<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Economic Snapshot................................ 2
Performance Results.............................. 3
Portfolio Management Review...................... 4
Glossary of Terms................................ 7
Portfolio Highlights............................. 8
Portfolio of Investments......................... 10
Statement of Assets and Liabilities.............. 19
Statement of Operations.......................... 20
Statement of Changes in Net Assets............... 21
Financial Highlights............................. 22
Notes to Financial Statements.................... 24
Report of Independent Accountants................ 29
Dividend Reinvestment Plan....................... 30
</TABLE>
NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE.
<PAGE> 2
LETTER TO SHAREHOLDERS
November 19, 1999
Dear Shareholder:
As we approach the end of the century--and the millennium--it seems
appropriate to take a look back at the progress we've made over the last 100
years and how the world of investing has changed over the generations. Although
rapid advances in technology and science have dramatically altered the world
that we live in today, one of the greatest shifts we've seen this century is the
increasing importance of investing for many Americans.
Once considered primarily for the wealthy, investing in the stock market is
now available to most people. In fact, almost 79 million individuals--who
represent almost half of all U.S. households--own stocks either directly or
through mutual funds. This is even more impressive when considering that just 16
years earlier, only 19 percent of households owned stocks. Another important
shift has been the need for retirement planning beyond a pension plan or Social
Security. The Investment Company Institute, the leading mutual fund industry
association, reports that 77 percent of all mutual fund shareholders earmarked
retirement as their primary financial goal in 1998.
Through all the changes in the investment environment over the past century,
the general principles that have made generations of investors successful remain
the same. Those that have stood the test of time include:
- Investing for the long-term
- Basing investment decisions on sound research
- Building a diversified portfolio
- Believing in the value of professional investment advice
While no one can predict the future, at Van Kampen, we believe that these
ideas will remain important tenets for investors well into the next century. As
we continue to focus on these principles, we hope that our decades of investment
experience can help bring you closer to your financial goals as we enter the new
millennium.
Sincerely,
[SIG.]
Richard F. Powers, III
Chairman
Van Kampen Investment Advisory Corp.
[SIG.]
Dennis J. McDonnell
President
Van Kampen Investment Advisory Corp.
Source: Investment Company Institute
1
<PAGE> 3
ECONOMIC SNAPSHOT
ECONOMIC GROWTH
Americans continued their spending spree over the past year, keeping the
economy growing at a healthy pace. High levels of consumer confidence fueled
this heavy retail activity, which pushed the personal savings rate to a record
low as spending rates outpaced income growth. Although the U.S. economy
experienced a slowdown during the second quarter of 1999, growth rebounded
toward the end of the reporting period.
EMPLOYMENT SITUATION
The strong job market helped support the strength of the economy. During the
reporting period, the unemployment rate reached its lowest level in almost 30
years, and wages continued to climb. The wage pressures were balanced somewhat
by productivity gains. However, these pressures ultimately pushed the cost of
labor higher in the second quarter, as the employment cost index recorded its
biggest gain in eight years before returning to a more moderate level in the
third quarter.
INFLATION AND INTEREST RATES
Inflation remained tame throughout most of the reporting period, although a
sharp increase in oil prices contributed to a spike in April's consumer price
index report. The Federal Reserve Board remained active in guarding against
inflation and tempering the economy during this environment. The Fed reversed
its three interest rate cuts from the fall of 1998, raising rates in June,
August, and November 1999 to keep the economy from overheating.
U.S. GROSS DOMESTIC PRODUCT
Seasonally Adjusted Annualized Rates
Third Quarter 1997 through Third Quarter 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
%
<S> <C> ---
97Q3 4.0
97Q4 3.1
98Q1 6.7
98Q2 2.1
98Q3 3.8
98Q4 5.9
99Q1 3.7
99Q2 1.9
99Q3 5.5
</TABLE>
Source: Bureau of Economic Analysis
2
<PAGE> 4
PERFORMANCE RESULTS FOR THE PERIOD ENDED OCTOBER 31, 1999
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
(NYSE TICKER SYMBOL--VOT)
<TABLE>
<S> <C>
COMMON SHARE TOTAL RETURNS
One-year total return based on market price(1)............ (12.84%)
One-year total return based on NAV(2)..................... (7.06%)
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3).................................................. 6.75%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)..................................... 10.55%
SHARE VALUATIONS
Net asset value........................................... $ 13.28
Closing common stock price................................ $11.5625
One-year high common stock price (11/30/98)............... $14.7500
One-year low common stock price (10/26/99)................ $11.0625
Preferred share (Series A) rate(5)........................ 3.60%
Preferred share (Series B) rate(5)........................ 3.50%
Preferred share (Series C) rate(5)........................ 3.20%
</TABLE>
(1) Total return based on market price assumes an investment at the 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 stock price at the end of the period
indicated.
(2) Total return based on net asset value (NAV) assumes an investment at the
beginning of the period indicated, reinvestment of all distributions for the
period, and sale of all shares at the end of the period, all at NAV.
(3) Distribution rate represents the monthly annualized distributions of the
Trust at the end of the period and not the earnings of the Trust.
(4) The taxable-equivalent distribution rate is calculated assuming a 36%
federal income tax bracket.
(5) See "Notes to Financial Statements" footnote #5, for more information
concerning Preferred Share reset periods.
A portion of the interest income may be taxable for those investors subject to
the federal alternative minimum tax (AMT).
Past performance does not guarantee future results. Investment return, stock
price and net asset value will fluctuate with market conditions. Trust shares,
when sold, may be worth more or less than their original cost.
3
<PAGE> 5
PORTFOLIO MANAGEMENT REVIEW
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
We recently spoke with representatives of the adviser of the Van Kampen
Municipal Opportunity Trust II about the key events and economic forces that
shaped the markets during the past year. Timothy D. Haney, portfolio manager,
has managed the Trust since 1995 and worked in the investment industry since
1988. He is joined by Peter W. Hegel, chief investment officer for fixed-income
investments. The following discussion reflects their views on the Trust's
performance during the 12 months ended October 31, 1999.
Q WHAT HAPPENED IN THE MUNICIPAL MARKET DURING THE REPORTING PERIOD?
A Bonds of all types experienced price declines during the past 12 months as
interest rates rose, especially toward the end of the reporting period. In
addition to the negative effects of the Federal Reserve Board's two
interest-rate increases during the summer, the bond market declined as the
nation's strong economic growth continued to spark inflation fears, leading to
concern about future rate hikes. Because of low institutional demand for
municipal bonds during the period, these conditions affected municipals more
than their taxable counterparts--corporate and Treasury bonds. The yields of
newly issued 30-year AAA municipal bonds rose more than a full percentage point
during the 12-month period, so the prices of existing bonds dropped
concurrently. The bonds in the Trust's portfolio were not spared by this market
movement and suffered price declines along with the rest of the municipal
market.
The interest-rate increases also suppressed municipal bond supply, bringing
overall nationwide issuance down more than 20 percent in the first ten months of
the year compared with 1998. Supply was down in almost every sector, with
electric-utility and health-care bonds experiencing the most significant drops.
Although new issuance kept pace with last year's active market, the amount of
bonds issued through refinancing was down more than 50 percent for the year
through October. Many municipalities simply chose not to refinance outstanding
bonds because of the higher interest rates they would have to pay in the current
marketplace.
