<PAGE> 1
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................... 1
Performance Results.............................. 4
Portfolio of Investments......................... 5
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
Report of Independent Accountants................ 19
Dividend Reinvestment Plan....................... 20
</TABLE>
VMO ANR 12/96
<PAGE> 2
LETTER TO SHAREHOLDERS
December 10, 1996
Dear Shareholder,
The first ten months of 1996 have
been a mixed experience for most
municipal bond fund investors. The
continuation of the 1995 rally at the
beginning of this year was thwarted
early on as the economy gained
momentum, causing the bond market to [PHOTO]
sell off. But by the second half of the
year, the pattern reversed. Growth
slowed and bonds recovered much of DENNIS J. MCDONNELL AND DON G. POWELL
their earlier losses.
This kind of volatility is not
unusual, but it is difficult to predict and serves as a reminder to investors to
maintain their long-term outlook. Bailing out during price declines and
re-entering after market rebounds is often a losing strategy. We believe it is
time in the market, not timing the market, that potentially maximizes long-term
investment gains.
Additionally, we believe our recent acquisition by Morgan Stanley Group Inc.
will further help investors achieve their long-term goals. Morgan Stanley's
strong global presence and commitment to superior investment performance
complement our broad range of investment products, money management
capabilities, and high level of service that we currently offer.
ECONOMIC OVERVIEW
The economy has grown at a moderate pace this year, despite the second
quarter's 4.7 percent surge. By the third quarter, growth slowed to 2.0 percent,
near the level that prevailed early in the year. This moderation of economic
activity, coupled with continued inflation, eased fears of an interest rate hike
by the Federal Reserve Board--fears that had dominated the market in early
summer and pushed long-term bond yields above 7.0 percent.
Once the market realized that the economy's pace had slowed, bond prices
rose from their 1996 lows and yields fell as they moved in the opposite
direction of bond prices. By the end of October, the 30-year Treasury bond yield
was near 6.5 percent.
During this recovery, municipal bonds rebounded even more than Treasuries,
due to a steady demand that outpaced supply. It is expected that on a nationwide
basis there will be little or no increase in the total number of municipal bonds
outstanding this year. The volume of new issues is expected to almost equal the
volume of bonds that were redeemed or called.
Continued on page two
1
<PAGE> 3
[PIE CHART]
Portfolio Composition by Credit Quality
as of October 31, 1996
<TABLE>
<S> <C>
AAA......... 52.0%
AA.......... 9.7%
A........... 13.0%
BBB......... 22.6%
BB.......... 2.7%
</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.
PERFORMANCE SUMMARY
Many closed-end municipal bond funds, such as this one, are currently
offering higher after-tax yields than taxable income alternatives. The Trust
generated a tax-exempt distribution of 6.55 percent(3), based on the closing
stock price of $13.75 per common share as of October 31, 1996. For shareholders
in the federal income tax bracket of 36 percent, this distribution rate is
equivalent to a yield of 10.23 percent(4) on a taxable investment.
The Trust's one-year total return was 7.72 percent(1), including
reinvestment of all dividends, reflecting a 0.9 percent increase in market price
for the period ended October 31, 1996.
TOP FIVE PORTFOLIO HOLDINGS BY INDUSTRY AS OF OCTOBER 31, 1996
General Purpose................... 17.9%
Wholesale Electric................ 17.0%
Single-Family Housing............. 11.9%
Health Care....................... 10.7%
Airport............................ 8.7%
ECONOMIC OUTLOOK
We believe Fed policy will remain unchanged through the end of the year. We
look for the long Treasury bond to trade within a range of 6.25 and 6.75 percent
and the 5-year Treasury to trade between 5.75 percent and 6.25 percent for the
remainder of 1996. After that, interest rates could rise moderately if the
economy rebounds to a 3.0 percent annual growth rate and inflation edges higher.
Based upon this view of moderate growth and slightly higher inflation, we
believe the outlook for fixed-income markets remains positive.
Relatively stable interest rates early next year would be favorable for the
leveraged structure of our closed-end funds, which involves borrowing short-term
funds to purchase long-term municipal securities. Depending on the difference
between long-term and short-term market rates, this structure provides
opportunities for additional earnings over time.
Continued on page three
2
<PAGE> 4
The leveraged capital structure of the Trust continues to provide common
shareholders with above-market levels of dividend income. It should be noted,
however, that the rise in short-term rates would have an unfavorable effect on
common share performance.
The bond market should find continued support from the results of the recent
national elections. With a Democratic president and a Republican Congress, there
should be checks on potential spending increases and tax cuts so the budget
deficit does not balloon out of control. This split government should also help
minimize chances of major tax reform, which would likely affect investment
markets, including municipal bonds.
