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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-6567
Van Kampen Municipal Opportunity Trust
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Ronald Robison
1221 Avenue of the Americas, New York, New York 10020
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: 10/31
Date of reporting period: 4/30/04
Item 1. Report to Shareholders.
The Trust's semi-annual report transmitted to shareholders pursuant to
Rule 30e-1 under the Investment Company Act of 1940 is as follows:
Welcome, Shareholder
In this report, you'll learn about how your investment in Van Kampen
Municipal Opportunity Trust performed during the semiannual period. The
portfolio management team will provide an overview of the market
conditions and discuss some of the factors that affected investment
performance during the reporting period. In addition, this report
includes the trust's financial statements and a list of trust investments
as of April 30, 2004.
Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that the trust will achieve its investment
objective. Trusts are subject to market risk, which is the possibility
that the market values of securities owned by the trust will decline and
that the value of trust shares may therefore be less than what you paid
for them. Accordingly, you can lose money investing in this trust.
Income may subject certain individuals to the federal Alternative Minimum
Tax (AMT).
<Table>
<Caption>
---------------------------------------------------------------------------------------
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE
---------------------------------------------------------------------------------------
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT
---------------------------------------------------------------------------------------
</Table>
Performance Summary as of 4/30/04
<Table>
<Caption>
MUNICIPAL OPPORTUNITY TRUST
SYMBOL: VMO
- ------------------------------------------------------
AVERAGE ANNUAL BASED ON BASED ON
TOTAL RETURNS NAV MARKET PRICE
Since Inception (04/24/92) 7.94% 7.00%
10-year 7.97 7.89
5-year 6.75 6.15
1-year 2.48 -4.47
6-month 0.79 -6.89
- ------------------------------------------------------
</Table>
Past performance is no guarantee of future results. Investment return, net asset
value (NAV) and common share market price will fluctuate and trust shares, when
sold, may be worth more or less than their original cost.
As a result of recent market activity, current performance may vary from the
figures shown. For more up-to-date information, please visit vankampen.com or
speak with your financial advisor. NAV per share is determined by dividing the
value of the trust's portfolio securities, cash and other assets, less all
liabilities, by the total number of common shares outstanding. The common share
market price is the price the market is willing to pay for shares of the trust
at a given time. Common share market price is influenced by a range of factors,
including supply and demand and market conditions. Total return assumes an
investment at the beginning of the period, reinvestment of all distributions for
the period in accordance with the trust's dividend reinvestment plan, and sale
of all shares at the end of the period.
The Lehman Brothers Municipal Bond Index is a broad-based statistical composite
of municipal bonds. The index is unmanaged and does not include any sales
charges or fees. Such costs would lower performance. It is not possible to
invest directly in an index.
1
Trust Report
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2004
Van Kampen Municipal Opportunity Trust is managed by the adviser's Municipal
Fixed Income team.(1) Current members include Dennis Pietrzak, Executive
Director; Robert Wimmel, Vice President; and John Reynoldson, Executive
Director.
MARKET CONDITIONS
The state of the U.S. economy remained mixed over the six-month period under
review. On the positive side, economic growth continued to be robust, with Gross
Domestic Product growth topping 4 percent in both the last quarter of 2003 and,
preliminarily, the first quarter of this year. While this strength in output has
historically triggered fears of rising interest rates, yields remained
stubbornly low across the municipal curve. These low yields were partly the
result of the continued low levels of observed inflation in the U.S. economy.
Unfortunately, they also reflected continuing weakness in the job market, which
remained soft throughout most of the period. The soft job numbers, coupled with
persistently low inflation, led the Federal Open Market Committee (the Fed) to
maintain its accommodative stance throughout the period.
The surprisingly rapid job growth data released in April, coupled with rapidly
rising commodity and high oil prices, led many investors to fear that the Fed
would be forced to raise interest rates earlier than the market initially
expected. As a result, bond yields across all major sectors spiked in April.
Supply of new municipal bonds in calendar 2003 hit record levels as
municipalities moved to take advantage of historically low interest rates. Many
cities and states sought to reduce expenditures by refinancing existing debt and
replacing it with lower-yielding bonds. In other cases, municipalities attempted
to meet current and future funding needs by issuing new debt. This activity
slowed in the first months of 2004.
The low interest rates that prevailed over much of the period also had an impact
on the demand for municipal bonds. Retail and institutional investor activity
slowed as holders of municipal bonds saw little reason to sell bonds purchased
at higher yield levels and reinvest at lower yields. However, the period was
marked by rising activity among non-traditional investors, such as hedge funds
and insurance companies seeking to take advantage of the attractiveness of
municipal bonds relative to some taxable securities. Additionally, investors'
search for yield led to significant outperformance by lower-rated bonds with
greater credit risk. Sectors such as health care, with a preponderance of
lower-rated issues, performed particularly well.
(1)Team Members may change without notice at any time.
2
PERFORMANCE ANALYSIS
Closed-end fund returns can be calculated based upon either the market price or
the net asset value (NAV) of its shares. NAV per share is determined by dividing
the value of the trust's portfolio securities, cash and other assets, less all
liabilities, by the total number of common shares outstanding, while market
price reflects the supply and demand for the shares. As a result, the two
returns can differ significantly. On both an NAV basis and a market-price basis,
the trust underperformed its benchmark, the Lehman Brothers Municipal Bond
Index. (See table below.)
The trust uses leverage to enhance its dividend to common shareholders. The
trust borrows money at short-term rates through the issuance of preferred
shares. The proceeds are typically reinvested in longer-term securities, taking
advantage of the difference between short- and longer-term rates. With short-
term rates at historic lows for much of the period, the difference between
short-and longer-term rates was relatively high. This made using leverage a
profitable approach in the early months of the period, and added to the trust's
returns. As yields rose toward the end of the period, the prices of bonds
declined. The trust's use of leverage magnified this negative price movement,
leading to a total return lower than that of its benchmark, which is not
leveraged.