Q DID MUNICIPAL BONDS BENEFIT FROM THE STRONG ECONOMY?
A Yes. The effects of the healthy economy were reflected in the good credit
conditions in the municipal market, even though prices suffered. With the
exception of the health-care sector, overall credit quality remained high,
and we witnessed a number of credit upgrades as tax revenues kept municipal
finances strong.
4
<PAGE> 6
Q WHAT TECHNIQUES DID YOU USE TO MANAGE THE TRUST IN THESE CONDITIONS?
A We took advantage of the general market price declines to enhance the
current income potential and tax management of the Trust. We sold some of
our holdings at a capital loss to offset some of the gains we had earned
early in 1999. This allowed us to avoid the need to distribute taxable capital
gains to shareholders this year. We replaced these bonds with longer-maturity,
higher-yielding issues, which protected the Trust's income stream. The new bonds
also had better protection against bond calls.
As a consequence of this strategy, there was an increase in the portfolio's
duration, or sensitivity to interest-rate changes. We feel that this will
benefit the Trust in a declining interest-rate environment by allowing it to
participate more fully in a market rally. In the short term, however, the longer
duration negatively affected the Trust's total return as interest rates climbed.
Q WHAT AREAS OF THE MUNICIPAL MARKET WERE MOST ATTRACTIVE TO YOU?
A We continually looked for the bonds that we felt represented the best
values compared with the other offerings in the marketplace. In general,
the most attractive bonds were the ones that, going forward, we felt would
be in greatest demand by retail investors. That often involved selling the
holdings that provided the most in-demand coupon rate by individual investors
(which varied as interest rates increased) and replacing them with other issues
that appeared to be undervalued. For example, we sought bonds issued in states
where heavy supply had temporarily suppressed prices. During the last year, we
found attractive issues that met this criteria in states like New York,
Colorado, and Michigan. When we correctly anticipated an increase in demand,
this strategy contributed to the Trust's total return. For additional portfolio
highlights, please refer to page 8.
Q HOW DID THE TRUST PERFORM DURING THE PERIOD?
A Total return performance was disappointing because of the general downturn
in bond prices and the Trust's increased duration. In addition, the
Trust's leverage component hurt its performance during the period.
Although leverage helps the Trust provide higher income levels to common
shareholders, it made the portfolio more sensitive to the interest-rate
increases during the reporting period. For the one-year period ended October 31,
1999, the Trust returned -12.84 percent(1) based on market price. This reflects
a decrease in market price from $14.0625 per share on October 31, 1998, to
$11.5625 per share on October 31, 1999.
On the positive side, the dividend remained unchanged during the past 12
months. The monthly federally tax-exempt dividend of $0.065 per share translates
to a distribution rate of 6.75 percent(3) based on the Trust's closing market
price on October 31, 1999. Because the Trust is exempt from federal income
taxes, this distribution rate is equivalent to a taxable yield of 10.55
percent(4) for an investor in the 36 percent federal income tax
5
<PAGE> 7
bracket. Please refer to the chart and footnotes on page 3 for additional
performance results. Past performance does not guarantee future performance.
Q WHAT DO YOU SEE AHEAD FOR THE ECONOMY AND THE MUNICIPAL MARKET?
A In the coming months, we will probably see a slowing economy, which may be
partly the result of year 2000 concerns. Wage increases will likely keep
inflation fears at the forefront, although increasing productivity should
be able to offset higher wage costs for employers.
Preparations for the turn of the millennium may also limit new issuance and
general market activity at the end of the year. Many municipal issuers are
planning to postpone issuing bonds until they feel certain that any potential
computer problems have been avoided, but we believe that market activity should
pick up early in 2000. In the meantime, we will continue to focus on finding
attractive-yielding bonds and protecting the Trust from bond calls as much as
possible. We will also use our extensive research capabilities to look for
attractive opportunities throughout the coming months.
[SIG.]
Timothy D. Haney
Portfolio Manager
[SIG.]
Peter W. Hegel
Chief Investment Officer
Fixed Income Investments
6
<PAGE> 8
GLOSSARY OF TERMS
CALL FEATURE: Allows the issuer to buy back a bond on specific dates at set
prices before maturity. These dates and prices are set when the bond is
issued. To compensate the bondholder for the potential loss of income and
ownership, a bond's call price is usually higher than the face value of the
bond. Bonds are usually called when interest rates drop so significantly
that the issuer can save money by issuing new bonds at lower rates.
CREDIT RATING: An evaluation of an issuer's credit history and capability of
repaying obligations. Standard & Poor's and Moody's Investors Service are
two companies that assign bond ratings. Standard & Poor's ratings range from
a high of AAA to a low of D, while Moody's ratings range from a high of Aaa
to a low of C.
CREDIT SPREAD: Also called quality spread, the difference in yield between
higher-quality issues and lower-quality issues. Normally, lower-quality
issues provide higher yields to compensate investors for the additional
credit risk.
DISCOUNT BOND: A bond whose market price is lower than its face value (or "par
value"). Because bonds usually mature at face value, a discount bond has
more potential to appreciate in price than a par bond does.
DURATION: A measure of the sensitivity of a bond's price to changes in interest
rates, expressed in years. Each year of duration represents an expected 1
percent change in the price of a bond for every 1 percent change in interest
rates (i.e. a 5-year duration means the bond will fall about 5 percent in
value if interest rates rise by 1 percent). The longer a bond's duration,
the greater the effect of interest rate movements on its price. Typically,
funds with shorter durations perform better in rising rate environments,
while funds with longer durations perform better when rates decline.
INVESTMENT-GRADE BONDS: Securities rated BBB and above by Standard & Poor's or
Baa and above by Moody Investors Service. Bonds rated below BBB or Baa are
noninvestment grade.
MATURITY LENGTH: The time it takes for a bond to mature. A bond issued in 1999
and maturing in 2009 is a 10-year bond.
PREREFUNDING: The process of issuing new bonds to refinance an outstanding
municipal bond issue prior to its maturity or call date. The proceeds from
the new bonds are generally invested in U.S. government securities.
Prerefunding typically occurs when interest rates decline and an issuer
replaces its higher-yielding bonds with current lower-yielding issues.
ZERO COUPON BONDS: A corporate or municipal bond that is traded at a deep
discount to face value and pays no interest. It is redeemed at maturity for
full face value.
