<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 5
Portfolio of Investments......................... 6
Statement of Assets and Liabilities.............. 10
Statement of Operations.......................... 11
Statement of Changes in Net Assets............... 12
Financial Highlights............................. 13
Notes to Financial Statements.................... 14
Dividend Reinvestment Plan....................... 19
</TABLE>
VKI SAR 6/97
<PAGE> 2
LETTER TO SHAREHOLDERS
June 5, 1997
Dear Shareholder,
As mentioned in your previous
report, VK/AC Holding, Inc., the parent
company of Van Kampen American Capital,
Inc., was acquired by Morgan Stanley
Group Inc., a world leader in asset
management. More recently, on February [PHOTO]
5, 1997, Morgan Stanley Group Inc. and
Dean Witter, Discover & Co. announced
their agreement to merge, and you DENNIS J. MCDONNELL AND DON G. POWELL
received a proxy in April. The merger
was completed on May 31, 1997, creating
the combined company of Morgan Stanley, Dean Witter, Discover & Co. This
preeminent global financial services firm boasts a market capitalization of $21
billion and leading market positions in securities, asset management, and credit
services. As the financial industry continues to witness unprecedented
consolidations and new partnerships, we believe that those firms that are
leaders in all facets of their business will be able to offer investors the
greatest opportunities and services as we move into the next century. We are
confident that this merger will provide investors with those benefits.
ECONOMIC REVIEW
Bond prices were volatile during the six months ended April 30, 1997. Prices
initially rose as the economy slowed, erasing fears of an interest rate hike by
the Federal Reserve Board. The November election of a Democratic president and
Republican Congress was positive for bonds because the split government was
viewed as a restraint on spending increases that could potentially swell the
budget deficit. In addition, support diminished for radical tax reform that
could threaten the tax-free status of municipal bonds.
By the beginning of 1997, the situation changed. Bond prices began to fall
as the economy picked up speed, culminating in a 5.60 percent annualized growth
rate in the first quarter. This strength, coupled with warnings by Fed Chairman
Alan Greenspan that tighter monetary policy might be appropriate, reignited
fears of a rate hike. On March 25, the Fed raised short-term rates by a modest
0.25 percent, which sent the 30-year Treasury bond yield above 7.00 percent for
the first time in six months. By the end of April, the 30-year Treasury bond
yield slipped back below 7.00 percent as the market turned its attention to
positive news about inflation, and bonds recovered some of their earlier losses.
Throughout most of the six months ended April 30, municipal bonds generally
outperformed Treasuries. Between October 31 and April 30, yields on long-term
municipal revenue bonds rose 21 basis points, while yields on 30-year Treasury
bonds jumped 31 basis points. Because bond yields move in the opposite direction
of prices, the smaller
Continued on page two
1
<PAGE> 3
increase in municipal yields meant that municipal bond prices did not fall as
sharply as Treasury bond prices did. A relatively stable supply of new issues,
combined with an increase in retail demand, contributed to the improved
performance of municipal bonds.
FUND STRATEGY
In managing the Trust, we maintained a concentration in high-quality bonds
during the period. As of April 30, approximately 57 percent of the Trust's
long-term investments were AAA-rated, the highest credit rating assigned to
bonds by the Standard & Poor's Ratings Group. In addition, approximately 24
percent of long-term investments were rated AA or A, and approximately 19
percent were rated BBB or below. BBB is the lowest rating Standard & Poor's
assigns to bonds in the investment grade-category. AAA-rated securities
typically have performed better when interest rates are declining and provide
the potential for safety of principal. They are extremely liquid because most
are insured bonds. BBB-rated securities have tended to perform better when rates
are rising, and they have the potential to provide additional income.
[CREDIT QUALITY GRAPH]
Portfolio Composition by Credit Quality as a Percentage of Long-Term
Investments as of April 30, 1997
<TABLE>
<S> <C>
AAA........................ 56.7%
AA......................... 14.5%
A.......................... 9.7%
BBB........................ 18.4%
B.......................... 0.7%
</TABLE>
Based upon credit quality ratings issued by Standard & Poor's. For securities
not rated by Standard & Poor's, the Moody's rating is used.
Portfolio turnover was moderate during the reporting period because market
conditions offered few opportunities to add value over existing holdings. The
average yield of bonds in the portfolio was higher than current market yields.
Activity was also limited by the tight spreads between yields of AAA-rated bonds
and lower-rated bonds. These spreads remained narrow due to the increasing
number of insured bonds in the municipal market. As a result, there was often
not enough yield reward to justify the additional credit risk of purchasing
lower-rated securities.