Our analysis of the macroeconomic environment, coupled with the levels of
interest rates near multi-decade lows, led us to believe that interest rates
were more likely to rise than to fall further. As a result, we kept the trust's
duration (a measure of interest-rate sensitivity) below that of its benchmark in
order to limit the potentially damaging impact of any increase in interest
rates. This approach hampered the trust's returns as interest rates fell for
much of the period. However, the strategy helped cushion returns in the final
weeks of the period when interest rates soared.
The trust's performance was also modestly hampered by its bias, relative to the
benchmark, toward high-quality securities. Municipal bond investors during the
period responded to the improving economy by reducing the yield spreads between
higher and lower-rated bonds (yield spreads reflect the premium demanded by
investors to buy lower-rated bonds). As a result, lower-quality bonds
outperformed. The portfolio had 84 percent exposure to bonds rated AA/Aa or
higher at the end of the period.
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2004
<Table>
<Caption>
- --------------------------------------------------------------
BASED ON BASED ON LEHMAN BROTHERS
NAV MARKET PRICE MUNICIPAL BOND INDEX
0.79% -6.89% 1.19%
- --------------------------------------------------------------
</Table>
Past performance is no guarantee of future results. Investment return, net asset
value and common share market price will fluctuate and trust shares, when sold,
may be worth more or less than their original cost. See Performance Summary for
additional performance information and index definition.
3
We also adjusted the portfolio's term structure in anticipation of rising
interest rates. Our research showed that the intermediate portion of the curve
offered the most promising total-return potential. As a result, we focused our
purchases on the 15- to 20-year segment of the curve. Many of the securities we
identified had the added appeal of premium coupons and 10-year call dates, which
served to add income to the portfolio while limiting its interest-rate exposure.
Our trading activity during the period was below traditional norms because we
wanted to avoid having to reinvest into securities with low yields. That said,
we were able to make selective relative-value trades among securities and
sectors as they moved into and out of fair value. Some of these acquisitions
were funded by the proceeds of housing bonds that were called away by their
issuers during the period. In other cases, we sold bonds that met their
performance objectives. We reinvested this cash into securities that we believed
had promising total-return characteristics.
The trust's portfolio remained well diversified during the period, with its
holdings spread across most major municipal-bond sectors. We believe this
long-standing strategy helps to minimize the risk of over-concentration in any
single sector, while also giving the portfolio exposure to as many potential
sources of return as possible. The three largest sector exposures at the end of
the period were general purpose, wholesale electric and airports.
As mentioned above, the portfolio's below-market duration served it well in the
final weeks of the period, when interest rates rose sharply. While it is
impossible to predict how long this trend will hold, we believe that the trust
is well positioned to weather further increases in rates. We look forward to
becoming more active in seeking attractive structures and relative-value trading
opportunities now that rates have moved into a more normal range.
<Table>
TOP 5 SECTORS AS OF 4/30/04 RATINGS ALLOCATION AS OF 4/30/04
General Purpose 14.7% AAA/Aaa 76.9%
Wholesale Electric 13.6 AA/Aa 7.1
Airport 13.0 A/A 10.1
Health Care 12.0 BBB/Baa 3.2
Public Building 8.1 BB/Ba 0.9
B/B 0.3
Non-Rated 1.5
</Table>
Subject to change daily. Provided for informational purposes only and should not
be deemed as a recommendation to buy or sell the securities mentioned or
securities in the sectors shown above. All percentages are as a percentage of
long-term investments. Securities are classified by sectors that represent broad
groupings of related industries. Ratings allocations based upon ratings as
issued by Standard and Poor's and Moody's. Van Kampen is a wholly owned
subsidiary of a global securities firm which is engaged in a wide range of
financial services including, for example, securities trading and brokerage
activities, investment banking, research and analysis, financing and financial
advisory services.
4
PROXY VOTING POLICIES AND PROCEDURES
A description of the trust's policies and procedures with respect to the
voting of proxies relating to the trust's portfolio securities is
available without charge, upon request, by calling 1-800-847-2424. This
information is also available on the Securities and Exchange Commission's
website at http://www.sec.gov.