7
<PAGE> 9
PORTFOLIO HIGHLIGHTS
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
TOP FIVE PORTFOLIO INDUSTRIES*
[GRAPH]
<TABLE>
<CAPTION>
OCTOBER 31, 1999 OCTOBER 31, 1998
---------------- ----------------
<S> <C> <C>
Health Care 16.90 19.70
Retail Elec/Gas/Teleph 11.60 12.40
Single-Family Housing 10.40 10.90
General Purpose 10.20 10.30
Industrial Revenue 9.90 9.90
</TABLE>
* As a percentage of long-term investments
NET ASSET VALUE AND MARKET PRICE
(BASED UPON MONTH-END VALUES)
JUNE 1993 THROUGH OCTOBER 1999
[GRAPH]
<TABLE>
<CAPTION>
MARKET PRICE NET ASSET VALUE
------------ ---------------
<S> <C> <C>
Jun 1993 14.95 14.95
14.96 14.96
14.75 15.30
14.75 15.69
Oct 1993 15.00 15.58
14.25 15.00
14.00 15.48
14.38 15.72
13.38 14.81
12.25 13.21
12.13 13.22
12.63 13.35
12.50 13.09
12.13 13.36
12.00 13.31
11.13 12.78
Oct 1994 10.50 12.20
10.75 11.59
10.25 12.06
11.25 12.62
12.00 13.23
11.75 13.32
11.75 13.12
11.50 13.64
11.13 13.13
11.00 13.22
11.13 13.37
11.25 13.39
Oct 1995 11.38 13.72
11.63 14.11
11.50 14.30
11.88 14.31
11.88 14.04
11.50 13.57
11.25 13.36
11.13 13.30
11.13 13.43
11.25 13.56
11.63 13.48
11.63 13.75
Oct 1996 11.63 13.88
11.75 14.20
11.50 14.00
11.63 13.87
12.00 13.98
11.75 13.63
11.63 13.70
12.00 13.92
12.25 14.06
13.00 14.64
12.88 14.29
12.88 14.47
Oct 1997 12.69 14.51
12.94 14.54
13.50 14.80
14.00 14.92
14.38 14.85
13.50 14.78
13.75 14.56
13.82 14.83
13.63 14.82
13.63 14.77
13.69 15.03
13.94 15.21
Oct 1998 14.06 15.08
14.63 15.07
14.50 15.03
14.00 15.17
13.94 14.96
14.13 14.88
13.56 14.85
13.19 14.60
12.94 14.17
13.06 14.15
12.69 13.81
11.94 13.65
Oct 1999 11.56 13.28
</TABLE>
The solid line above represents the Trust's net asset value (NAV), which
indicates overall changes in value among the Trust's underlying securities. The
Trust's market price is represented by the dashed line, which indicates the
price the market is willing to pay for shares of the Trust at a given time.
Market price is influenced by a range of factors, including supply and demand
and market conditions.
8
<PAGE> 10
PORTFOLIO HIGHLIGHTS (CONTINUED)
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
CREDIT QUALITY AS A PERCENTAGE OF LONG-TERM INVESTMENTS
AS OF OCTOBER 31, 1999
[PIE CHART]
<TABLE>
<CAPTION>
AAA/AAA AA/AA A/A BBB/BAA B/B
------- ----- --- ------- ---
<S> <C> <C> <C> <C> <C>
As of October 31, 1999 64.0 12.9 12.3 10.5 0.3
</TABLE>
AS OF OCTOBER 31, 1998
[PIE CHART]
<TABLE>
<CAPTION>
AAA/AAA AA/AA A/A BBB/BAA B/B
------- ----- --- ------- ---
<S> <C> <C> <C> <C> <C>
As of October 31, 1998 60.0 14.6 11.9 12.6 0.9
</TABLE>
Based upon the highest credit quality ratings as issued by Standard & Poor's or
Moody's, respectively.
DIVIDEND HISTORY
FOR THE PERIOD ENDED OCTOBER 31, 1999
[BAR GRAPH]
<TABLE>
<CAPTION>
DIVIDEND
--------
<S> <C>
Nov 1998 0.0650
Dec 1998 0.0650
Jan 1999 0.0650
Feb 1999 0.0650
Mar 1999 0.0650
Apr 1999 0.0650
May 1999 0.0650
Jun 1999 0.0650
Jul 1999 0.0650
Aug 1999 0.0650
Sep 1999 0.0650
Oct 1999 0.0650
</TABLE>
The dividend history represents past performance of the Trust and does not
predict the Trust's future distributions.
9
<PAGE> 11
PORTFOLIO OF INVESTMENTS
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS 100.1%
ALABAMA 1.3%
$1,000 Alabama Bldg Renovation Fin Auth Rev
Rfdg (AMBAC Insd)..................... 5.625% 09/01/24 $ 948,720
2,000 Lauderdale Cnty & Florence, AL
Hlthcare Auth Rev Coffee Hlth Group
Ser A (MBIA Insd)..................... 5.250 07/01/19 1,794,980
1,000 Valley, AL Spl Care Fac Fin Auth Rev
Lanier Mem Hosp Ser A................. 5.600 11/01/16 885,180
------------
3,628,880
------------
ARIZONA 1.5%
1,000 Mesa, AZ Indl Dev Auth Rev Discovery
Hlth Sys Ser A (MBIA Insd)............ 5.625 01/01/29 945,270
2,860 Pima Cnty, AZ Indl Dev Auth Indl Rev
Lease Oblig Irvington Proj Tucson Ser
A Rfdg (FSA Insd)..................... 7.250 07/15/10 3,076,960
------------
4,022,230
------------
CALIFORNIA 13.3%
1,300 Anaheim, CA Pub Fin Auth Lease Rev Pub
Impt Proj Ser C (FSA Insd)............ 6.000 09/01/16 1,345,318
4,600 California St Pub Wks Brd Lease Rev
Var Univ CA Proj A Rfdg............... 5.500 06/01/10 4,731,790
5,905 California St Pub Wks Brd Lease Rev
Var Univ CA Proj A Rfdg............... 5.500 06/01/14 5,884,155
5,000 Foothill/Eastern Corridor Agy CA Toll
Rd Rev Cap Apprec Rfdg (MBIA Insd).... * 01/15/18 1,628,700
2,000 Foothill/Eastern Corridor Agy CA Toll
Rd Rev Sr Lien Ser A.................. 6.500 01/01/32 2,212,400
2,000 Imperial Irrig Dist CA Ctfs Partn Elec
Sys Proj (Prerefunded @ 11/01/04)
(MBIA Insd)........................... 6.750 11/01/11 2,239,820
2,860 Los Angeles Cnty, CA Metro Tran Auth
Sales Tax Rev Ppty Ser A Rfdg (FGIC
Insd)................................. 5.000 07/01/21 2,513,883
11,500 Los Angeles, CA Dept Wtr & Pwr Elec
Plant Rev Crossover Rfdg (FGIC
Insd)................................. 5.375 09/01/23 10,655,440
2,000 Orange Cnty, CA Recovery Ctfs Ser A
(MBIA Insd)........................... 6.000 07/01/08 2,154,500
3,000 Southern CA Pub Pwr Auth Pwr Proj Rev
San Juan Unit 3 Ser A (MBIA Insd)..... 5.000 01/01/20 2,662,710
------------
36,028,716
------------
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COLORADO 4.3%
$1,000 Arapahoe Cnty, CO Cap Impt Trust Fund
Hwy Rev E-470 Proj Ser B (Prerefunded
@ 08/31/05)........................... 7.000% 08/31/26 $ 1,135,410
7,500 Arapahoe Cnty, CO Cap Impt Trust Fund
Hwy Rev E-470 Proj Ser C (Prerefunded
@ 08/31/05)........................... * 08/31/26 1,171,575
1,250 Denver, CO City & Cnty Arpt Rev Ser
A..................................... 7.000 11/15/99 1,251,463
2,650 Denver, CO City & Cnty Arpt Rev Ser
B..................................... 7.250 11/15/05 2,825,509
895 Denver, CO City & Cnty Arpt Rev Ser
B..................................... 7.250 11/15/07 954,276
105 Denver, CO City & Cnty Arpt Rev Ser B
(Prerefunded @ 11/15/02).............. 7.250 11/15/07 115,166
1,500 Denver, CO City & Cnty Arpt Rev Ser
D..................................... 7.750 11/15/13 1,761,945
2,500 E-470 Pub Hwy Auth CO Rev Cap Apprec
Sr Ser B (MBIA Insd).................. * 09/01/11 1,291,125
4,000 E-470 Pub Hwy Auth CO Rev Cap Apprec
Sr Ser B (MBIA Insd).................. * 09/01/22 987,440
------------
11,493,909
------------
CONNECTICUT 1.3%
3,435 Connecticut St Dev Auth Pkg Fac
Hartford Hosp Rev (MBIA Insd)......... 6.875 10/01/06 3,545,298
------------
FLORIDA 4.4%
2,000 Dade Cnty, FL Genl Oblig Seaport Bonds
(Prerefunded @ 10/01/01) (AMBAC
Insd)................................. 6.500 10/01/26 2,104,180
1,050 Florida Hsg Fin Agy Single Family Mtg
Ser A Rfdg (GNMA Collateralized)...... 6.550 07/01/14 1,080,681