Acquisitions focused on finding long-term discount bonds that could enhance
the call protection of the Trust. In other words, we hope to lessen the
concentration of bonds that can be called at any one time. When buying new
securities for the portfolio, we attempt to identify those bonds that we believe
will outperform within a particular sector and that can be purchased at an
attractive price. We believe this "bottom-up" approach, supported by our
research, provides significant added value to the portfolio.
We shortened the duration during this period of rising interest rates in
order to potentially reduce the Trust's volatility to rate increases. Duration,
which is expressed in
Continued on page three
2
<PAGE> 4
years, is a measure of a portfolio's sensitivity to interest rate movements.
Portfolios with long durations have tended to perform better when rates are
falling, and portfolios with short durations have tended to perform better when
rates are rising. At the end of the period, the Trust's portfolio duration stood
at 7.31 years compared to 8.10 years for the Lehman Brothers Municipal Bond
Index benchmark.
[DIVIDEND HISTORY GRAPH]
Six-month Dividend History
For the Peroid Ended April 30, 1997
<TABLE>
<CAPTION>
Distribution per Share
<S> <C>
Nov 1996......................... $0.620
Dec 1996......................... $0.620
Jan 1997......................... $0.620
Feb 1997......................... $0.620
Mar 1997......................... $0.620
Apr 1997......................... $0.620
</TABLE>
The dividend history represents past performance of the Trust and does
not predict the Trust's future distributions.
PERFORMANCE SUMMARY
We are pleased to report that the Van Kampen American Capital Advantage
Municipal Income Trust II continued its positive performance over the first half
of its fiscal year. For the six-month period ended April 30, 1997, the Trust
generated a total return at market price of 4.34 percent(1). The Trust offered a
tax-exempt distribution rate of 6.40 percent(3), based on the closing common
stock price of $11.625 per share on April 30, 1997. Because income from the
Trust is exempt from federal income tax, this distribution rate represents a
yield equivalent to a taxable investment earning 10.00 percent(4) (for investors
in the 36 percent federal income tax bracket). At the end of the reporting
period, the closing share price of the Trust traded at a 12.9 percent discount
to its net asset value of $13.35.
Continued on page four
3
<PAGE> 5
TOP FIVE PORTFOLIO INDUSTRY HOLDINGS BY SECTOR AS OF APRIL 30, 1997*
Health Care....................... 25.1%
Single-Family Housing............. 16.5%
Transportation.................... 10.4%
General Purpose................... 10.3%
Industrial Revenue................. 7.8%
*As a Percentage of Long-Term Investments
MUNICIPAL MARKET OUTLOOK
We continue to see signs of a strong economy, although we do not expect the
unusually brisk growth rate of the first quarter to be sustained throughout the
year. As a result, we believe the Fed will monitor the economy closely and take
aggressive action to control growth if inflation picks up or the high growth
rate is sustained. However, if growth slows, we believe the Fed will leave rates
unchanged. Given this outlook, we expect that yields on the 30-year Treasury
bond will range between 6.75 and 7.40 percent for the remainder of the year,
with higher levels occurring early and lower yields dominating the second half
of 1997. Although short-term interest rates have risen, this has not had a
significant impact on the leveraged structure of the Trust.
We believe the Trust is positioned to perform well in the coming months, and
we do not anticipate major structural changes in the portfolio. In light of our
expectations for interest rates, we will continue to maintain a slightly
defensive posture by keeping a relatively short duration for the portfolio and
adjusting the duration when prudent. We will also continue to seek a balance
between the Trust's total return and its dividend income, as well as to add
value through security selection. Thank you for your continued confidence in Van
Kampen American Capital and your Trust's team of managers.
Sincerely,
[SIG]
Don G. Powell
Chairman
Van Kampen American Capital
Investment Advisory Corp.
[SIG]
Dennis J. McDonnell
President
Van Kampen American Capital
Investment Advisory Corp.
Please see footnotes on page five
4
<PAGE> 6
PERFORMANCE RESULTS FOR THE PERIOD ENDED APRIL 30, 1997
VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST II
(AMEX TICKER SYMBOL--VKI)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
Six-month total return based on market price(1)............ 4.34%
Six-month total return based on NAV(2)..................... 1.56%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3)................................................... 6.40%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)...................................... 10.00%
SHARE VALUATIONS
Net asset value............................................ $ 13.35
Closing common stock price................................. $11.625
Six-month high common stock price (02/25/97)............... $12.125
Six-month low common stock price (12/18/96)................ $11.000
Preferred share (Series A) rate(5)......................... 4.36%
Preferred share (Series B) rate(5)......................... 4.00%
</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.
Market forecasts provided in this report may not necessarily come to pass.