5
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED)
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
MUNICIPAL BONDS 157.5%
ALABAMA 2.1%
$1,305 Lee Cnty, AL Sch Wts Ltd Oblg (MBIA Insd)....... 5.000% 02/01/21 $ 1,337,912
2,405 Marshall Cnty, AL Hlthcare Ser C................ 6.000 01/01/32 2,501,104
5 Mobile, AL Indl Dev Brd Solid Waste Disp Rev
Mobile Energy Svc Co Proj Rfdg (a) (b).......... 6.950 01/01/20 34
1,500 University of South Alabama Univ Rev & Cap Impt
Tuition & Rfdg (FGIC Insd)...................... 5.000 03/15/23 1,523,880
-------------
5,362,930
-------------
ARIZONA 1.7%
2,500 Arizona Sch Fac Brd Ctf Part Ser A (MBIA
Insd)........................................... 5.250 09/01/17 2,671,975
1,500 Maricopa Cnty, AZ Stadium Dist Rfdg (AMBAC
Insd)........................................... 5.375 06/01/19 1,607,190
-------------
4,279,165
-------------
ARKANSAS 1.3%
3,035 Fort Smith, AR Wtr & Swr Rev Ser A Rfdg (FSA
Insd)........................................... 5.250 10/01/16 3,244,627
-------------
CALIFORNIA 11.1%
115 California Rural Home Mtg Fin Auth Single Family
Mtg Rev Ser C (AMT) (GNMA Collateralized)....... 7.800 02/01/28 121,921
4,500 California St (AMBAC Insd)...................... 5.125 10/01/27 4,513,905
5,500 California St Dept Wtr Res Pwr Ser A (AMBAC
Insd)........................................... 5.500 05/01/16 6,003,140
2,000 California St Dept Wtr Res Pwr Ser A............ 5.750 05/01/17 2,168,540
2,500 California St Pub Wks Brd Lease Rev Dept
Corrections Ser E Rfdg (XLCA Insd).............. 5.000 06/01/18 2,593,175
2,000 California St Pub Wks Brd Lease Rev Dept Mental
Hlth Coalinga A................................. 5.000 06/01/25 1,908,400
3,500 California St Pub Wks Brd Lease Rev Dept Mental
Hlth Coalinga A................................. 5.125 06/01/29 3,361,435
5,000 Contra Costa, CA Home Mtg Fin Auth Home Mtg Rev
(Escrowed to Maturity) (MBIA Insd).............. * 09/01/17 2,532,250
4,000 Foothill/Eastern Corridor Agy CA Toll Rd Rev
Conv Cap Apprec Sr Lien Ser A (Escrowed to
Maturity) (c)................................... 0/7.050 01/01/10 4,593,720
-------------
27,796,486
-------------
COLORADO 4.1%
2,000 Arapahoe Cnty, CO Cap Impt Tr Fd Hwy Rev E-470
Proj Ser B (Prerefunded @ 08/31/05)............. 7.000 08/31/26 2,204,340
1,505 Arapahoe Cnty, CO Ctfs Partn Rfdg (FSA Insd).... 5.250 12/01/15 1,638,072
545 Colorado Hlth Fac Auth Rev Catholic Hlth
Initiatives..................................... 5.250 09/01/21 553,409
1,000 Colorado Hlth Fac Auth Rev Hosp Portercare
Adventist Hlth.................................. 6.500 11/15/31 1,084,800
</Table>
6 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
COLORADO (CONTINUED)
$1,000 Colorado Hsg Fin Auth Multi-Family Hsg Ins Mtg
Ser B2 (AMT) (FHA Gtd).......................... 5.800% 10/01/28 $ 1,027,420
226 Colorado Hsg Fin Auth Single Family Pgm Sr Ser
A2 (AMT)........................................ 7.250 05/01/27 228,904
160 Colorado Hsg Fin Auth Single Family Pgm Sr Ser
C1 (AMT)........................................ 7.550 11/01/27 163,936
1,000 Denver, CO City & Cnty Arpt Rev Ser B (AMT)
(MBIA Insd)..................................... 6.250 11/15/07 1,101,000
1,005 Greeley, CO Multi-Family Rev Hsg Mtg Creek Stone
(AMT) (FHA Gtd)................................. 5.950 07/01/28 1,029,281
1,000 Highlands Ranch Metro Dist No 2 CO Rfdg (FSA
Insd)........................................... 6.500 06/15/11 1,179,470
-------------
10,210,632
-------------
CONNECTICUT 2.2%
3,250 Connecticut St Spl Oblig Pkg Rev Bradley Intl
Arpt Ser A (AMT) (ACA Insd)..................... 6.600 07/01/24 3,488,323
1,000 Mashantucket Western Pequot Tribe CT Spl Rev Ser
A, 144A--Private Placement (d).................. 6.400 09/01/11 1,069,740
840 Mashantucket Western Pequot Tribe CT Spl Rev Ser
A, 144A--Private Placement (Escrowed to
Maturity) (d)................................... 6.500 09/01/06 927,956
-------------
5,486,019
-------------
DISTRICT OF COLUMBIA 2.0%
5,000 Metropolitan Washington DC Arpt Auth Sys Ser A
(AMT) (FGIC Insd)............................... 5.250 10/01/32 5,013,250
-------------
FLORIDA 3.6%
2,000 Escambia Cnty, FL Hlth Fac Auth Rev FL Hlthcare
Fac Ln VHA Pgm (AMBAC Insd)..................... 5.950 07/01/20 2,089,280
1,000 Lakeland, FL Hosp Sys Rev Lakeland Regl Hlth
Sys............................................. 5.500 11/15/32 1,005,580
2,100 Miami-Dade Cnty, FL Aviation Miami Intl Arpt