2,000 Greater Orlando Aviation Auth Orlando
FL Arpt Facs Rev Ser A (FGIC Insd).... 5.125 10/01/28 1,737,660
2,000 Hillsborough Cnty, FL Indl Dev Auth
Pollutn Ctl Rev Tampa Elec Co Proj Ser
92 Rfdg............................... 8.000 05/01/22 2,190,420
1,000 Jacksonville, FL Hosp Rev Univ Med
Cent Inc Proj (Connie Lee Insd)....... 6.500 02/01/11 1,053,370
3,590 Pinellas Cnty, FL Hsg Fin Auth Single
Family Mtg Rev Multi Cnty Ser A (GNMA
Collateralized)....................... 6.650 08/01/21 3,711,988
------------
11,878,299
------------
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
GEORGIA 0.8%
$2,000 Muni Elec Auth GA Proj One Sub Ser A
(AMBAC Insd).......................... 6.000% 01/01/04 $ 2,096,160
------------
ILLINOIS 6.3%
3,750 Bolingbrook, IL Cap Apprec Ser B...... * 01/01/32 494,887
3,365 Chicago, IL Cap Apprec (Prerefunded @
07/01/05) (AMBAC Insd)................ * 01/01/17 1,222,471
4,650 Chicago, IL Single Family Mtg Rev Ser
A (GNMA Collateralized)............... 7.000 09/01/27 4,941,787
920 Chicago, IL Single Family Mtg Rev Ser
B (GNMA Collateralized)............... 7.625 09/01/27 1,015,349
3,000 Illinois Dev Fin Auth Solid Waste Disp
Rev................................... 5.950 12/01/24 2,910,540
4,305 Illinois Hlth Fac Auth Rev OSF
Hlthcare Sys Rfdg..................... 6.000 11/15/10 4,327,558
2,030 Peoria, Moline & Freeport, IL Coll Mtg
Ser A (GNMA Collateralized)........... 7.600 04/01/27 2,217,613
------------
17,130,205
------------
INDIANA 2.8%
4,000 East Chicago, IN Elementary Sch Bldg
Corp First Mtg Ser A.................. 6.250 07/05/08 4,211,600
3,000 Indiana Hlth Fac Fin Auth Hosp Rev
Columbus Regl Hosp Rfdg (FSA Insd).... 7.000 08/15/15 3,390,450
------------
7,602,050
------------
IOWA 0.4%
1,200 Ottumwa, IA Hosp Fac Rev Rfdg......... 6.000 10/01/18 1,123,380
------------
LOUISIANA 1.8%
2,000 New Orleans, LA Rfdg (FGIC Insd)...... 5.500 12/01/21 1,912,520
2,800 Saint Charles Parish, LA Solid Waste
Disp Rev LA Pwr & Lt Co Proj (FSA
Insd)................................. 7.050 04/01/22 2,932,188
------------
4,844,708
------------
MAINE 0.6%
1,410 Maine St Hsg Auth Mtg Purp Ser C2..... 6.875 11/15/23 1,471,744
------------
MARYLAND 0.3%
1,000 Maryland St Econ Dev Corp Student Hsg
Rev Collegiate Hsg Towson Ser A....... 5.750 06/01/29 891,180
------------
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MASSACHUSETTS 1.6%
$1,000 Massachusetts St Hlth & Edl Fac Auth
Rev Saint Mem Med Cent Ser A.......... 6.000% 10/01/23 $ 885,680
3,335 Massachusetts St Hsg Fin Agy Hsg Rev
Insd Rental Ser A Rfdg (AMBAC Insd)... 6.600 07/01/14 3,480,539
------------
4,366,219
------------
MICHIGAN 5.3%
1,000 Battle Creek, MI Downtown Dev Auth Tax
Increment Rev (Prerefunded @
05/01/04)............................. 7.600 05/01/16 1,129,910
3,300 Michigan St Bldg Auth Rev Ser 2 (MBIA
Insd)................................. 6.250 10/01/20 3,346,068
1,000 Michigan St Hosp Fin Auth Rev Detroit
Med Cent Oblig Ser A.................. 5.250 08/15/28 781,320
1,500 Michigan St Hsg Dev Auth Ltd Oblig Hsg
Orion Four Ser A...................... 6.250 08/01/39 1,474,785
1,500 Michigan St Hsg Dev Auth Multi-Family
Rev Ltd Oblig Ser A Rfdg (GNMA
Collateralized)....................... 6.600 04/01/30 1,568,700
1,000 Michigan St Strat Fd Ltd Oblig Rev
Detroit Edison Co Ser A Rfdg (MBIA
Insd)................................. 5.550 09/01/29 913,920
6,000 Wayne Charter Cnty, MI Arpt Rev
Detroit Metro Wayne Cnty Ser A (MBIA
Insd)................................. 5.000 12/01/28 5,017,440
------------
14,232,143
------------
MISSISSIPPI 1.1%
1,500 Mississippi Dev Bank Spl Oblig Cap
Proj & Equip Acquisition Ser A2 (AMBAC
Insd)................................. 5.000 07/01/24 1,300,230
1,550 Mississippi Dev Bank Spl Oblig Madison
Cnty Hosp Proj........................ 6.400 07/01/29 1,537,817
------------
2,838,047
------------
MISSOURI 2.0%
4,500 Kansas City, MO Muni Assistance Corp
Rev Rfdg (MBIA Insd).................. 5.000 04/15/20 3,947,175
1,500 Saint Louis Cnty, MO Mtg Rev Ctfs Rcpt
Ser H (GNMA Collateralized)........... 5.400 07/01/18 1,402,320
------------
5,349,495
------------
NEVADA 1.2%
2,970 Clark Cnty, NV Indl Dev Rev NV Pwr Co
Proj Ser C Rfdg (AMBAC Insd).......... 7.200 10/01/22 3,209,946
------------
</TABLE>
See Notes to Financial Statements
13
<PAGE> 15
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW JERSEY 4.0%
$1,000 New Jersey Hlthcare Fac Fin Auth Rev
Genl Hosp Cent at Passaic (FSA
Insd)................................. 6.000% 07/01/06 $ 1,066,270
1,750 New Jersey Hlthcare Fac Fin Auth Rev
Hackensack Med Cent (Prerefunded @
07/01/01) (FGIC Insd)................. 6.625 07/01/17 1,851,097
5,630 Salem Cnty, NJ Indl Pollutn Ctl Fin
Auth Rev Pollutn Ctl Pub Svc Elec &
Gas Ser A (MBIA Insd)................. 5.450 02/01/32 5,200,544
2,500 Secaucus, NJ Muni Util Auth Swr Rev
Ser A Rfdg............................ 6.000 12/01/08 2,642,200
------------
10,760,111
------------
NEW MEXICO 0.3%
1,000 New Mexico St Hosp Equip Ln Council
Hosp Rev Mem Med Cent Inc Proj........ 5.500 06/01/28 849,720
------------
NEW YORK 12.1%
1,215 New York City Muni Wtr Fin Auth Wtr &
Swr Sys Rev Ser A..................... 7.000 06/15/09 1,276,515
2,500 New York City Ser A................... 7.000 08/01/04 2,722,825
3,950 New York City Ser A1.................. 6.375 08/01/10 4,212,399
1,050 New York City Ser A1 (Prerefunded @
08/01/05)............................. 6.375 08/01/10 1,141,581
2,000 New York City Ser B1 (Prerefunded @
08/15/04) (MBIA Insd)................. 6.950 08/15/12 2,213,240
1,800 New York City Ser E Rfdg.............. 6.600 08/01/03 1,913,328
1,500 New York St Dorm Auth Lease Rev Muni
Hlth Fac Impt Pgm Ser 1 (FSA Insd).... 4.750 01/15/29 1,215,735
1,000 New York St Dorm Auth Rev City Univ
Third Genl Res Ser 2 (Prerefunded @
07/01/04) (MBIA Insd)................. 6.250 07/01/19 1,067,940
3,000 New York St Dorm Auth Rev Cons City
Univ Sys Ser A Rfdg................... 6.000 07/01/06 3,141,330
1,520 New York St Dorm Auth Rev Insd John T
Mather Mem Hosp (Connie Lee Insd)..... 6.500 07/01/09 1,652,301
2,000 New York St Dorm Auth Rev NY Univ Ser
A (AMBAC Insd) (a).................... 5.250 07/01/07 2,002,940
2,545 New York St Dorm Auth Rev Secured Hosp
New York Downtown Rfdg................ 5.200 02/15/14 2,332,645
970 New York St Energy Resh & Dev Auth St
Service Contract Rev.................. 5.750 04/01/03 1,000,109
</TABLE>
See Notes to Financial Statements
14
<PAGE> 16
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK (CONTINUED)
$ 835 New York St Energy Resh & Dev Auth St
Service Contract Rev.................. 5.400% 04/01/04 $ 851,884