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS
ALASKA 1.4%
$3,000 Alaska St Hsg Fin Corp Ser A Rfdg............. 5.000% 12/01/18 $ 2,662,620
------------
ARIZONA 1.0%
1,665 Pima Cnty, AZ Indl Dev Auth Indl Rev Lease
Oblig Irvington Proj Tucson Ser A Rfdg (FSA
Insd)......................................... 7.250 07/15/10 1,836,478
------------
CALIFORNIA 7.5%
3,000 Los Angeles Cnty, CA Tran Comm Sales Tax Rev
Prop C 2nd Sr Ser A (MBIA Insd)............... 6.250 07/01/13 3,148,740
1,000 Montebello, CA Unified Sch Dist Ctfs Partn Cap
Impts Proj.................................... 6.300 06/01/11 1,028,920
2,000 Orange Cnty, CA Recovery Ctfs Partn Ser A
(MBIA Insd)................................... 6.000 07/01/08 2,125,380
4,000 Orange Cnty, CA Recovery Ser A Rfdg (MBIA
Insd)......................................... 6.000 06/01/08 4,286,000
4,000 San Bernardino Cnty, CA Ctfs Partn Med Cent
Fin Proj (MBIA Insd).......................... 5.000 08/01/28 3,564,000
------------
14,153,040
------------
COLORADO 6.4%
1,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev
E-470 Proj Ser B.............................. 7.000 08/31/26 1,070,640
5,000 Arapahoe Cnty, CO Cap Impt Trust Fund Hwy Rev
E-470 Proj Ser C.............................. * 08/31/26 614,600
4,460 Colorado Hsg Fin Auth Single Family Pgm Sr Ser
A............................................. 8.000 06/01/25 4,919,335
1,500 Colorado Hsg Fin Auth Single Family Pgm Sr Ser
A2............................................ 7.250 05/01/27 1,642,320
1,605 Colorado Hsg Fin Auth Single Family Pgm Sr Ser
B1............................................ 7.650 11/01/26 1,789,511
725 Colorado Hsg Fin Auth Single Family Pgm Sr Ser
E............................................. 8.125 12/01/24 793,839
1,100 Denver, CO City & Cnty Arpt Rev Ser A......... 8.500 11/15/23 1,244,089
------------
12,074,334
------------
CONNECTICUT 1.1%
2,000 Mashantucket Western Pequot Tribe Conn Spl Rev
Ser A (d)..................................... 6.400 09/01/11 2,065,740
------------
GEORGIA 2.0%
3,445 De Kalb Cnty, GA Hsg Auth Multi-Family Hsg Rev
North Hill Apts Proj Rfdg (FNMA Insd)......... 6.625 01/01/25 3,736,068
------------
ILLINOIS 9.9%
2,090 Alton, IL Hosp Fac Rev Saint Anthony's Hlth
Cent Rfdg..................................... 5.500 09/01/06 2,061,806
5,000 Chicago, IL O'Hare Intl Arpt Rev Sr Lien Ser A
Rfdg.......................................... 5.000 01/01/12 4,671,300
7,375 Illinois Hlth Fac Auth Rev Swedish American
Hosp Rfdg (AMBAC Insd)........................ 5.375 11/15/13 7,097,331
4,640 Illinois Hsg Dev Auth Rev Homeowner Mtg Subser
A-2........................................... 7.125 08/01/26 4,897,845
------------
18,728,282
------------
IOWA 0.7%
1,300 Ottumwa, IA Hosp Fac Rev Ottumwa Regl Hlth
Rfdg & Impt................................... 6.000 10/01/18 1,254,409
------------
KENTUCKY 1.5%
3,000 Louisville & Jefferson Cnty, KY Metro Swr Dist
Drainage Rev Rfdg (MBIA Insd)................. 5.300 05/15/19 2,802,270
------------
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LOUISIANA 1.8%
$1,400 Louisiana Pub Fac Auth Rev Hlth Fac Glen
Retirement Ser A.............................. 6.700% 12/01/25 $ 1,415,428
1,750 Saint Charles Parish, LA Pollutn Ctl Rev LA
Pwr & Lt Co Proj (FSA Insd)................... 7.500 06/01/21 1,914,885
------------
3,330,313
------------
MARYLAND 3.6%
2,955 Maryland St Cmnty Dev Admin Dept Hsg & Cmnty
Dev Single Family Pgm......................... 6.800 04/01/24 3,053,254
4,000 Maryland St Hlth & Higher Edl Fac Auth Rev
Subn Hosp Rfdg (AMBAC Insd)................... 5.000 07/01/13 3,748,600
------------
6,801,854