(AMT) (FGIC Insd)............................... 5.375 10/01/27 2,148,132
2,375 North Broward, FL Hosp Dist Rev Impt............ 6.000 01/15/31 2,471,995
1,300 Plantation, FL Impt Projs Rfdg (FSA Insd)....... 5.000 08/15/21 1,341,353
-------------
9,056,340
-------------
GEORGIA 7.0%
2,166 Fulton Cnty, GA Lease Rev (Acquired 12/23/1994,
Cost $2,165,964) (e)............................ 7.250 06/15/10 2,245,282
7,000 Georgia Muni Elec Auth Pwr Rev Ser A (MBIA
Insd)........................................... 6.500 01/01/20 8,521,450
6,245 Municipal Elec Auth GA Combustion Turbine Proj
Ser A (MBIA Insd)............................... 5.250 11/01/16 6,679,839
-------------
17,446,571
-------------
</Table>
See Notes to Financial Statements 7
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
ILLINOIS 9.6%
$2,000 Chicago, IL Brd of Ed (Prerefunded @ 12/01/10)
(FGIC Insd)..................................... 5.500% 12/01/31 $ 2,258,120
5,000 Chicago, IL O'Hare Intl Arpt Rev Gen Arpt Second
Lien Ser A Rfdg (MBIA Insd) (f)................. 6.375 01/01/12 5,246,000
105 Chicago, IL Single Family Mtg Rev Ser A (AMT)
(GNMA Collateralized)........................... 7.000 09/01/27 105,523
75 Chicago, IL Single Family Mtg Rev Ser B (AMT)
(GNMA Collateralized)........................... 7.625 09/01/27 76,522
1,000 Chicago, IL Wastewtr Transmission Rev Second
Lien (MBIA Insd)................................ 5.750 01/01/25 1,071,450
2,000 Cook Cnty, IL Cmnty Cap Apprec (FSA Insd)....... * 12/01/10 1,557,620
2,500 Du Page Cnty, IL Trans Rev (FSA Insd)........... 5.750 01/01/17 2,761,675
3,285 Illinois Hlth Facs Auth Rev Midwest Physician
Group Ltd Proj (Prerefunded @ 11/15/04)......... 8.125 11/15/19 3,469,551
540 Illinois Hsg Dev Auth Rev Homeowner Mtg G2
(AMT)........................................... 6.050 08/01/29 561,373
3,630 Kendall, Kane & Will Cntys, IL Cmnty Sch Dist
308 Ser B (FGIC Insd)........................... 5.250 10/01/20 3,804,639
1,000 Metropolitan Pier & Expo Auth IL Dedicated St
Tax Rev McCormick Pl Expn Proj Rfdg (FGIC
Insd)........................................... 5.500 12/15/24 1,050,320
1,865 Sangamon Cnty, IL Cmnty Unit Sch Dist No 5 (FGIC
Insd)........................................... 6.500 12/01/05 2,004,204
-------------
23,966,997
-------------
INDIANA 3.2%
3,270 Allen Cnty, IN War Mem Coliseum Ser A (AMBAC
Insd)........................................... 5.500 11/01/16 3,535,491
1,000 Indiana St Dev Fin Auth Rev Exempt Fac Conv Rfdg
(AMT)........................................... 5.950 08/01/30 1,014,090
1,210 North Adams, IN Cmnty Sch Cap Apprec First Mtg
(FSA Insd)...................................... * 01/15/16 686,481
2,500 Purdue Univ, IN Univ Rev Student Fee Ser B
(Prerefunded @ 01/01/05)........................ 6.750 07/01/09 2,665,425
-------------
7,901,487
-------------
IOWA 0.8%
1,890 Des Moines, IA Pub Pkg Sys Rev Ser A (FGIC
Insd)........................................... 5.750 06/01/17 2,100,111
-------------
KENTUCKY 3.1%
1,475 Kenton Cnty, KY Arpt Brd Rev Cincinnati/Northn
KY Intl Arpt Ser A Rfdg (AMT) (MBIA Insd)....... 6.200 03/01/08 1,636,055
1,995 Kentucky Hsg Corp Hsg Rev Ser F (AMT) (FNMA
Collateralized)................................. 5.450 01/01/32 2,025,085
</Table>
8 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
KENTUCKY (CONTINUED)
$2,345 Kentucky St Tpk Auth Econ Dev Revitalization
Proj Rfdg (FSA Insd)............................ 5.625% 07/01/14 $ 2,599,573
1,250 Kentucky St Tpk Auth Econ Dev Revitalization
Proj Rfdg (Prerefunded @ 01/01/11) (FSA Insd)... 5.625 07/01/13 1,386,863
-------------
7,647,576
-------------
MARYLAND 1.8%
1,050 Maryland St Econ Dev Corp Student Hsg Rev Univ
MD College Park Proj............................ 5.625 06/01/35 1,061,403
1,000 Maryland St Hlth & Higher Ed Fac Auth Rev
Medstar Health Rfdg............................. 5.375 08/15/24 973,420
2,350 Northeast, MD Waste Disp Auth Rfdg (AMT) (AMBAC
Insd)........................................... 5.500 04/01/16 2,509,424
-------------
4,544,247
-------------
MASSACHUSETTS 3.9%
4,000 Massachusetts Muni Whsl Elec Co Proj 6 A (MBIA
Insd)........................................... 5.250 07/01/15 4,282,800
3,000 Massachusetts St Dev Fin Agy Semass Sys Ser A
(MBIA Insd)..................................... 5.625 01/01/16 3,271,620
1,000 Massachusetts St Fed Hwy Gnt Antic Nt Ser A..... 5.750 06/15/15 1,133,810
1,000 Massachusetts St Hlth & Ed Fac Auth Rev Partn