500 New York St Energy Resh & Dev Auth St
Service Contract Rev.................. 5.500 04/01/05 510,890
500 New York St Energy Resh & Dev Auth St
Service Contract Rev.................. 5.500 04/01/06 509,580
1,500 New York St Loc Govt Assistance Corp
Ser A (Prerefunded @ 4/01/02)......... 6.875 04/01/19 1,612,605
1,375 New York St Med Care Fac Fin Agy Rev
Mental Hlth Svcs Fac Impt Ser D
(Prerefunded @ 08/15/04) (MBIA
Insd)................................. 5.900 02/15/10 1,469,751
2,000 New York St Urban Dev Corp Rev
Correctional Fac Ser A Rfdg........... 5.500 01/01/16 1,878,520
------------
32,726,118
------------
NORTH CAROLINA 1.0%
3,000 Martin Cnty, NC Indl Fac & Pollutn Ctl
Fin Auth Rev Solid Waste Weyerhaeuser
Co.................................... 5.650 12/01/23 2,679,510
------------
OHIO 4.2%
1,880 Cleveland, OH Arpt Sys Rev Ser A (FSA
Insd)................................. 5.125 01/01/27 1,603,903
2,000 Franklin Cnty, OH Hosp Rev Holy Cross
Hlth Sys Ser B Rfdg (MBIA Insd)....... 5.250 06/01/08 2,011,520
1,040 Lorain Cnty, OH Hosp Rev EMH Regl Med
Cent Rfdg (AMBAC Insd)................ 7.750 11/01/13 1,187,971
2,395 Lucas Cnty, OH Hosp Rev Impt Saint
Vincent Med Cent (MBIA Insd).......... 6.625 08/15/22 2,502,919
2,000 Ohio St Wtr Dev Auth Solid Waste Disp
Rev................................... 6.300 09/01/20 1,993,580
1,000 Rocky River, OH City Sch Dist......... 5.375 12/01/17 947,890
1,065 Strongsville, OH...................... 6.700 12/01/11 1,176,793
------------
11,424,576
------------
</TABLE>
See Notes to Financial Statements
15
<PAGE> 17
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
OKLAHOMA 2.7%
$2,250 Shawnee, OK Hosp Auth Hosp Rev
Midamerica Healthcare Inc Rfdg........ 6.125% 10/01/14 $ 2,160,698
2,960 Tulsa, OK Indl Auth Hosp Rev Hillcrest
Med Cent Proj Rfdg (Connie Lee
Insd)................................. 6.250 06/01/07 3,201,802
1,975 Tulsa, OK Muni Arpt Tran Rev American
Airls Inc............................. 7.375 12/01/20 2,048,806
------------
7,411,306
------------
OREGON 0.9%
2,310 Oregon St Vets Welfare Ser 76A........ 6.050 10/01/28 2,348,993
------------
PENNSYLVANIA 8.8%
1,425 Allegheny Cnty, PA Ser C49 Rfdg (MBIA
Insd) (a)............................. 5.000 04/01/05 1,420,910
5,780 Erie, PA Sch Dist Cap Apprec Rfdg (FSA
Insd)................................. * 09/01/20 1,616,088
1,500 Pennsylvania Econ Dev Fin Auth Res
Recovery Rev Colver Proj Ser D........ 7.050 12/01/10 1,592,670
4,000 Pennsylvania Hsg Fin Agy Single Family
Ser 56A............................... 6.150 10/01/27 4,016,760
1,600 Pennsylvania St Higher Edl Fac Auth
Rev Med College PA Ser A (Prerefunded
@ 03/01/01)........................... 7.250 03/01/11 1,692,928
2,635 Philadelphia, PA (MBIA Insd).......... 5.000 05/15/25 2,269,736
2,000 Philadelphia, PA Gas Wks Rev Second
Ser (FSA Insd)........................ 5.000 07/01/29 1,691,420
7,500 Philadelphia, PA Gas Wks Rev Ser 14
Rfdg (FSA Insd) (b)................... 6.250 07/01/08 7,998,075
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 1,417,465
------------
23,716,052
------------
TENNESSEE 1.3%
2,500 Harpeth Vly Utils Dist TN Davidson &
Williamson Cntys Rev (MBIA Insd)...... 5.250 09/01/17 2,325,900
1,100 Tennessee Hsg Dev Agy Mtg Fin Ser A... 7.125 07/01/26 1,138,137
------------
3,464,037
------------
</TABLE>
See Notes to Financial Statements
16
<PAGE> 18
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXAS 3.0%
$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 $ 2,163,800
2,840 Harris Cnty, TX Toll Rd Sub Lien Rev
Rfdg.................................. 6.750 08/01/14 2,985,436
3,000 Travis Cnty, TX Hlth Fac Dev Corp Rev
Ascension Hlth Credit Ser A (AMBAC
Insd) (a)............................. 5.875 11/15/24 2,923,200
------------
8,072,436
------------
UTAH 0.4%
1,010 Utah St Hsg Fin Agy Single Family Mtg
Sr Issue Ser B-2 (FHA Insd)........... 6.500 07/01/15 1,034,846
------------
VIRGINIA 3.6%
1,250 Fredericksburg, VA Indl Dev Auth Hosp
Fac Rev (Prerefunded @ 08/15/01) (FGIC
Insd)................................. 6.600 08/15/23 1,319,038
1,500 Henrico Cnty, VA Indl Dev Auth Pub Fac
Lease Rev Henrico Cnty Regl Jail
Proj.................................. 6.500 08/01/10 1,627,470
2,000 Loudoun Cnty, VA Ctfs Partn (FSA
Insd)................................. 6.900 03/01/19 2,147,420
3,680 Virginia St Hsg Dev Auth Comwlth Mtg
Ser C................................. 6.250 07/01/11 3,727,987
1,000 Virginia St Hsg Dev Auth Multi-Family
Ser E Rfdg............................ 5.900 11/01/17 1,003,000
------------
9,824,915
------------
WASHINGTON 0.7%
1,000 Quinault Indian Nation, WA Rfdg & Impt
Quinault Beach Ser A.................. 5.800 12/01/15 946,930
1,000 Washington St Higher Ed Fac Auth Rev
Gonzaga Univ Proj Rfdg (MBIA Insd).... 4.750 04/01/22 828,200
------------
1,775,130
------------
WEST VIRGINIA 2.4%
735 Harrison Cnty, WV Cnty Cmnty Solid
Waste Disp Rev West PA Pwr Co Ser C
(AMBAC Insd).......................... 6.750 08/01/24 777,895
3,000 Marshall Cnty, WV Pollutn Ctl Rev OH
Pwr Co Proj Ser C Rfdg (MBIA Insd).... 6.850 06/01/22 3,193,770
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 2,457,365
------------
6,429,030
------------
</TABLE>
See Notes to Financial Statements
17
<PAGE> 19
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
WISCONSIN 1.3%
$1,000 Wisconsin St Hlth & Edl Fac Auth Rev
Aurora Hlthcare Inc Ser A............. 5.600% 02/15/29 $ 856,700
2,490 Wisconsin St Hlth & Edl Fac Auth Rev
Bellin Mem Hosp (AMBAC Insd).......... 6.625 02/15/08 2,703,468
------------
3,560,168
------------
PUERTO RICO 3.1%
8,000 Puerto Rico Comwlth Hwy & Tran Auth
Hwy Rev Ser Y Rfdg (FSA Insd)......... 6.250 07/01/21 8,465,600
------------
TOTAL INVESTMENTS 100.1%
(Cost $265,520,275)................................................ 270,295,157
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1%)........................ (197,854)
------------
NET ASSETS 100.0%................................................... $270,097,303
============
</TABLE>
* Zero coupon bond
(a) Securities purchased on a when issued or delayed delivery basis.
(b) Assets segregated as collateral for when issued or delayed delivery purchase
commitments.
AMBAC--AMBAC Indemnity Corporation
Connie Lee--Connie Lee Insurance Company
FGIC--Financial Guaranty Insurance Company
FHA--Federal Housing Administration
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Investors Assurance Corp.
See Notes to Financial Statements
18
<PAGE> 20
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Total Investments (Cost $265,520,275)....................... $270,295,157