------------
MASSACHUSETTS 5.1%
1,200 Massachusetts Bay Tran Auth MA Genl Tran Sys
Ser A Rfdg.................................... 6.250 03/01/12 1,293,528
2,665 Massachusetts Muni Whsl Elec Co Pwr Supply Sys
Rev Ser B Rfdg (MBIA Insd).................... 5.000 07/01/12 2,501,502
1,550 Massachusetts St Consolidated Loan
Series D (Prerefunded 09/01/01) (c)........... 7.000 07/01/07 1,699,373
600 Massachusetts St Consolidated Loan
Series D (Unrefunded Bal)..................... 7.000 07/01/07 656,394
1,550 Massachusetts St Hlth & Edl Fac Auth Rev Saint
Mem Med Cent Ser A............................ 6.000 10/01/23 1,364,419
2,150 Massachusetts St Hsg Fin Agy Hsg Rev Insd
Rental Ser A (AMBAC Insd) (c)................. 6.650 07/01/19 2,225,766
------------
9,740,982
------------
MICHIGAN 2.5%
2,000 Detroit, MI Downtown Dev Auth Tax Increment
Rev Dev Area No 1 Proj Ser C1................. 6.250 07/01/25 2,037,620
2,500 Detroit, MI Wtr Supply Sys Rev Rfdg (FGIC
Insd) (c)..................................... 6.250 07/01/12 2,631,550
------------
4,669,170
------------
MISSISSIPPI 2.9%
3,000 Mississippi Home Corp Single Family Rev Mtg
Ser C (GNMA Collateralized) (e)............... 5.500/7.600 06/01/29 3,353,130
2,060 Mississippi Home Corp Single Family Rev Mtg
Ser F (GNMA Collateralized)................... 6.250 12/01/16 2,083,566
------------
5,436,696
------------
MISSOURI 1.0%
2,000 Kansas City, MO Muni Assistance Corp Rev Rfdg
(MBIA Insd)................................... 5.000 04/15/20 1,827,880
------------
NEW HAMPSHIRE 0.5%
1,000 New Hampshire St Business Fin Auth Wtr Fac Rev
Pennichuck Wtrwks Inc (AMBAC Insd) (b)........ 6.300 05/01/22 1,020,690
------------
NEW MEXICO 0.8%
1,570 New Mexico Mtg Fin Auth Single Family Mtg Pgm
Ser H (GNMA Collateralized)................... 6.600 07/01/15 1,624,510
------------
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
NEW YORK 17.6%
$3,000 New York City Ser G........................... 6.000% 02/01/11 $ 2,994,120
5,000 New York City Ser H........................... 7.200 02/01/13 5,359,850
6,250 New York St Energy Resh & Dev Auth Fac Rev
Cons Edison Co NY Inc Proj Ser A (MBIA
Insd)......................................... 6.750 01/15/27 6,599,062
1,250 New York St Energy Resh & Development Auth Fac
Rev Cons Edison Co NY Inc Proj Ser B (MBIA
Insd)......................................... 6.375 12/01/27 1,285,713
3,000 New York St Med Care Fac Fin Agy Rev NY Hosp
Mtg Ser A (AMBAC Insd)........................ 6.200 08/15/05 3,232,140
3,000 New York St Med Care Fac Fin Agy Rev NY Hosp
Mtg Ser A (AMBAC Insd)........................ 6.800 08/15/24 3,270,450
2,175 New York St Med Care Fac Fin Agy Rev Ser A.... 6.800 02/15/20 2,273,179
1,450 New York St Pwr Auth Rev & Genl Purp Ser CC
Rfdg (AMBAC Insd)............................. 5.125 01/01/10 1,400,222
1,000 New York St Thruway Auth Svc Contract Rev Loc
Hwy & Brdg (MBIA insd)........................ 5.125 04/01/07 991,910
2,500 Port Auth NY & NJ Cons 67th Ser............... 6.875 01/01/25 2,647,425
3,505 Port Auth NY & NJ Cons 92nd Ser (c)........... 5.000 07/15/15 3,230,804
------------
33,284,875
------------
NORTH CAROLINA 1.0%
2,000 Martin Cnty, NC Indl Fac & Pollutn Ctl Fin
Auth Rev Solid Waste Weyerhaeuser Co.......... 5.650 12/01/23 1,913,320
------------
OHIO 0.6%
1,165 Marion Cnty, OH Hosp Impt Rev Cmnty Hosp
Rfdg.......................................... 6.100 05/15/06 1,195,057
------------
OKLAHOMA 4.9%
3,500 Shawnee, OK Hosp Auth Hosp Rev Midamerica
Hlthcare Inc Rfdg............................. 6.125 10/01/14 3,434,830
2,780 Tulsa, OK Arpts Impt Trust Genl Rev (MBIA