The stock market is another factor that could influence the performance of
the bond market in the coming year. If stocks suffer a protracted setback, the
demand for bonds, including municipals, could increase.
We will closely monitor any new developments in Washington and in the
financial markets in order to evaluate their potential impact on the Trust. We
believe that in the coming year, the municipal market will continue to be an
attractive investment choice for investors seeking high current income. Thank
you for your continued confidence in your investment with Van Kampen American
Capital and for the privilege of working with you to help you achieve your
financial goals.
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.
3
<PAGE> 5
PERFORMANCE RESULTS FOR THE PERIOD ENDED OCTOBER 31, 1996
VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST
(NYSE TICKER SYMBOL--VMO)
<TABLE>
<CAPTION>
COMMON SHARE TOTAL RETURNS
<S> <C>
One-year total return based on market price(1)............ 7.72%
One-year total return based on NAV(2)..................... 7.61%
DISTRIBUTION RATES
Distribution rate as a % of closing common stock
price(3).................................................. 6.55%
Taxable-equivalent distribution rate as a % of closing
common stock price(4)..................................... 10.23%
SHARE VALUATIONS
Net asset value........................................... $ 16.12
Closing common stock price................................ $13.750
One-year high common stock price (02/22/96)............... $14.500
One-year low common stock price (06/14/96)................ $12.750
Preferred share (Series A) rate(5)........................ 3.429%
Preferred share (Series B) rate(5)........................ 3.350%
</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.
4
<PAGE> 6
PORTFOLIO OF INVESTMENTS
October 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS
ALABAMA 0.5%
$ 2,000 Mobile, AL Indl Dev Brd Solid Waste Disp Rev
Mobile Energy Svcs Co Proj Rfdg................ 6.950% 01/01/20 $ 2,122,500
-----------
CALIFORNIA 5.7%
1,580 California Hsg Fin Agy Rev Home Mtg Ser B1..... 6.300 08/01/08 1,643,990
2,000 California Pollutn Ctl Fin Auth Pollutn Ctl Rev
Southern CA Edison Co (Embedded Cap) (AMBAC
Insd).......................................... 6.000 07/01/27 2,013,320
1,000 California Rural Home Mtg Fin Mtg Backed Secs
Pgm Ser C (GNMA Collateralized)(d)............. 6.40/7.80 02/01/28 1,109,360
5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev
(MBIA Insd).................................... * 09/01/17 1,444,400
4,000 Foothill/Eastern Tran Agy Conv Cap Apprec Sr
Lien Ser A (d)................................. 0/7.050 01/01/10 2,534,040
5,000 Orange Cnty, CA Recovery Ctfs Ser A (MBIA
Insd).......................................... 6.000 07/01/06 5,383,150
5,000 Orange Cnty, CA Recovery Ctfs Ser A (MBIA
Insd).......................................... 6.000 07/01/08 5,398,450
3,000 Orange Cnty, CA Recovery Ser A Rfdg (MBIA
Insd).......................................... 6.000 06/01/08 3,237,930
-----------
22,764,640
-----------
COLORADO 5.7%
2,000 Arapahoe Cnty, CO Cap Impt Trust Fd Hwy Rev
E-470 Proj Ser B............................... 7.000 08/31/26 2,170,160
1,000 Colorado Hlth Fac Auth Rev Vail Vly Med Cent
Proj Ser A..................................... 6.500 01/15/13 1,015,670
1,500 Colorado Hsg Fin Auth Single Family Pgm Sr Ser
C1............................................. 7.550 11/01/27 1,645,245
1,480 Colorado Hsg Fin Auth Single Family Proj Sr Ser
A3............................................. 7.000 11/01/24 1,541,168
3,500 Denver, CO City & Cnty Arpt Rev Ser A (c)...... 8.500 11/15/07 4,000,920
7,000 Denver, CO City & Cnty Arpt Rev Ser A (c)...... 8.875 11/15/12 8,333,360
1,750 Denver, CO City & Cnty Arpt Rev Ser B (MBIA
Insd).......................................... 6.250 11/15/06 1,883,735
1,000 Denver, CO City & Cnty Arpt Rev Ser B (MBIA
Insd).......................................... 6.250 11/15/07 1,074,270
1,000 Highlands Ranch Metro Dist No 2 CO Rfdg (FSA
Insd).......................................... 6.500 06/15/11 1,125,870