Hlthcare Sys Ser C.............................. 5.750 07/01/32 1,046,650
-------------
9,734,880
-------------
MICHIGAN 2.3%
3,505 Detroit, MI Wtr Supply Sys Ser B (MBIA Insd).... 5.250 07/01/18 3,734,402
2,000 Michigan St Ctf Part (AMBAC Insd)............... 5.500 06/01/27 2,082,140
-------------
5,816,542
-------------
MINNESOTA 0.4%
1,000 Chaska, MN Elec Rev Ser A....................... 6.100 10/01/30 1,050,820
-------------
MISSISSIPPI 0.9%
1,500 Mississippi Home Corp Single Family Rev Mtg Ser
C (AMT) (GNMA Collateralized)................... 7.600 06/01/29 1,604,880
620 Mississippi Home Corp Single Family Rev Mtg Ser
F (AMT) (GNMA Collateralized)................... 7.550 12/01/27 639,381
-------------
2,244,261
-------------
MISSOURI 3.8%
2,150 Cape Girardeau Cnty, MO Indl Southeast MO Hosp
Assoc........................................... 5.500 06/01/22 2,189,904
3,605 Curators Univ MO Sys Facs Rev Ser A............. 5.000 11/01/21 3,713,583
150 Saint Louis Cnty, MO Single Family Mtg Rev (MBIA
Insd)........................................... 6.900 04/01/16 151,298
3,000 Sikeston, MO Elec Rev Rfdg (MBIA Insd) (f)...... 6.200 06/01/10 3,435,480
-------------
9,490,265
-------------
</Table>
See Notes to Financial Statements 9
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
NEVADA 0.6%
$1,500 Reno, NV Sr Lien Retrac Reno Trans Proj (AMBAC
Insd)........................................... 5.125% 06/01/32 $ 1,507,725
-------------
NEW HAMPSHIRE 1.1%
2,500 New Hampshire Hlth & Ed Fac Univ Sys of NH
(AMBAC Insd).................................... 5.500 07/01/15 2,732,100
-------------
NEW JERSEY 14.2%
2,000 Garden St Preservation Tr NJ Ser A (FSA Insd)... 5.250 11/01/18 2,146,140
5,000 New Jersey Econ Dev Auth Sch Fac Constr Ser F
(FGIC Insd)..................................... 5.250 06/15/20 5,306,650
20,000 New Jersey Econ Dev Auth St Contract Econ
Recovery (MBIA Insd)............................ 5.900 03/15/21 22,958,400
5,000 New Jersey St Ed Fac Auth Higher Ed Cap Impt Ser
A (AMBAC Insd).................................. 5.250 09/01/21 5,252,650
-------------
35,663,840
-------------
NEW MEXICO 0.7%
1,720 New Mexico Mtg Fin Auth Single Family Mtg Pgm
Ser G (AMT) (GNMA Collateralized)............... 7.250 07/01/26 1,760,970
-------------
NEW YORK 13.7%
10,000 New York City Ser A............................. 7.000 08/01/07 11,053,400
3,000 New York City Ser A Rfdg........................ 7.000 08/01/05 3,194,130
2,500 New York St Dorm Auth Lease Mun Hlth Facs Impt
Ser 1 (FSA Insd)................................ 5.500 01/15/12 2,720,575
1,495 New York St Dorm Auth Rev Mental Hlth Svcs Fac
Ser A........................................... 5.750 08/15/12 1,622,987
5 New York St Dorm Auth Rev Mental Hlth Svcs Fac
Ser A (Prerefunded @ 02/15/07).................. 5.750 08/15/12 5,567
1,445 New York St Dorm Auth Rev Secd Hosp North Gen
Hosp Rfdg (MBIA Insd)........................... 5.750 02/15/17 1,600,843
2,040 New York St Dorm Auth Rev Secd Hosp North Gen
Hosp Rfdg....................................... 5.750 02/15/18 2,231,842
3,780 New York St Mtg Agy Rev Ser 101 (AMT)........... 5.400 04/01/32 3,842,635
3,500 Port Auth NY & NJ Cons 97th Ser (AMT) (FGIC
Insd)........................................... 6.650 01/15/23 3,643,325
4,000 Port Auth NY & NJ Spl Oblig Rev Spl Proj JFK
Intl Arpt Terminal 6 (AMT) (MBIA Insd).......... 5.750 12/01/22 4,292,440
-------------
34,207,744
-------------
</Table>
10 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
NORTH CAROLINA 6.9%
$1,500 North Carolina Eastn Muni Pwr Agy Pwr Sys Rev
Ser D........................................... 6.700% 01/01/19 $ 1,657,065
11,000 North Carolina Muni Pwr Agy No 1 Catawba Elec
Rev Rfdg (MBIA Insd)............................ 6.000 01/01/12 12,568,820
3,000 North Carolina Muni Pwr Agy Ser A (MBIA Insd)... 5.250 01/01/19 3,165,360
-------------
17,391,245
-------------
NORTH DAKOTA 0.3%
700 North Dakota St Hsg Fin Agy Ser C (AMT)......... 5.550 07/01/29 718,305
-------------
OHIO 3.4%
700 Akron, OH Ctf Part Akron Muni Baseball Stad
Proj............................................ 6.500 12/01/07 751,499
1,190 Bowling Green St Univ OH (FGIC Insd)............ 5.750 06/01/14 1,330,301
500 Cuyahoga Cnty, OH Hosp Fac Rev Canton Inc Proj.. 7.500 01/01/30 550,700
3,000 Lucas Cnty, OH Hosp Rev Promedica Hlthcare Oblig
Rfdg (MBIA Insd)................................ 6.000 11/15/07 3,312,120
1,500 Mahoning Cnty, OH Hosp Fac Forum Hlth Oblig