Insd)......................................... 7.700 06/01/13 2,857,451
2,785 Tulsa, OK Indl Auth Hosp Rev Hillcrest Med
Cent Proj Rfdg (Connie Lee Insd).............. 6.250 06/01/06 2,955,136
------------
9,247,417
------------
OREGON 3.8%
2,010 Emerald Peoples Util Dist OR Elec Sys Rev
(FGIC Insd)................................... 7.350 11/01/09 2,380,564
3,000 Oregon Hlth Sciences Univ Rev Ser B (MBIA
Insd)......................................... 5.250 07/01/28 2,810,190
2,000 Oregon St Econ Dev Rev Georgia Pacific Corp... 6.350 08/01/25 2,033,700
------------
7,224,454
------------
PENNSYLVANIA 3.6%
2,000 Pennsylvania Econ Dev Fin Auth Res Recovery
Rev Colver Proj Ser D......................... 7.150 12/01/18 2,097,760
3,200 Philadelphia, PA Wtr & Wastewtr Rev Rfdg (Cap
Guar Insd).................................... 5.000 06/15/16 2,901,152
1,700 Sharon, PA Regl Hlth Sys Auth Hosp Rev Sharon
Regl Hlth Sys Proj A Rfdg..................... 6.875 12/01/09 1,785,884
------------
6,784,796
------------
RHODE ISLAND 2.1%
3,865 Rhode Island Hsg & Mtg Fin Corp Homeownership
Oppty Ser E1 (FHA Gtd)........................ 7.500 10/01/11 4,052,182
------------
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- ----------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TEXAS 9.4%
$2,220 Bexar Cnty, TX Hlth Fac Dev Corp Hosp Rev
Baptist Mem Hosp Sys Proj (MBIA Insd)......... 6.625% 02/15/12 $ 2,401,507
3,065 Bexar Cnty, TX Hlth Fac Dev Corp Hosp Rev
Baptist Mem Hosp Sys Proj (MBIA Insd)......... 6.625 02/15/13 3,309,832
2,070 Bexar Cnty, TX Hlth Fac Dev Corp Hosp Rev
Baptist Mem Hosp Sys Proj (MBIA Insd)......... 6.500 08/15/15 2,219,578
2,200 Brazos River Auth TX Pollutn Ctl Rev Coll TX
Util Elec Co Proj Ser A....................... 8.250 01/01/19 2,346,036
1,705 Brownsville, TX Util Sys Rev.................. 7.375 01/01/10 1,928,952
3,480 Houston, TX Arpt Sys Rev (c).................. 9.500 07/01/10 4,525,427
1,170 Temple, TX Jr College Dist Hsg Rfdg (MBIA
Insd)......................................... 5.250 07/01/18 1,100,853
------------
17,832,185
------------
VIRGINIA 1.7%
3,000 Fairfax Cnty, VA Econ Dev Auth Res Recovery
Rev Ogden Martin Sys Proj Ser A............... 7.750 02/01/11 3,209,670
------------
WYOMING 0.9%
1,500 Laramie Cnty, WY Hosp Rev Mem Hosp Proj (AMBAC
Insd)......................................... 6.700 05/01/12 1,626,465
------------
PUERTO RICO 3.4%
6,000 Puerto Rico Comwlth Hwy & Tran Ser Y (Embedded
Cap) (FSA Insd)............................... 5.730 07/01/21 6,457,560
------------
TOTAL LONG-TERM INVESTMENTS 98.7%
(Cost $178,126,627) (a)....................................................... 186,593,317
SHORT-TERM INVESTMENTS 0.1%
(Cost $200,000) (a)........................................................... 200,000
OTHER ASSETS IN EXCESS OF LIABILITIES 1.2%..................................... 2,279,814
------------
NET ASSETS 100.0%.............................................................. $189,073,131
============
</TABLE>
*Zero coupon bond
(a) At April 30, 1997, for federal income tax purposes cost of long- and
short-term investments is $178,326,627; the aggregate gross unrealized
appreciation is $8,743,941 and the aggregate gross unrealized depreciation
is $248,764, resulting in net unrealized appreciation including open option
and futures transactions of $8,495,177.
(b) Securities purchased on a when issued or delayed delivery basis.
(c) Assets segregated as collateral for when issued or delayed delivery purchase
commitments, open option and open futures transactions.
(d) Private placement issue.
(e) Security is a "Step-up" bond where the coupon increases or steps up at a
predetermined date.