-----------
22,790,398
-----------
CONNECTICUT 0.9%
1,700 Mashantucket Western Pequot Tribe Connecticut
Spl Rev Ser A (e).............................. 6.500 09/01/06 1,743,860
2,000 Mashantucket Western Pequot Tribe Connecticut
Spl Rev Ser A (e).............................. 6.400 09/01/11 2,007,180
-----------
3,751,040
-----------
DISTRICT OF COLUMBIA 0.6%
2,000 Metropolitan WA, DC Arpt Auth Genl Arpt Rev Ser
A (FGIC Insd).................................. 7.250 10/01/10 2,200,520
-----------
FLORIDA 0.8%
3,000 Florida St Brd Edl Cap Outlay Pub Edl Ser A.... 5.875 06/01/16 3,066,720
-----------
GEORGIA 3.0%
3,370 Fulton Cnty, GA Lease Rev (e).................. 7.250 06/15/10 3,848,708
7,000 Municipal Elec Auth GA Spl Oblig First
Crossover (MBIA Insd).......................... 6.500 01/01/20 7,954,870
-----------
11,803,578
-----------
</TABLE>
See Notes to Financial Statements
5
<PAGE> 7
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HAWAII 1.4%
$ 5,000 Hawaii St Arpt Sys Rev Ser 2................... 7.000% 07/01/18 $ 5,368,200
-----------
IDAHO 1.6%
6,000 Idaho Hsg Agy Single Family Mtg Sr Ser A....... 6.700 07/01/27 6,218,520
-----------
ILLINOIS 7.7%
5,000 Chicago, IL O'Hare Intl Arpt Rev Genl Arpt 2nd
Lien Ser A (MBIA Insd) (c)..................... 6.375 01/01/12 5,358,900
5,000 Chicago, IL O'Hare Intl Arpt Rev Genl Arpt 2nd
Lien Ser A (AMBAC Insd)........................ 5.500 01/01/16 4,785,600
6,400 Chicago, IL Sch Fin Auth Ser A (MBIA Insd)..... 5.000 06/01/09 6,128,640
1,000 Chicago, IL Single Family Mtg Rev Ser A (GNMA
Collateralized)................................ 7.000 09/01/27 1,103,880
1,195 Chicago, IL Single Family Mtg Rev Ser B (GNMA
Collateralized)................................ 7.625 09/01/27 1,328,936
3,285 Illinois Hlth Fac Auth Rev Midwest Physician
Group Ltd Proj................................. 8.125 11/15/19 3,515,870
1,000 Northern Illinois Univ Rev Aux Fac Sys (FGIC
Insd).......................................... 5.700 04/01/16 994,720
2,000 Northern Illinois Univ Rev Aux Fac Sys (FGIC
Insd).......................................... 5.750 04/01/22 1,993,260
1,475 Regional Tran Auth IL Ser A (AMBAC Insd)....... 6.500 06/01/15 1,601,304
1,410 Sangamon Cnty, IL Cmnty Unit Sch Dist No 5
(FGIC Insd).................................... 6.400 12/01/03 1,547,151
1,865 Sangamon Cnty, IL Cmnty Unit Sch Dist No 5
(FGIC Insd).................................... 6.500 12/01/05 2,072,164
-----------
30,430,425
-----------
INDIANA 0.7%
2,500 Purdue Univ, IN Univ Rev Student Fee Ser B..... 6.750 07/01/09 2,759,150
-----------
KANSAS 0.6%
2,345 Sedgwick Cnty, KS Unified Sch Dist Rfdg & Impt
(FSA Insd) (b)................................. 5.375 11/01/17 2,298,757
-----------
KENTUCKY 0.5%
2,000 Kentucky Hsg Corp Hsg Rev Ser E................ 6.300 01/01/28 2,027,840
-----------
MAINE 1.0%
2,470 Maine Edl Ln Auth Rev Supplemental Pgm Ser
A1............................................. 7.000 12/01/16 2,635,811
1,355 Maine Edl Ln Auth Rev Supplemental Pgm Ser
A2............................................. 7.150 12/01/16 1,449,037
-----------
4,084,848
-----------
MARYLAND 1.7%
3,500 Maryland St Cmnty Dev Admin Dept Hsg & Cmnty
Dev Rev Single Family Pgm 7th Ser.............. 7.250 04/01/19 3,705,170
3,005 Maryland St Cmnty Dev Admin Dept Hsg & Cmnty
Dev Rev Single Family Pgm 7th Ser.............. 7.300 04/01/25 3,178,599
-----------
6,883,769
-----------
MASSACHUSETTS 1.6%
1,200 Holyoke, MA Muni Purp Ln Ser A (FSA Insd)...... 5.500 06/15/16 1,197,780
2,000 Massachusetts St Hlth & Edl Fac Auth Rev New
England Med Cent Hosp Ser G (Embedded Swap)
(MBIA Insd).................................... 3.100 07/01/13 1,714,420
3,000 Plymouth Cnty, MA Ctfs Partn Ser A............. 7.000 04/01/22 3,342,960
-----------
6,255,160
-----------
MICHIGAN 1.2%
4,500 Monroe Cnty, MI Pollutn Ctl Rev Coll Detroit
Edison Monroe Ser 1 (MBIA Insd)................ 6.875 09/01/22 4,914,000
-----------
</TABLE>
See Notes to Financial Statements
6
<PAGE> 8
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MISSISSIPPI 1.6%
$ 3,750 Mississippi Home Corp Single Family Rev Mtg Ser