Group Ser A..................................... 6.000 11/15/32 1,562,520
1,000 Ohio St Air Quality Dev Auth Rev JMG Fdg Ltd
Part Proj Rfdg (AMT) (AMBAC Insd)............... 6.375 04/01/29 1,036,640
-------------
8,543,780
-------------
OKLAHOMA 4.3%
690 Central OK Transn & Pkg Auth Pkg Sys (AMBAC
Insd)........................................... 5.000 07/01/19 711,721
625 Central OK Transn & Pkg Auth Pkg Sys (AMBAC
Insd)........................................... 5.000 07/01/20 641,844
4,770 McAlester, OK Pub Wks Auth Util Cap Apprec (FSA
Insd)........................................... * 02/01/34 919,608
1,300 Sapulpa, OK Muni Auth Cap Impt Rev Rfdg
(Prerefunded @ 07/01/10) (FSA Insd)............. 5.750 07/01/30 1,488,201
1,000 Tulsa Cnty, OK Pub Fac Auth Cap Impt Rev (AMBAC
Insd)........................................... 6.250 11/01/22 1,150,800
2,000 Tulsa, OK Indl Auth Hosp Rev Hillcrest Med Cent
Proj Rfdg (Escrowed to Maturity) (Connie Lee
Insd)........................................... 6.125 06/01/05 2,099,580
3,140 Tulsa, OK Indl Auth Hosp Rev Hillcrest Med Cent
Proj Rfdg (Escrowed to Maturity) (Connie Lee
Insd)........................................... 6.250 06/01/08 3,555,548
230 University of Oklahoma Rev Mult Facs (MBIA
Insd)........................................... 5.000 06/01/20 236,693
-------------
10,803,995
-------------
</Table>
See Notes to Financial Statements 11
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
OREGON 3.2%
$2,500 Oregon Hlth Sciences Univ Insd Ser A (MBIA
Insd)........................................... 5.250% 07/01/22 $ 2,608,575
5,000 Oregon St Dept Admin Ser C Rfdg (MBIA Insd)..... 5.250 11/01/18 5,288,250
-------------
7,896,825
-------------
PENNSYLVANIA 7.3%
2,000 Harrisburg, PA Auth Res Gtd Sub Ser D-2 (FSA
Insd)........................................... 5.000 12/01/33 2,124,480
1,000 Harrisburg, PA Cap Apprec Nts Ser F Rfdg (AMBAC
Insd)........................................... * 03/15/15 605,690
1,865 Harrisburg, PA Cap Apprec Ser D Rfdg (AMBAC
Insd)........................................... * 09/15/15 1,103,875
1,865 Harrisburg, PA Cap Apprec Ser D Rfdg (AMBAC
Insd)........................................... * 03/15/16 1,068,757
1,000 Philadelphia, PA Sch Dist Ser A (FSA Insd)...... 5.750 02/01/13 1,116,630
3,500 State Pub Sch Bldg Auth PA Sch Rev Lease
Philadelphia Sch Dist Proj (FSA Insd)........... 5.000 06/01/33 3,486,560
3,000 Susquehanna Area Regl Arpt Auth PA Ser A (AMT)
(AMBAC Insd).................................... 5.375 01/01/21 3,108,900
5,415 Susquehanna Area Regl Arpt Auth PA Ser A (AMT)
(AMBAC Insd).................................... 5.375 01/01/22 5,584,490
-------------
18,199,382
-------------
RHODE ISLAND 0.6%
1,480 Rhode Island St Econ Dev Ser A Rfdg (AMT) (FSA
Insd)........................................... 5.000 07/01/19 1,485,165
-------------
SOUTH CAROLINA 1.5%
1,250 Easley, SC Util Rev Comb (FSA Insd)............. 5.250 12/01/18 1,325,150
2,500 South Carolina Jobs Econ Dev Auth Indl Rev Elec
& Gas Co Proj Ser A (AMBAC Insd)................ 5.200 11/01/27 2,554,600
-------------
3,879,750
-------------
SOUTH DAKOTA 0.6%
1,375 Deadwood, SD Ctfs Partn (ACA Insd).............. 6.375 11/01/20 1,464,636
-------------
TENNESSEE 0.9%
1,000 Elizabethton, TN Hlth & Ed Fac Brd Rev Hosp
First Mtg Ser B Impt & Rfdg..................... 8.000 07/01/33 1,155,600
1,000 Johnson City, TN Hlth & Ed Fac Brd Hosp Rev
First Mtg Mtn St Hlth Ser A Rfdg (MBIA Insd).... 7.500 07/01/25 1,233,310
-------------
2,388,910
-------------
TEXAS 19.4%
980 Austin, TX Utility Sys Rev Comb (AMBAC Insd).... 6.500 11/15/05 1,051,109
20 Austin, TX Utility Sys Rev Comb Rfdg (Escrowed
to Maturity) (AMBAC Insd)....................... 6.500 11/15/05 21,482
2,545 Dallas Cnty, TX Cmnty College Fin Sys (AMBAC
Insd)........................................... 5.375 02/15/17 2,723,888
</Table>
12 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
$3,000 Dallas Cnty, TX Util & Reclamation Dist Ser B
Rfdg (AMBAC Insd)............................... 5.875% 02/15/29 $ 3,078,930
2,500 Dallas, TX Wtrwks & Swr Sys Rev & Impt Rfdg (FSA
Insd)........................................... 5.375 10/01/18 2,696,300
5,500 Dallas-Fort Worth, TX Intl Arpt Rev Impt Jt Ser
A Rfdg (AMT) (FGIC Insd)........................ 5.500 11/01/31 5,633,980
1,500 Dallas-Fort Worth, TX Intl Arpt Rev Jt Ser A
(AMT) (FGIC Insd)............................... 5.750 11/01/30 1,549,170