Cash........................................................ 137,558
Receivables:
Investments Sold.......................................... 5,290,102
Interest.................................................. 4,368,511
Other....................................................... 97,346
------------
Total Assets.......................................... 280,188,674
------------
LIABILITIES:
Payables:
Investments Purchased..................................... 9,331,601
Income Distributions--Common and Preferred Shares......... 291,243
Investment Advisory Fee................................... 149,710
Administrative Fee........................................ 46,065
Affiliates................................................ 27,225
Trustees' Deferred Compensation and Retirement Plans........ 107,645
Accrued Expenses............................................ 137,882
------------
Total Liabilities..................................... 10,091,371
------------
NET ASSETS.................................................. $270,097,303
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 4,600 issued with liquidation preference of
$25,000 per share)........................................ $115,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 11,681,272 shares issued and
outstanding).............................................. 116,813
Paid in Surplus............................................. 172,387,137
Net Unrealized Appreciation................................. 4,774,882
Accumulated Undistributed Net Investment Income............. 1,326,236
Accumulated Net Realized Loss............................... (23,507,765)
------------
Net Assets Applicable to Common Shares................ 155,097,303
------------
NET ASSETS.................................................. $270,097,303
============
NET ASSET VALUE PER COMMON SHARE ($155,097,303 divided by
11,681,272 shares outstanding)............................ $ 13.28
============
</TABLE>
See Notes to Financial Statements
19
<PAGE> 21
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 16,049,414
------------
EXPENSES:
Investment Advisory Fee..................................... 1,848,669
Administrative Fee.......................................... 568,821
Preferred Share Maintenance................................. 321,303
Trustees' Fees and Related Expenses......................... 27,224
Custody..................................................... 19,941
Legal....................................................... 13,770
Other....................................................... 224,615
------------
Total Expenses.......................................... 3,024,343
------------
NET INVESTMENT INCOME....................................... $ 13,025,071
============
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ (560,865)
Options................................................... 83,445
------------
Net Realized Loss......................................... (477,420)
------------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 25,521,866
End of the Period:
Investments............................................. 4,774,882
------------
Net Unrealized Depreciation During the Period............... (20,746,984)
------------
NET REALIZED AND UNREALIZED LOSS............................ $(21,224,404)
============
NET DECREASE IN NET ASSETS FROM OPERATIONS.................. $ (8,199,333)
============
</TABLE>
See Notes to Financial Statements
20
<PAGE> 22
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended October 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1999 October 31, 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................. $ 13,025,071 $ 13,066,075
Net Realized Gain/Loss............................ (477,420) 334,216
Net Unrealized Appreciation/Depreciation During
the Period...................................... (20,746,984) 6,349,185
------------ ------------
Change in Net Assets from Operations.............. (8,199,333) 19,749,476
------------ ------------
Distributions from Net Investment Income:
Common Shares................................... (9,111,160) (9,081,893)
Preferred Shares................................ (3,700,075) (4,055,598)
------------ ------------
Total Distributions............................... (12,811,235) (13,137,491)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES...................................... (21,010,568) 6,611,985
NET ASSETS:
Beginning of the Period........................... 291,107,871 284,495,886
------------ ------------
End of the Period (Including accumulated
undistributed net investment income of
$1,326,236 and $1,112,400, respectively)........ $270,097,303 $291,107,871
============ ============
</TABLE>
See Notes to Financial Statements
21
<PAGE> 23
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of the
Period (a).................................... $ 15.076 $ 14.510 $ 13.877
-------- -------- --------
Net Investment Income......................... 1.115 1.119 1.130
Net Realized and Unrealized Gain/Loss......... (1.817) .572 .601
-------- -------- --------
Total from Investment Operations.............. (.702) 1.691 1.731
-------- -------- --------
Less:
Distributions from Net Investment Income:
Paid to Common Shareholders............... .780 .778 .750
Common Share Equivalent of Distributions
Paid to Preferred Shareholders.......... .317 .347 .348
Distributions from Net Realized Gain:
Paid to Common Shareholders............... -0- -0- -0-
Common Share Equivalent of Distributions
Paid to Preferred Shareholders.......... -0- -0- -0-
-------- -------- --------
Total Distributions........................... 1.097 1.125 1.098
-------- -------- --------
Net Asset Value, End of the Period............ $ 13.277 $ 15.076 $ 14.510
======== ======== ========
Market Price Per Share at End of the Period... $11.5625 $14.0625 $12.6875
Total Investment Return at Market Price (b)... (12.84%) 17.23% 16.02%
Total Return at Net Asset Value (c)........... (7.06%) 9.50% 10.24%
Net Assets at End of the Period (In
millions)................................... $ 270.1 $ 291.1 $ 284.5
Ratio of Expenses to Average Net Assets
Applicable to Common Shares**............... 1.79% 1.79% 1.83%
Ratio of Net Investment Income to Average Net
Assets Applicable to Common Shares (d)...... 5.50% 5.20% 5.56%
Portfolio Turnover............................ 25% 13% 23%
* Non-Annualized
** Ratio of Expenses to Average Net Assets
Including Preferred Shares................. 1.06% 1.08% 1.08%
</TABLE>
(a) Net Asset Value at June 25, 1993, is adjusted for common and preferred share
offering costs of $.234 per common share.