C (GNMA Collateralized) (d).................... 5.50/7.60% 06/01/29 $ 4,141,350
2,000 Mississippi Home Corp Single Family Rev Mtg Ser
F (GNMA Collateralized) (d).................... 6.00/7.55 12/01/27 2,179,980
-----------
6,321,330
-----------
MISSOURI 1.1%
915 Saint Louis Cnty, MO Single Family (MBIA
Insd).......................................... 6.900 04/01/16 951,884
3,000 Sikeston, MO Elec Rev Rfdg (MBIA Insd) (c)..... 6.200 06/01/10 3,287,970
-----------
4,239,854
-----------
NEVADA 1.1%
4,000 Clark Cnty, NV Indl Dev Rev NV Pwr Co Proj Ser
A (FGIC Insd).................................. 6.700 06/01/22 4,273,960
-----------
NEW JERSEY 5.6%
20,000 New Jersey Econ Dev Auth St Contract Econ
Recovery (Embedded Cap) (MBIA Insd)............ 5.900 03/15/21 20,729,400
1,395 New Jersey Hlthcare Fac Fin Auth Rev Christ
Hosp Group Issue (Connie Lee Insd)............. 7.000 07/01/04 1,574,536
-----------
22,303,936
-----------
NEW MEXICO 2.2%
995 Hobbs, NM Single Family Mtg Rev Rfdg........... 8.750 07/01/11 1,076,202
5,245 New Mexico Mtg Fin Auth Single Family Mtg Pgm
Ser G (GNMA Collateralized).................... 7.250 07/01/26 5,538,825
2,000 University of NM Technology Dev Corp Lease Rev
Univ Cent Resh Pk Proj Ser A (MBIA Insd)....... 6.450 08/15/18 2,164,280
-----------
8,779,307
-----------
NEW YORK 17.7%
5,000 Battery Park City Auth NY Rev (MBIA Insd)...... 5.250 11/01/17 4,747,050
3,000 Metropolitan Tran Auth NY Svcs Contract Tran
Fac Ser 5 Rfdg................................. 7.000 07/01/12 3,240,240
1,440 New York City Indl Spl Fac Terminal One Group
Assn Proj...................................... 6.100 01/01/09 1,478,578
8,500 New York City Muni Wtr Fin Auth Ser A.......... 5.500 06/15/24 8,144,700
4,000 New York City Muni Wtr Fin Auth Wtr & Swr Sys
Rev Ser A Rfdg................................. 5.500 06/15/23 3,835,400
10,000 New York City Ser A............................ 7.000 08/01/07 10,973,900
5,000 New York City Ser A Rfdg....................... 7.000 08/01/05 5,482,050
8,000 New York City Ser D............................ 7.500 02/01/19 8,850,800
6,060 New York St Dorm Auth Rev City Univ Ser F...... 5.500 07/01/12 5,855,838
1,365 New York St Dorm Auth Rev St Univ Edl Fac Ser B
Rfdg........................................... 5.250 05/15/09 1,316,379
4,325 New York St Energy Resh & Dev Auth St Svc
Contract Rev Western NY Nuclear Svc Cent
Proj........................................... 5.500 04/01/99 4,409,900
1,900 New York St Mtg Agy Rev Homeowner Mtg Ser 58... 6.400 04/01/27 1,958,691
6,400 New York St Thruway Auth Svc Contract Rev Loc
Hwy & Brdg..................................... 5.750 04/01/09 6,410,240
3,500 Port Auth NY & NJ Cons 97th Ser (FGIC Insd).... 6.650 01/15/23 3,820,110
-----------
70,523,876
-----------
</TABLE>
See Notes to Financial Statements
7
<PAGE> 9
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NORTH CAROLINA 6.2%
$13,000 North Carolina Eastn Muni Pwr Agy Pwr Sys Rev
Ser B Rfdg..................................... 6.000% 01/01/14 $12,753,260
11,000 North Carolina Muni Pwr Agy No 1 Catawba Elec
Rev (Embedded Cap) (MBIA Insd)................. 6.000 01/01/12 11,741,290
-----------
24,494,550
-----------
OHIO 1.3%
1,000 Akron, OH Ctfs Partn Akron Muni Baseball
Stadium Proj (b)(d)............................ 0/6.500 12/01/07 733,530
3,000 Lucas Cnty, OH Hosp Rev Promedica Hlthcare
Oblig. (MBIA Insd)............................. 6.000 11/15/07 3,211,290
1,000 Ohio St Air Quality Dev Auth Rev JMG Funding
Ltd Partnership Proj Rfdg (AMBAC Insd)......... 6.375 04/01/29 1,064,170
-----------
5,008,990
-----------
OKLAHOMA 2.2%
2,000 Tulsa, OK Indl Auth Hosp Rev Hillcrest Med Cent
Projet Rfdg (Connie Lee Insd).................. 6.125 06/01/05 2,129,520
3,140 Tulsa, OK Indl Auth Hosp Rev Hillcrest Med Cent
Projet Rfdg (Connie Lee Insd).................. 6,250 06/01/08 3,353,489
3,000 Tulsa, OK Muni Arpt Tran Rev American Airls
Inc............................................ 7.600 12/01/30 3,232,890
-----------
8,715,899
-----------
OREGON 0.9%
1,240 Emerald Peoples Util Dist OR Elec Sys Rev Rfdg