4,000 Dallas-Fort Worth, TX Intl Arpt Rev Jt Ser A
(AMT) (FSA Insd)................................ 5.500 11/01/21 4,197,640
1,135 Fort Worth, TX Gen Purp Ser A Rfdg.............. 5.000 03/01/20 1,165,168
6,000 Harris Cnty, TX Flood Ctl Dist Contract Ser B
Rfdg............................................ 5.000 10/01/22 6,101,220
2,000 Houston, TX Arpt Sys Rev Sub Lien (FSA Insd).... 5.500 07/01/20 2,144,940
3,000 Houston, TX Arpt Sys Rev Sub Lien Ser A (AMT)
(FSA Insd)...................................... 5.625 07/01/30 3,067,260
5,000 Houston, TX Arpt Sys Rev Sub Lien Ser A (AMT)
(FSA Insd)...................................... 5.125 07/01/32 4,911,850
1,500 Metropolitan Hlth Fac Dev Corp TX Wilson N Jones
Mem Hosp Proj................................... 7.250 01/01/31 1,415,415
5,000 North Cent TX Hlth Fac Dev Hosp Childrens Med
Ctr Dallas (AMBAC Insd)......................... 5.250 08/15/32 5,081,550
1,184 Texas Gen Svcs Comm Partn Int Lease Purch Ctfs.. 7.250 08/01/11 1,201,866
2,360 University of Texas Rev Fin Sys Ser B........... 5.250 08/15/20 2,495,794
-------------
48,537,562
-------------
WASHINGTON 10.0%
9,850 Bellevue, WA Convention Cent Comp Int Rfdg (MBIA
Insd)........................................... * 02/01/25 3,149,833
3,750 Chelan Cnty, WA Pub Util Dist No. 001 Cons Rev
Chelan Hydro Ser A (AMT) (MBIA Insd)............ 5.600 01/01/36 3,882,338
5,000 Energy Northwest WA Elec Rev Columbia Generating
Ser A Rfdg (FSA Insd)........................... 5.500 07/01/16 5,414,600
2,000 Port Seattle, WA Rev Ser B (AMT) (MBIA Insd).... 5.625 02/01/24 2,063,640
4,000 Tacoma, WA Elec Sys Rev Ser B Rfdg (FSA Insd)... 5.500 01/01/11 4,445,600
2,900 Thurston & Pierce Cntys, WA (FSA Insd).......... 5.000 12/01/22 2,951,794
5,125 Washington St Pub Pwr Supply Sys Nuclear Proj No
3 Rev Ser C Rfdg (MBIA Insd).................... * 07/01/14 3,192,158
-------------
25,099,963
-------------
WEST VIRGINIA 3.2%
8,000 Harrison Cnty, WV Cmnty Solid Waste Disp Rev
West Penn Pwr Co Proj Ser A (AMT) (MBIA Insd)... 6.875 04/15/22 8,031,680
-------------
</Table>
See Notes to Financial Statements 13
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
PORTFOLIO OF INVESTMENTS -- APRIL 30, 2004 (UNAUDITED) continued
<Table>
<Caption>
PAR
AMOUNT
(000) DESCRIPTION COUPON MATURITY VALUE
- ----------------------------------------------------------------------------------------------
WISCONSIN 0.7%
$1,500 Southeast WI Professional Baseball Pk Dist Sales
Tax Rev Ser A Rfdg (MBIA Insd).................. 5.500% 12/15/20 $ 1,667,655
-------------
TOTAL LONG-TERM INVESTMENTS 157.5%
(Cost $373,055,628)......................................................... 394,374,438
SHORT-TERM INVESTMENT 0.2%
(Cost $400,000)............................................................. 400,000
-------------
TOTAL INVESTMENTS 157.7%
(Cost $373,455,628)......................................................... 394,774,438
OTHER ASSETS IN EXCESS OF LIABILITIES 2.2%................................... 5,610,546
PREFERRED SHARES (INCLUDING ACCRUED DISTRIBUTIONS) (59.9%)................... (150,051,581)
-------------
NET ASSETS APPLICABLE TO COMMON SHARES 100.0%................................ $ 250,333,403
=============
</Table>
* Zero coupon bond
(a) Non-income producing security.
(b) This borrower has filed for protection in federal bankruptcy court.
(c) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(d) 144A securities are those which are exempt from registration under Rule 144A
of the Securities Act of 1933, as amended. These securities may only be
resold in transactions exempt from registration which are normally those
transactions with qualified institutional buyers.
(e) These securities are restricted and may be resold only in transactions
exempt from registration which are normally those transactions with
qualified institutional buyers. Restricted securities comprise 0.9% of net
assets applicable to common shares.
(f) All or a portion of these securities have been physically segregated in
connection with open futures contracts.
ACA--American Capital Access
AMBAC--AMBAC Indemnity Corp.
AMT--Alternative Minimum Tax
Connie Lee--Connie Lee Insurance Co.
FGIC--Financial Guaranty Insurance Co.
FHA--Federal Housing Administration
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance Inc.
GNMA--Government National Mortgage Association
MBIA--Municipal Bond Investors Assurance Corp.
XLCA--XL Capital Assurance Inc.