(b) Total Investment Return at Market Price reflects the change in market value
of the common shares for the period indicated with reinvestment of dividends
in accordance with the Trust's dividend reinvestment plan.
(c) Total Return at Net Asset Value (NAV) reflects the change in value of the
Trust's assets with reinvestment of dividends based upon NAV.
(d) Net Investment Income is adjusted for the common share equivalent of
distributions paid to preferred shareholders.
22
<PAGE> 24
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 25, 1993
(Commencement
Year Ended October 31 of Investment
- ------------------------------------- Operations) to
1996 1995 1994 October 31, 1993
- -------------------------------------------------------
<S> <C> <C> <C>
$ 13.717 $ 12.201 $ 15.584 $14.766
-------- -------- -------- -------
1.140 1.149 1.108 .312
.119 1.548 (3.276) .710
-------- -------- -------- -------
1.259 2.697 (2.168) 1.022
-------- -------- -------- -------
.750 .795 .900 .150
.349 .386 .256 .054
-0- -0- .049 -0-
-0- -0- .010 -0-
-------- -------- -------- -------
1.099 1.181 1.215 .204
-------- -------- -------- -------
$ 13.877 $ 13.717 $ 12.201 $15.584
======== ======== ======== =======
$ 11.625 $ 11.375 $ 10.500 $15.000
8.98% 16.07% (24.59%) 1.01%*
6.82% 19.54% (16.14%) 4.87%*
$ 277.1 $ 275.2 $ 257.5 $ 297.0
1.90% 1.94% 1.82% 1.59%
5.77% 5.88% 6.11% 4.76%
37% 58% 115% 55%*
1.10% 1.10% 1.06% 1.11%
</TABLE>
See Notes to Financial Statements
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
- --------------------------------------------------------------------------------
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, 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 generally accepted
accounting principles 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 are valued at
fair value using procedures established in good faith by the Board of Trustees.
Short-term securities with remaining maturities of 60 days or less are valued at
amortized cost.
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
maintain, in a segregated account with its custodian, assets having an aggregate
value at least equal to the amount of the when issued or delayed delivery
purchase commitments until payment is made.
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Bond
premium and original issue discount are amortized over the expected life of each
applicable security.
24
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
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, 1999, the Trust had an accumulated capital loss
carryforward for tax purposes of $23,507,765 which will expire between October
31, 2002 and October 31, 2007.
At October 31, 1999, for federal income tax purposes, cost of long-term
investments is $265,520,275; the aggregate gross unrealized appreciation is
$8,933,013 and the aggregate gross unrealized depreciation is $4,158,131,
resulting in net unrealized appreciation on long-term investments of $4,774,882.
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, which are included as ordinary income for tax
purposes.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen
Investment Advisory Corp. (the "Adviser") will provide Investment advice and
facilities to the Trust for an annual fee payable monthly of .65% of the average
net assets of the Trust. In addition, the Trust will pay a monthly
administrative fee to Van Kampen Funds Inc. or its affiliates (collectively "Van
Kampen"), the Trust's Administrator, at an annual rate of .20% of the average
daily net assets of the Trust. The administrative services provided by the
Administrator include record keeping and reporting responsibilities with respect
to the Trust's portfolio and preferred shares and providing certain services to
shareholders.
For the year ended October 31, 1999, the Trust recognized expenses of
approximately $4,500 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom (Illinois), counsel to the Trust, of which a trustee of
the Trust is an affiliated person.
25
<PAGE> 27
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
For the year ended October 31, 1999, the Trust recognized expenses of
approximately $93,400 representing Van Kampen's cost of providing accounting and
legal services to the Trust.
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 provides 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 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 October 31, 1999, 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 $74,144,058 and $72,621,356,
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 has a variety of reasons to use derivative instruments, such as to
attempt to protect the Trust against possible changes in the market value of its
portfolio and to manage the portfolio's effective yield, maturity and duration.
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 an option contract or taking
delivery of a security underlying a futures contract. In these instances the
recognition of gain or loss is postponed until the disposal of the security
underlying the option or futures contract.
Summarized below are the specific types of derivative financial instruments
used by the Trust.
A. OPTION CONTRACTS--An option contract gives the buyer the right, but not the
obligation to buy (call) or sell (put) an underlying item at a fixed exercise
price during a specified period. These contracts are generally used by the Trust
to manage the portfolio's effective maturity and duration.
26
<PAGE> 28
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
Transactions in options for the year ended October 31, 1999, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- --------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1998................. 100 $ 61,690
Options Written and Purchased (Net)............. 200 82,756
Options Terminated in Closing Transactions
(Net)......................................... (100) (33,566)
Options Expired (Net)........................... (200) (110,880)
---- ---------
Outstanding at October 31, 1999................. -0- $ -0-
==== =========
</TABLE>
B. FUTURES CONTRACTS--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 futures on U.S. Treasury Bonds and the Municipal Bond
Index and typically closes the contract prior to the delivery date. These
contracts are generally used to manage the portfolio's effective maturity and
duration.
Upon entering into futures contracts, the Trust maintains, in a segregated
account with its custodian, cash or liquid securities with a value equal to its
obligation under the futures contracts. 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).