(FGIC Insd).................................... 7.350 11/01/12 1,506,637
2,000 Oregon St Econ Dev Rev Georgia Pacific Corp.... 6.350 08/01/25 2,036,400
-----------
3,543,037
-----------
PENNSYLVANIA 6.4%
9,000 Allegheny Cnty, PA Hosp Dev Auth Rev Pittsburgh
Mercy Hlth Sys Inc (AMBAC Insd)................ 5.625 08/15/26 8,871,210
6,655 Berks Cnty, PA Muni Auth Rev Highlands at
Wyomissing Proj B.............................. 6.875 10/01/17 6,915,876
8,500 Geisinger Auth PA Hlth Sys Ser A (Embedded
Cap)........................................... 6.400 07/01/22 8,718,790
1,000 Pennsylvania Intergvtl Co-op Auth Spl Tax Rev
City of Philadelphia (Prerefunded @
06/15/02)...................................... 6.800 06/15/22 1,109,140
-----------
25,615,016
-----------
TEXAS 4.0%
1,000 Austin, TX Util Sys Rev Rfdg (AMBAC Insd)(b)... 6.500 11/15/05 1,063,600
4,500 Dallas-Fort Worth, TX Intl Arpt Fac Impt Corp
Rev Delta Airls Inc (c)........................ 7.000 11/01/01 4,709,700
2,525 Dallas-Fort Worth, TX Intl Arpt Fac Impt Corp
Rev Delta Airls Inc............................ 7.625 11/01/21 2,723,591
5,000 Ector Cnty, TX Hosp Dist Hosp Rev Med Cent
Hosp........................................... 7.300 04/15/12 5,514,600
1,893 Texas Genl Svcs Comm Partn Int Lease Pur Ctfs
(e)............................................ 7.250 08/01/11 1,929,484
-----------
15,940,975
-----------
</TABLE>
See Notes to Financial Statements
8
<PAGE> 10
PORTFOLIO OF INVESTMENTS (CONTINUED)
October 31, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Par
Amount
(000) Description Coupon Maturity Market Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTAH 2.2%
$ 1,500 Intermountain Pwr Agy UT Pwr Supply Rev Ser B
Rfdg (MBIA Insd) (b)........................... 5.750% 07/01/19 $ 1,465,170
1,500 Intermountain Pwr Agy UT Rev Ser E Rfdg (FSA
Insd).......................................... 6.000 07/01/06 1,611,975
3,000 Salt Lake City, UT Hosp Rev IHC Hosp Inc Rfdg
(Embedded Cap)................................. 5.500 08/15/97 2,808,390
2,690 Utah St Hsg Fin Agy Single Family Mtg Sr Issue
B3............................................. 7.100 07/01/24 2,807,338
------------
8,692,873
------------
VIRGINIA 2.0%
8,200 Roanoke, VA Indl Dev Auth Hosp Rev Roanoke Mem
Hosp Carilion Hlth Sys Ser B Rfdg (MBIA Insd)
(d)............................................ 4.70/6.25 01/01/00 8,038,050
------------
WASHINGTON 6.6%
9,850 Bellevue, WA Convention Cent Comp Int Rfdg
(MBIA Insd).................................... * 02/01/25 1,921,439
10,975 Washington St Pub Pwr Supply Sys Nuclear Proj
No 1 Rev Ser A Rfdg (MBIA Insd)................ 5.700 07/01/17 10,810,375
10,000 Washington St Pub Pwr Supply Sys Nuclear Proj
No 1 Rev Ser B Rfdg (MBIA Insd)................ 5.600 07/01/15 9,745,100
2,000 Washington St Pub Pwr Supply Sys Nuclear Proj
No 2 Rev Ser A Rfdg (AMBAC Insd)............... 6.000 07/01/08 2,118,700
5,125 Washington St Pub Pwr Supply Sys Nuclear Proj
No 3 Rev Ser C Rfdg (MBIA Insd)................ * 07/01/14 1,828,395
------------
26,424,009
------------
WEST VIRGINIA 2.1%
8,000 Harrison Cnty, WV Cmnty Solid Waste Disp Rev
West Penn Pwr Co Proj Ser A (c)................ 6.875 04/15/22 8,491,920
------------
WISCONSIN 1.2%
1,000 Madison, WI Indl Dev Rev Madison Gas & Elec Co
Proj Ser A..................................... 6.750 04/01/27 1,063,780
3,500 Wisconsin Hsg & Econ Dev Auth Home Ownership
Rev Ser C...................................... 6.250 09/01/17 3,575,985
------------
4,639,765
------------
TOTAL LONG-TERM INVESTMENTS 99.6%
(Cost $374,286,598) (a)...................................................... 395,787,412
OTHER ASSETS IN EXCESS OF LIABILITIES 0.4%.................................... 1,717,104
------------
NET ASSETS 100.0%............................................................. $397,504,516
============
*Zero coupon bond
</TABLE>
(a) At October 31, 1996, cost for federal income tax purposes is $374,286,598;
the aggregate gross unrealized appreciation is $21,974,601 and the aggregate
gross unrealized depreciation is $473,787, resulting in net unrealized
appreciation of $21,500,814.