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Long Term Investments, at Market Value (Cost $178,126,627)
(Note 1).................................................. $186,593,317
Short-Term Investments (Cost $200,000) (Note 1)............. 200,000
Cash........................................................ 28,851
Receivables:
Interest.................................................. 3,613,570
Securities Sold........................................... 61,465
Unamortized Organizational Costs (Note 1)................... 10,575
Other....................................................... 2,642
------------
Total Assets.......................................... 190,510,420
------------
LIABILITIES:
Payables:
Securities Purchased...................................... 1,002,450
Investment Advisory Fee (Note 2).......................... 100,552
Income Distributions -- Common and Preferred Shares....... 44,305
Variation Margin on Futures (Note 4)...................... 36,813
Administrative Fee (Note 2)............................... 30,939
Affiliates (Note 2)....................................... 5,953
Accrued Expenses............................................ 157,936
Deferred Compensation and Retirement Plans (Note 2)......... 55,810
Options at Market Value (Net premiums received of $21,501)
(Note 4).................................................. 2,531
------------
Total Liabilities..................................... 1,437,289
------------
NET ASSETS.................................................. $189,073,131
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000
shares, 1,600 issued with liquidation preference of
$50,000 per share) (Note 5)............................... $ 80,000,000
------------
Common Shares ($.01 par value with an unlimited number of
shares authorized, 8,168,211 shares issued and
outstanding).............................................. 81,682
Paid in Surplus............................................. 120,809,877
Net Unrealized Appreciation on Securities................... 8,495,177
Accumulated Undistributed Net Investment Income............. 501,540
Accumulated Net Realized Loss on Securities................. (20,815,145)
------------
Net Assets Applicable to Common Shares................ 109,073,131
------------
NET ASSETS.................................................. $189,073,131
============
NET ASSET VALUE PER COMMON SHARE ($109,073,131 divided by
8,168,211 shares outstanding)............................. $ 13.35
============
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest.................................................... $ 5,573,866
-----------
EXPENSES:
Investment Advisory Fee (Note 2)............................ 613,416
Administrative Fee (Note 2)................................. 188,743
Preferred Share Maintenance (Note 5)........................ 122,632
Custody..................................................... 13,861
Trustees Fees and Expenses (Note 2)......................... 12,833
Legal (Note 2).............................................. 7,240
Amortization of Organizational Costs (Note 1)............... 3,966
Other....................................................... 88,412
-----------
Total Expenses.......................................... 1,051,103
-----------
NET INVESTMENT INCOME....................................... $ 4,522,763
===========
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments............................................... $ (50,135)
Options................................................... (174,390)
Futures................................................... (161)
-----------
Net Realized Loss on Securities............................. (224,686)
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period................................... 9,608,098
-----------
End of the Period:
Investments............................................. 8,466,690
Options................................................. 18,970
Futures................................................. 9,517
-----------
8,495,177
-----------
Net Unrealized Depreciation on Securities During the
Period.................................................... (1,112,921)
-----------
NET REALIZED AND UNREALIZED LOSS ON SECURITIES.............. $(1,337,607)
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 3,185,156
===========
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended April 30, 1997 and the
Year Ended October 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
April 30, 1997 October 31, 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 4,522,763 $ 9,162,619
Net Realized Gain/Loss on Securities.................... (224,686) 734,858
Net Unrealized Appreciation/Depreciation on Securities
During the Period..................................... (1,112,921) 786,082
------------ ------------
Change in Net Assets from Operations.................... 3,185,156 10,683,559
------------ ------------
Distributions from Net Investment Income:
Common Shares......................................... (3,038,481) (6,211,780)
Preferred Shares...................................... (1,398,542) (2,886,832)
------------ ------------
Total Distributions..................................... (4,437,023) (9,098,612)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES..... (1,251,867) 1,584,947
NET ASSETS:
Beginning of the Period................................. 190,324,998 188,740,051
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $501,540 and $415,800,
respectively)......................................... $189,073,131 $190,324,998
============ ============
</TABLE>
See Notes to Financial Statements
12
<PAGE> 14
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share of
the Trust outstanding throughout the periods indicated. (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
August 27, 1993
(Commencement
Six Months Ended Year Ended October 31, of Investment
April 30, --------------------------- Operations) to
1997 1996 1995 1994 October 31, 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of the Period (a)......... $13.507 $13.313 $11.928 $14.972 $14.921
------- ------- ------- ------- -------
Net Investment Income..... .554 1.122 1.151 1.120 .085
Net Realized and
Unrealized Gain/Loss on
