.................................... -0-
-------
$12,965
=======
</Table>
As of October 31, 2003, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $132,494
</Table>
Net realized gains and losses may differ for financial reporting and tax
purposes as a result of deferral of losses resulting from wash sales
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 .60% of the average daily net assets
of the Trust. In addition, the Trust pays a monthly administrative fee to Van
Kampen Investments Inc. or its affiliates (collectively "Van Kampen"), the
Trust's Administrator, at an annual rate of .05% of the average daily net assets
of the Trust. Effective June 1, 2004, the administrative fee was reduced from
..05% to .00%.
For the six months ended April 30, 2004, the Trust recognized expenses of
approximately $8,600 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Trust, of which a trustee of the Trust
is an affiliated person.
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, 2004, the Trust recognized expenses of
19
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) continued
approximately $17,300 representing Van Kampen's 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
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.
At April 30, 2004, Van Kampen owned 6,700 common shares of the Trust.
3. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $20,791,012 and $16,531,048,
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.
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 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.
20
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) continued
Transactions in futures contracts for the six months ended April 30, 2004,
were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at October 31, 2003............................. 423
Futures Opened.............................................. 1,045
Futures Closed.............................................. (905)
-----
Outstanding at April 30, 2004............................... 563
=====
</Table>
The futures contracts outstanding as of April 30, 2004 and the descriptions
and unrealized appreciation/depreciation are as follows:
<Table>
<Caption>
UNREALIZED
CONTRACTS APPRECIATION
SHORT CONTRACTS:
U.S. Treasury Notes 10-Year Futures June 2004 (Current
Notional Value of $110,500 per contract)................ 97 273,776
U.S. Treasury Notes 5-Year Futures June 2004 (Current
Notional Value of $109,938 per contract)................ 466 898,524
--- ----------
563 $1,172,300
=== ==========
</Table>
5. PREFERRED SHARES
As of April 30, 2004, 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, 2004 was 1.065%. During the six months ended April 30, 2004,
the rates ranged from 0.500% to 1.450%.
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.
21
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
22
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
23
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
J. MILES BRANAGAN
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
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, NY 10020
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK AND TRUST COMPANY
c/o EquiServe
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 AUDITORS
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.
24
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our Web site, and text files (also known as "cookies") may be
placed on your computer to help us to recognize you and to facilitate
transactions you initiate. We do not disclose any nonpublic personal information
about you or any of our former customers to anyone, except as permitted by law.
For instance, so that we may continue to offer you Van Kampen investment
products and services that meet your investing needs, and to effect transactions
that you request or authorize, we may disclose the information we collect to
companies that perform services on our behalf, such as printers and mailers that
assist us in the distribution of investor materials. These companies will use
this information only for the services for which we hired them, and are not
permitted to use or share this information for any other purpose. To protect
your nonpublic personal information internally, we permit access to it only by
authorized employees, and maintain physical, electronic and procedural
safeguards to guard your nonpublic personal information.
* Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van
Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services
Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the
many Van Kampen mutual funds and Van Kampen unit investment trusts.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
(VAN KAMPEN INVESTMENTS LOGO)
Copyright (C)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC.
VOT SAR 6/04 RN04-00744P-Y04/04
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. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. [Reserved.]
Item 9. 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 10. 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 22, 2004
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 22, 2004
By: /s/ John L. Sullivan
----------------------
Name: John L. Sullivan
Title: Principal Financial Officer
Date: June 22, 2004