(b) Securities purchased on a when issued or delayed delivery basis.
(c) Assets segregated as collateral for when issued or delayed delivery purchase
commitments and open futures transactions.
(d) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(e) Private placement issue.
See Notes to Financial Statements
9
<PAGE> 11
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $374,286,598) (Note 1)............... $395,787,412
Cash.................................................................... 468,503
Receivables:
Interest.............................................................. 6,673,252
Securities Sold....................................................... 5,666,240
Unamortized Organizational Expenses (Note 1)............................ 3,788
Other................................................................... 5,748
------------
Total Assets...................................................... 408,604,943
------------
LIABILITIES:
Payables:
Securities Purchased.................................................. 10,281,346
Investment Advisory Fee (Note 2)...................................... 217,961
Income Distributions--Common and Preferred Shares..................... 161,476
Variation Margin on Futures (Note 4).................................. 81,250
Administrative Fee (Note 2)........................................... 67,065
Affiliates (Note 2)................................................... 2,563
Accrued Expenses........................................................ 239,318
Deferred Compensation and Retirement Plans (Note 2)..................... 49,448
------------
Total Liabilities................................................. 11,100,427
------------
NET ASSETS.............................................................. $397,504,516
============
NET ASSETS CONSIST OF:
Preferred Shares ($.01 par value, authorized 100,000,000 shares, 3,000
issued with liquidation preference of $50,000 per share) (Note 5)..... $150,000,000
------------
Common Shares ($.01 par value with an unlimited number of shares
authorized, 15,352,891 shares issued and outstanding)................. 153,529
Paid in Surplus......................................................... 226,719,758
Net Unrealized Appreciation on Securities............................... 20,761,700
Accumulated Undistributed Net Investment Income......................... 1,240,155
Accumulated Net Realized Loss on Securities............................. (1,370,626)
------------
Net Assets Applicable to Common Shares............................ 247,504,516
------------
NET ASSETS.............................................................. $397,504,516
============
NET ASSET VALUE PER COMMON SHARE ($247,504,516 divided
by 15,352,891 shares outstanding)..................................... $ 16.12
============
</TABLE>
See Notes to Financial Statements
10
<PAGE> 12
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................................. $23,574,694
-----------
EXPENSES:
Investment Advisory Fee (Note 2)......................................... 2,568,017
Administrative Fee (Note 2).............................................. 790,159
Preferred Share Maintenance (Note 5)..................................... 365,675
Legal (Note 2)........................................................... 25,920
Trustees Fees and Expenses (Note 2)...................................... 24,627
Amortization of Organizational Expenses (Note 1)......................... 8,023
Other.................................................................... 278,734
-----------
Total Expenses....................................................... 4,061,155
-----------
NET INVESTMENT INCOME.................................................... $19,513,539
===========
REALIZED AND UNREALIZED GAIN/LOSS ON SECURITIES:
Realized Gain/Loss on Securities:
Investments............................................................ $ 5,339,197
Options................................................................ (263,813)
Futures................................................................ (574,677)
-----------
Net Realized Gain on Securities.......................................... 4,500,707
-----------
Unrealized Appreciation/Depreciation on Securities:
Beginning of the Period.................................................. 21,185,149
-----------
End of the Period:
Investments............................................................ 21,500,814
Futures................................................................ (739,114)
-----------
20,761,700
-----------
Net Unrealized Depreciation on Securities During the Period.............. (423,449)
-----------
NET REALIZED AND UNREALIZED GAIN ON SECURITIES........................... $ 4,077,258
===========
NET INCREASE IN NET ASSETS FROM OPERATIONS............................... $23,590,797
===========
</TABLE>
See Notes to Financial Statements
11
<PAGE> 13
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended October 31, 1996 and 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1996 October 31, 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income............................ $ 19,513,539 $ 19,582,543