Securities.............. (.165) .186 1.455 (3.072) .125
------- ------- ------- ------- -------
Total from Investment
Operations................ .389 1.308 2.606 (1.952) .210
------- ------- ------- ------- -------
Less Distributions from Net
Investment Income:
Paid to Common
Shareholders.......... .372 .761 .834 .834 -0-
Common Share Equivalent
of Distributions Paid
to Preferred
Shareholders.......... .171 .353 .387 .258 -0-
------- ------- ------- ------- -------
Total Distributions......... .543 1.114 1.221 1.092 -0-
------- ------- ------- ------- -------
Net Asset Value, End of the
Period.................... $13.353 $13.507 $13.313 $11.928 $15.131
======= ======= ======= ======= =======
Market Price Per Share at
End of the Period......... $11.625 $11.500 $11.500 $9.875 $14.625
Total Investment Return at
Market Price (b).......... 4.34%* 6.82% 25.22% (27.65%) (2.50%)*
Total Return at Net Asset
Value (c)................. 1.56%* 7.44% 19.09% (16.10%) .87%*
Net Assets at End of the
Period (In millions)...... $189.1 $190.3 $188.7 $177.4 $123.6
Ratio of Expenses to Average
Net Assets Applicable to
Common Shares............. 1.92% 1.94% 1.98% 1.82% 1.30%
Ratio of Expenses to Average
Net Assets................ 1.11% 1.12% 1.12% 1.09% 1.30%
Ratio of Net Investment
Income to Average Net
Assets Applicable to
Common Shares (d)......... 5.71% 5.77% 6.01% 6.34% 3.40%
Portfolio Turnover.......... 7%* 37% 79% 214% 24%*
</TABLE>
(a) Net Asset Value at August 27, 1993, of $15.000 is adjusted for common share
offering costs of $.079 per common share. Net asset value at October 31,
1993 of $15.131 is adjusted for preferred share offering costs of $.159 per
common share.
(b) Total Investment Return at 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.
* Non-Annualized
See Notes to Financial Statements
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Advantage Municipal Income 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 will invest substantially all
of its assets in municipal securities rated investment grade at the time of
investment. The Trust commenced investment operations on August 27, 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--Investments are stated at value using market quotations
or, if such valuations are not available, estimates obtained from yield data
relating to instruments or securities with similar characteristics in accordance
with 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.
D. ORGANIZATIONAL COSTS--The Trust has reimbursed Van Kampen American Capital
Distributors, Inc. or its affiliates (collectively "VKAC") for costs incurred in
connection with the Trust's organization in the amount of $40,000. These costs
are being amortized on a
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
straight line basis over the 60 month period ending August 26, 1998. Van Kampen
American Capital Investment Advisory Corp. (the "Adviser") has agreed that in
the event any of the initial shares of the Trust originally purchased by VKAC
are redeemed during the amortization period, the Trust will be reimbursed for
any unamortized organizational costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
E. 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, 1996, the Trust had an accumulated capital loss
carryforward for tax purposes of $20,658,907 which will expire between October
31, 2002 and October 31, 2003. Net realized gains or losses may differ for
financial and tax reporting purposes primarily as a result of gains or losses
recognized for tax purposes on the mark-to-market of open option contracts at
October 31, 1996, the Fund's year-end.
F. DISTRIBUTION OF INCOME AND GAINS--The Trust declares and pays dividends from
net investment income to common shareholders monthly. Net realized gains, if
any, are distributed annually on a pro rata basis to common and preferred
shareholders.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, 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 VKAC, the Trust's Administrator, at an
annual rate of .20% of the average 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.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom
(Illinois), counsel to the Trust, of which a trustee of the Trust is an
affiliated person.
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended April 30, 1997, the Trust recognized expenses of
approximately $23,100 representing VKAC's cost of providing accounting and legal
services to the Trust.
Certain officers and trustees of the Trust are also officers and directors
of VKAC. The Trust does not compensate its officers or trustees who are officers
of VKAC.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of VKAC. 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 under the plan is equal to the trustees' annual retainer fee, which is
currently $2,500.
At April 30, 1997, VKAC 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 $14,117,300 and $13,140,385,
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 on securities. 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.
16
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
Transactions in options for the six months ended April 30, 1997, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- -------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1996.................. 40 $ (75,323)
Options Written and Purchased (Net).............. 525 (75,513)
Options Terminated in Closing Transactions
(Net).......................................... (157) (33,078)
Options Expired (Net)............................ (354) 205,415
---- ---------
Outstanding at April 30, 1997.................... 54 $ 21,501
==== =========
</TABLE>
The related futures contracts of the outstanding option transaction as of
April 30, 1997, and the description and market value are as follows:
<TABLE>
<CAPTION>
EXPIRATION MONTH/ MARKET VALUE
CONTRACTS EXERCISE PRICE OF OPTION
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Muni Bond Future
June 1997 Written Put
(Current Notional Value of
$114,375 per contract)...... 54 June/108 $(2,531)
== =======
</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 future contracts, the Fund maintains, in a segregated
account with its custodian, 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).