There were no transactions in futures contracts during the year ended
October 31, 1999.
C. INDEXED SECURITIES--These instruments are identified in the portfolio of
investments. The price of these securities may be more volatile than the price
of a comparable fixed rate security.
An Embedded Cap security includes a cap strike level such that the coupon
payment may be supplemented by cap payments if the floating rate index upon
which the cap is based rises above the strike level. The Trust invests in these
instruments as a hedge against a rise in the short-term interest rates which it
pays on the preferred shares.
5. PREFERRED SHARES
Effective with the close of business on April 23, 1999, the liquidation
preference on the Trust's preferred shares decreased from $50,000 to $25,000 per
share. This decrease was effected by means of a 2 for 1 stock split that doubled
the Trust's number of outstanding preferred shares. The total liquidation value
for the Trust was unchanged.
27
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1999
- --------------------------------------------------------------------------------
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 seven days through an auction process. However, effective with the auction
on August 9, 1999, the dividend period for Series A was extended through April
10, 2000. Additionally, effective with its auction on August 6, 1999, the
dividend period for Series B was extended through April 7, 2000. Following these
extended dividend periods, Series A and B will revert back to their normal 28
day reset period. The average rate in effect on October 31, 1999 was 3.443%.
During the year ended October 31, 1999, the rates ranged from 2.000% to 4.500%.
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.
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.
28
<PAGE> 30
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen Municipal Opportunity Trust II:
We have audited the accompanying statement of assets and liabilities of Van
Kampen Municipal Opportunity Trust II (the "Trust"), including the portfolio of
investments, as of October 31, 1999 and the related statement of operations for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1999, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen Municipal Opportunity Trust II as of October 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles.
KPMG LLP
Chicago, Illinois
December 6, 1999
29
<PAGE> 31
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 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
30
<PAGE> 32
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST II
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*
STEVEN MULLER
THEODORE A. MYERS
RICHARD F. POWERS, III* -- Chairman
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
RICHARD F. POWERS, III*
President
DENNIS J. MCDONNELL*
Executive Vice President and Chief Investment Officer
A. THOMAS SMITH III*
Vice President and Secretary
JOHN L. SULLIVAN*
Vice President, Treasurer and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
MICHAEL H. SANTO*
EDWARD C. WOOD, III*
Vice Presidents
INVESTMENT ADVISER
VAN KAMPEN
INVESTMENT ADVISORY CORP.
1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
CUSTODIAN AND
TRANSFER AGENT
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT ACCOUNTANTS
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
For Federal income tax purposes, the following information is furnished with
respect to the distributions paid by the Trust during its taxable year ended
October 31, 1999. The Trust designated 99.9% of the income distributions as a
tax-exempt income distribution. In January, 2000, the Trust will provide tax
information to shareholders for the 1999 calendar year.
* "Interested" persons of the Trust, as defined in the Investment Company Act
of 1940.
(C) Van Kampen Funds Inc., 1999 All rights reserved.
(SM) denotes a service mark of Van Kampen Funds Inc.
31
<PAGE> 33
RESULTS OF SHAREHOLDER VOTES
The Annual Meeting of Shareholders of the Trust was held on June 16, 1999, where
shareholders voted on the election of trustees and the selection of independent
public accountants.
1) With regard to the election of the following trustee by preferred
shareholders of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
--------------------
IN FAVOR WITHHELD
- ----------------------------------------------------------------------
<S> <C> <C>
Theodore A. Myers............................... 4,296 -0-
</TABLE>
2) With regard to the election of the following trustees by the common
shareholders of the Trust:
<TABLE>
<CAPTION>
# OF SHARES
--------------------
IN FAVOR WITHHELD
- ----------------------------------------------------------------------
<S> <C> <C>
Don G. Powell*.................................. 9,066,117 101,272
Hugo F. Sonnenschein............................ 9,063,699 103,695
</TABLE>
The other Trustees of the Trust whose term did not expire in 1999 are David C.
Arch, Rod Dammeyer, Howard J Kerr, Dennis J. McDonnell, Steven Muller and Wayne
W. Whalen.
3) With regard to the ratification of KPMG LLP as independent public
accountants for the Trust, 9,017,080 shares voted in favor of the proposal,
32,197 shares voted against and 122,409 shares abstained.
* On August 9, 1999, Don G. Powell resigned and the Board of Trustees appointed
Richard F. Powers, III.
32
<PAGE> 34
YEAR 2000 READINESS DISCLOSURE
Like other mutual funds, financial and business organizations and individuals
around the world, the Trust could be adversely affected if the computer systems
used by the Trust's investment adviser and other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. This is commonly known as the "Year 2000 Problem." The Trust's
investment adviser is taking steps that it believes are reasonably designed to
address the Year 2000 Problem with respect to computer systems that it uses and
to obtain reasonable assurances that comparable steps are being taken by the
Trust's other major service providers. At this time, there can be no assurances
that these steps will be sufficient to avoid any adverse impact to the Trust. In
addition, the Year 2000 Problem may adversely affect the markets and the issuers
of securities in which the Trust may invest that, in turn, may adversely affect
the net asset value of the Trust. Improperly functioning trading systems may
result in settlement problems and liquidity issues. In addition, corporate and
governmental data processing errors may result in production problems for
individual companies or issuers and overall economic uncertainty. Earnings of
individual issuers will be affected by remediation costs, which may be
substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Trust's investments may be adversely affected. The
statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of dispute.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000902754
<NAME> VK MUNI OPP TRUST II
<SERIES>
<NUMBER> 11
<NAME> MUNI OPP TRUST II
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1999
<INVESTMENTS-AT-COST> 265,520,275
<INVESTMENTS-AT-VALUE> 270,295,157
<RECEIVABLES> 9,658,613
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 234,904
<TOTAL-ASSETS> 280,188,674
<PAYABLE-FOR-SECURITIES> 9,331,601
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 759,770
<TOTAL-LIABILITIES> 10,091,371
<SENIOR-EQUITY> 115,000,000
<PAID-IN-CAPITAL-COMMON> 172,503,950
<SHARES-COMMON-STOCK> 11,681,272
<SHARES-COMMON-PRIOR> 11,681,272
<ACCUMULATED-NII-CURRENT> 1,326,236
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (23,507,765)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,774,882
<NET-ASSETS> 270,097,303
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,049,414
<OTHER-INCOME> 0
<EXPENSES-NET> (3,024,343)
<NET-INVESTMENT-INCOME> 13,025,071
<REALIZED-GAINS-CURRENT> (477,420)
<APPREC-INCREASE-CURRENT> (20,746,984)
<NET-CHANGE-FROM-OPS> (8,199,333)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (12,811,235)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (21,010,568)
<ACCUMULATED-NII-PRIOR> 1,112,400
<ACCUMULATED-GAINS-PRIOR> (23,030,345)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,848,669
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,024,343
<AVERAGE-NET-ASSETS> 284,416,606
<PER-SHARE-NAV-BEGIN> 15.076
<PER-SHARE-NII> 1.115
<PER-SHARE-GAIN-APPREC> (1.817)
<PER-SHARE-DIVIDEND> 1.097
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 13.277
<EXPENSE-RATIO> 1.79
</TABLE>