Net Realized Gain/Loss on Securities............. 4,500,707 (5,569,226)
Net Unrealized Appreciation/Depreciation on
Securities During the Period................... (423,449) 29,881,589
------------ ------------
Change in Net Assets from Operations............. 23,590,797 43,894,906
------------ ------------
Distributions from Net Investment Income:
Common Shares.................................. (13,909,348) (15,536,849)
Preferred Shares............................... (5,459,584) (5,986,277)
------------ ------------
Total Distributions.............................. (19,368,932) (21,523,126)
------------ ------------
NET CHANGE IN NET ASSETS FROM INVESTMENT
ACTIVITIES..................................... 4,221,865 22,371,780
NET ASSETS:
Beginning of the Period.......................... 393,282,651 370,910,871
------------ ------------
End of the Period (Including undistributed net
investment income of $1,240,155 and $1,095,548,
respectively).................................. $397,504,516 $393,282,651
============ ============
</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.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 24, 1992
(Commencement
Year Ended October 31 of Investment
------------------------------------- Operations) to
1996 1995 1994 1993 October 31, 1992
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of the Period (a)...... $15.846 $14.389 $17.297 $14.990 $ 14.771
------- ------- ------- ------- -------
Net Investment Income............ 1.271 1.275 1.303 1.354 .611
Net Realized and Unrealized
Gain/Loss on Securities........ .266 1.584 (2.918) 2.332 .083
------- ------- ------- ------- -------
Total from Investment Operations... 1.537 2.859 (1.615) 3.686 .694
------- ------- ------- ------- -------
Less:
Distributions from Net Investment
Income:
Paid to Common Shareholders.... .906 1.012 1.020 1.020 .340
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders....... .356 .390 .273 .282 .135
Distributions from Net Realized
Gain on Securities (Note 1):
Paid to Common Shareholders.... -0- -0- -0- .057 -0-
Common Share Equivalent of
Distributions Paid to
Preferred Shareholders....... -0- -0- -0- .020 -0-
------- ------- ------- ------- -------
Total Distributions................ 1.262 1.402 1.293 1.379 .475
------- ------- ------- ------- -------
Net Asset Value, End of the
Period........................... $16.121 $15.846 $14.389 $17.297 $ 14.990
======= ======= ======= ======= =======
Market Price Per Share at End of
the Period....................... $13.750 $13.625 $13.000 $16.375 $ 14.500
Total Investment Return at Market
Price (b)........................ 7.72% 12.70% (14.96%) 20.85% (1.16%)*
Total Return at Net Asset Value
(c).............................. 7.61% 17.74% (11.30%) 23.17% 2.10%*
Net Assets at End of the Period (In
millions)........................ $ 397.5 $ 393.3 $ 370.9 $ 415.6 $ 380.1
Ratio of Expenses to Average Net
Assets Applicable to Common
Shares........................... 1.66% 1.75% 1.69% 1.62% 1.54%
Ratio of Expenses to Average Net
Assets........................... 1.03% 1.06% 1.05% 1.02% 1.04%
Ratio of Net Investment Income to
Average Net Assets Applicable to
Common Shares (d)................ 5.73% 5.87% 6.43% 6.51% 5.82%
Portfolio Turnover................. 85% 70% 76% 52% 53%*
</TABLE>
(a) Net asset value at April 24, 1992, is adjusted for common and preferred
share offering costs of $.229 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.
* Non-Annualized
See Notes to Financial Statements
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Municipal Opportunity Trust (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 in a portfolio
consisting substantially of municipal obligations rated investment grade at the
time of investment. The Trust commenced investment operations on April 24, 1992.
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 EXPENSES--The Trust has reimbursed Van Kampen American Capital
Distributors Inc. or its affiliates (collectively "VKAC") for costs incurred in
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1996
- --------------------------------------------------------------------------------
connection with the Trust's organization in the amount of $40,000. These costs
are being amortized on a straight line basis over the 60 month period ending
April 23, 1997. 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 expenses 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 $2,109,740 which will expire on October 31,
2003.
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. Distributions from net realized gains for book purposes may
include short-term capital gains, which are included as ordinary income for tax
purposes.
For the year ended October 31, 1996, 99.6% of the income distributions made
by the Trust were exempt from federal income taxes. In January, 1997, the Trust
will provide tax information to shareholders for the 1996 calendar year.