Transactions in futures contracts for the six months ended April 30, 1997,
were as follows:
<TABLE>
<CAPTION>
CONTRACTS
- ----------------------------------------------------------------------
<S> <C>
Outstanding at October 31, 1996............................. 0
Futures Opened.............................................. 97
Futures Closed.............................................. (10)
---
Outstanding at April 30, 1997............................... 87
===
</TABLE>
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
April 30, 1997 (Unaudited)
- --------------------------------------------------------------------------------
The futures contracts outstanding as of April 30, 1997, and the descriptions
and unrealized appreciation/depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS APPRECIATION/DEPRECIATION
- --------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Note -- 10 Year Future
June 1997 -- Sells to Open
(Current Notional Value of
$106,969 per contract)........ 20 $(24,536)
Muni Bond Future
June 1997 -- Sells to Open
(Current Notional Value of
$114,375 per contract)........ 67 34,053
-- --------
87 $ 9,517
== ========
</TABLE>
C. EMBEDDED CAP SECURITIES--These securities, which are identified in the
portfolio of investments, include 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 price of these
securities may be more volatile than the price of a comparable fixed rate
security. The Trust invests in these instruments as a hedge against a rise in
the short-term interest rates which it pays on its preferred shares.
5. PREFERRED SHARES
The Trust has outstanding 1,600 Auction Preferred Shares ("APS") in two series
of 800 shares each. Dividends are cumulative and the dividend rate is currently
reset every seven days for both series through an auction process. The average
rate in effect on April 30, 1997, was 4.180%. During the six months ended April
30, 1997, the rates ranged from 3.100% to 5.100%.
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 $50,000 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.
18
<PAGE> 20
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 American Capital
Attn.: Closed-End Funds
2800 Post Oak Blvd.
Houston, TX 77056
19
<PAGE> 21
FUNDS DISTRIBUTED BY VAN KAMPEN AMERICAN CAPITAL
GLOBAL AND
INTERNATIONAL
Global Equity Fund
Global Government Securities Fund
Global Managed Assets Fund
Short-Term Global Income Fund
Strategic Income Fund
EQUITY
Growth
Aggressive Growth Fund
Emerging Growth Fund
Enterprise Fund
Growth Fund
Pace Fund
Growth & Income
Comstock Fund
Equity Income Fund
Growth and Income Fund
Harbor Fund
Real Estate Securities Fund
Utility Fund
FIXED INCOME
Corporate Bond Fund
Government Securities Fund
High Income Corporate Bond Fund
High Yield Fund
Limited Maturity Government Fund
Prime Rate Income Trust
Reserve Fund
U.S. Government Fund
U.S. Government Trust for Income
TAX-FREE
California Insured Tax Free Fund
Florida Insured Tax Free Income Fund
High Yield Municipal Fund
Insured Tax Free Income Fund
Intermediate Term Municipal Income Fund
Municipal Income Fund
New Jersey Tax Free Income Fund
New York Tax Free Income Fund
Pennsylvania Tax Free Income Fund
Tax Free High Income Fund
Tax Free Money Fund
MORGAN STANLEY
FUND, INC.
Aggressive Equity Fund
American Value Fund
Asian Growth Fund
Emerging Markets Fund
Global Equity Allocation Fund
Global Fixed Income Fund
High Yield Fund
International Magnum Fund
Latin American Fund
U.S. Real Estate Fund
Worldwide High Income Fund
Ask your investment representative for a prospectus containing more complete
information, including sales charges and expenses. Please read it carefully
before you invest or send money. Or call us weekdays from 7:00 a.m. to 7:00 p.m.
Central time at 1-800-341-2911 for Van Kampen American Capital funds, or
1-800-282-4404 for Morgan Stanley retail funds.
20
<PAGE> 22
VAN KAMPEN AMERICAN CAPITAL ADVANTAGE MUNICIPAL INCOME TRUST II
BOARD OF TRUSTEES
DAVID C. ARCH
ROD DAMMEYER
HOWARD J KERR
DENNIS J. MCDONNELL*--Chairman
THEODORE A. MYERS
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*
OFFICERS
DENNIS J. MCDONNELL*
President
RONALD A. NYBERG*
Vice President and Secretary
EDWARD C. WOOD, III*
Vice President and Chief Financial Officer
CURTIS W. MORELL*
Vice President and Chief Accounting Officer
JOHN L. SULLIVAN*
Treasurer
TANYA M. LODEN*
Controller
PETER W. HEGEL*
Vice President
INVESTMENT ADVISER
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
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 PEAT MARWICK LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, Illinois 60601
* "Interested" persons of the Trust, as defined in the Investment Company Act of
1940.
(C) Van Kampen American Capital Distributors, Inc., 1997 All rights reserved.
(SM) denotes a service mark of Van Kampen American Capital Distributors, Inc.
21