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,
counsel to the Trust, of which a trustee of the Trust is an affiliated person.
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1996
- --------------------------------------------------------------------------------
For the year ended October 31, 1996, the Trust recognized expenses of
approximately $20,300 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 has implemented deferred compensation and retirement plans for its
trustees. Under the deferred compensation plan, trustees may elect to defer all
or a portion of their compensation to a later date. The retirement plan covers
those trustees who are not officers of VKAC.
At October 31, 1996, 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 $333,906,674 and $349,294,348,
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 for exercised option contracts where the
recognition of gain or loss is postponed until the disposal of the security
underlying the option 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)
October 31, 1996
- --------------------------------------------------------------------------------
Transactions in options for the year ended October 31, 1996, were as
follows:
<TABLE>
<CAPTION>
CONTRACTS PREMIUM
- -------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1995.................. -0- $ -0-
Options Written and Purchased (Net).............. 450 (263,790)
Options Expired (Net)............................ (450) 263,790
--- ---------
Outstanding at October 31, 1996.................. -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, the Municipal Bond
Index and Eurodollar Notes and typically closes the contracts 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, 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). The cost of securities acquired through
delivery under a contract is adjusted by the unrealized gain or loss on the
contract. The fluctuation in market value of the contracts is settled daily
through a cash margin account.
Transactions in futures contracts for the year ended October 31, 1996, were
as follows:
<TABLE>
<CAPTION>
CONTRACTS
<S> <C>
- --------------------------------------------------------------------
Outstanding at October 31, 1995.......................... 600
Futures Opened........................................... 1,400
Futures Closed........................................... (1,800)
------
Outstanding at October 31, 1996.......................... 200
======
</TABLE>
The futures contracts outstanding as of October 31, 1996, and the
description and unrealized depreciation are as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS DEPRECIATION
- ---------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Bond and Futures
December 1996 - Sells to Open................. 200 $739,114
=== ========
</TABLE>
C. INDEXED SECURITIES--These instruments are identified in the portfolio of
investments. Their price may be more volatile than the price of a comparable
fixed rate security.
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1996
- --------------------------------------------------------------------------------
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 its preferred shares.
An Embedded Swap security includes a swap component such that the fixed
coupon component of the underlying bond is adjusted by the difference between
the securities fixed swap rate and the floating swap index. 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 3,000 Auction Preferred Shares ("APS") in two series
of 1,500 shares each. Dividends are cumulative and the dividend rate on each
series is currently reset every 28 days through an auction process. The average
rate in effect on October 31, 1996 was 3.39%. During the year ended October 31,
1996, the rates ranged from 3.34% to 4.50%.
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
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders of
Van Kampen American Capital Municipal Opportunity Trust:
We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Municipal Opportunity Trust (the "Trust"), including the
portfolio of investments, as of October 31, 1996, 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, 1996, 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 American Capital Municipal Opportunity Trust as of October 31, 1996, 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 Peat Marwick LLP
Chicago, Illinois
December 4, 1996
19
<PAGE> 21
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, of 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
20
<PAGE> 22
VAN KAMPEN AMERICAN CAPITAL MUNICIPAL OPPORTUNITY TRUST
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
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., 1996 All rights reserved.
(SM) denotes a service mark of Van Kampen American Capital Distributors, Inc.
RESULTS OF SHAREHOLDER VOTES
An Annual Meeting of Shareholders of the Trust was held on May 23, 1996, where
shareholders voted on the election of trustees and the selection of independent
public accountants. With regard to the election of David C. Arch as elected
trustee by the common shareholders of the Trust, 10,146,985 shares voted in his
favor, 192,734 withheld. With regard to the election of Howard J Kerr as elected
trustee by the common shareholders of the Trust, 10,143,929 shares voted in his
favor, 195,790 withheld. With regard to the election of Dennis J. McDonnell as
elected trustee by the common shareholders of the Trust, 10,145,288 shares voted
in his favor, 194,430 withheld. With regard to the ratification of KPMG Peat
Marwick LLP as independent public accountants for the Trust, 10,140,071 voted in
favor, 82,485 voted against and 119,747 abstained.
A Special Meeting of Shareholders of the Trust was held on October 23, 1996,
where shareholders voted on a new investment advisory agreement and changes to
investment policies. With regard to the approval of a new investment advisory
agreement between Van Kampen American Capital Investment Advisory Corp. and the
Trust, 9,171,230 shares voted for the proposal, 189,683 voted against and
243,908 abstained. With regard to the approval of certain changes to the Trust's
fundamental investment policies with respect to investment in other investment
companies, 5,095,982 shares voted for the proposal, 239,161 voted against and
304,134 abstained.
21