14 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
April 30, 2004 (Unaudited)
<Table>
ASSETS:
Total Investments (Cost $373,455,628)....................... $394,774,438
Cash........................................................ 184,246
Receivables:
Interest.................................................. 6,073,772
Investments Sold.......................................... 125,597
Other....................................................... 1,481
------------
Total Assets............................................ 401,159,534
------------
LIABILITIES:
Payables:
Investment Advisory Fee................................... 199,200
Variation Margin on Futures............................... 114,875
Income Distributions--Common Shares....................... 79,345
Administrative Fee........................................ 16,600
Other Affiliates.......................................... 16,146
Trustees' Deferred Compensation and Retirement Plans........ 247,471
Accrued Expenses............................................ 100,913
------------
Total Liabilities....................................... 774,550
Preferred Shares (including accrued distributions).......... 150,051,581
------------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $250,333,403
============
NET ASSET VALUE PER COMMON SHARE ($250,333,403 divided by
15,357,684 shares outstanding)............................ $ 16.30
============
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of
shares authorized, 15,357,684 shares issued and
outstanding).............................................. $ 153,577
Paid in Surplus............................................. 226,773,592
Net Unrealized Appreciation................................. 22,067,277
Accumulated Undistributed Net Investment Income............. 1,718,912
Accumulated Net Realized Loss............................... (379,955)
------------
NET ASSETS APPLICABLE TO COMMON SHARES...................... $250,333,403
============
PREFERRED SHARES ($.01 par value, authorized 100,000,000
shares, 6,000 issued with liquidation preference of
$25,000 per share)........................................ $150,000,000
============
NET ASSETS INCLUDING PREFERRED SHARES....................... $400,333,403
============
</Table>
See Notes to Financial Statements 15
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
FINANCIAL STATEMENTS continued
Statement of Operations
For the Six Months Ended April 30, 2004 (Unaudited)
<Table>
INVESTMENT INCOME:
Interest.................................................... $10,414,466
-----------
EXPENSES:
Investment Advisory Fee..................................... 1,229,604
Preferred Share Maintenance................................. 198,775
Administrative Fee.......................................... 102,467
Trustees' Fees and Related Expenses......................... 58,291
Legal....................................................... 22,115
Custody..................................................... 12,922
Other....................................................... 121,685
-----------
Total Expenses.......................................... 1,745,859
-----------
NET INVESTMENT INCOME....................................... $ 8,668,607
===========
REALIZED AND UNREALIZED GAIN/LOSS:
Realized Gain/Loss:
Investments............................................... $ 1,306,498
Futures................................................... (3,095,910)
-----------
Net Realized Loss........................................... (1,789,412)
-----------
Unrealized Appreciation/Depreciation:
Beginning of the Period................................... 25,976,471
End of the Period:
Investments............................................. 21,318,810
Futures................................................. 748,467
-----------
22,067,277
-----------
Net Unrealized Depreciation During the Period............... (3,909,194)
-----------
NET REALIZED AND UNREALIZED LOSS............................ $(5,698,606)
===========
DISTRIBUTIONS TO PREFERRED SHAREHOLDERS..................... $ (853,706)
===========
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES FROM
OPERATIONS................................................ $ 2,116,295
===========
</Table>
16 See Notes to Financial Statements
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets (Unaudited)
<Table>
<Caption>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
------------------------------------
FROM INVESTMENT ACTIVITIES:
Operations:
Net Investment Income................................... $ 8,668,607 $ 18,197,414
Net Realized Gain/Loss.................................. (1,789,412) 6,086,249
Net Unrealized Depreciation During the Period........... (3,909,194) (4,641,387)
Distributions to Preferred Shareholders:
Net Investment Income................................. (532,318) (1,239,349)
Net Realized Gain..................................... (321,388) (537,720)
------------ ------------
Change in Net Assets Applicable to Common Shares from
Operations............................................ 2,116,295 17,865,207
Distributions to Common Shareholders:
Net Investment Income................................. (8,797,232) (17,777,125)
Net Realized Gain..................................... (4,378,366) (7,109,923)
------------ ------------
NET CHANGE IN NET ASSETS APPLICABLE TO COMMON SHARES
FROM INVESTMENT ACTIVITIES............................ (11,059,303) (7,021,841)
FROM CAPITAL TRANSACTIONS:
Value of Common Shares Issued Through Dividend
Reinvestment.......................................... 81,435 -0-
------------ ------------
TOTAL DECREASE IN NET ASSETS APPLICABLE TO COMMON
SHARES................................................ (10,977,868) (7,021,841)
NET ASSETS APPLICABLE TO COMMON SHARES:
Beginning of the Period................................. 261,311,271 268,333,112
------------ ------------
End of the Period (Including accumulated undistributed
net investment income of $1,718,912 and $2,379,855,
respectively)......................................... $250,333,403 $261,311,271
============ ============
</Table>
See Notes to Financial Statements 17
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
FINANCIAL HIGHLIGHTS (UNAUDITED)
THE FOLLOWING SCHEDULE PRESENTS FINANCIAL HIGHLIGHTS FOR ONE COMMON SHARE OF THE
TRUST OUTSTANDING THROUGHOUT THE PERIODS INDICATED.
<Table>
<Caption>
SIX MONTHS
ENDED
APRIL 30, ------------------------------
2004 2003 2002 (a) 2001
--------------------------------------------
NET ASSET VALUE, BEGINNING OF THE PERIOD........ $ 17.02 $ 17.48 $ 17.59 $ 16.29
------- ------- ------- -------
Net Investment Income......................... .56 1.19 1.23 1.26
Net Realized and Unrealized Gain/Loss......... (.37) .09 .15 1.29
Common Share Equivalent of Distributions Paid
to Preferred Shareholders:
Net Investment Income....................... (.03) (.08) (.09) (.32)
Net Realized Gain........................... (.02) (.04) (.08) (.01)
------- ------- ------- -------
Total from Investment Operations................ .14 1.16 1.21 2.22
Distributions Paid to Common Shareholders:
Net Investment Income....................... (.57) (1.16) (1.08) (.92)
Net Realized Gain........................... (.29) (.46) (.24) -0-
------- ------- ------- -------
NET ASSET VALUE, END OF THE PERIOD.............. $ 16.30 $ 17.02 $ 17.48 $ 17.59
======= ======= ======= =======
Common Share Market Price at End
of the Period................................. $ 14.73 $ 16.65 $ 16.04 $ 15.65
Total Return (b)................................ -6.89%* 14.53% 11.36% 21.42%
Net Assets Applicable to Common Shares at End of
the Period (In millions)...................... $ 250.3 $ 261.3 $ 268.3 $ 270.0
Ratio of Expenses to Average Net Assets
Applicable to Common Shares (c)............... 1.34% 1.28% 1.42% 1.58%
Ratio of Net Investment Income to Average Net
Assets Applicable to Common Shares (c)........ 6.65% 6.90% 7.17% 7.40%
Portfolio Turnover.............................. 8%* 36% 43% 34%
SUPPLEMENTAL RATIOS:
Ratio of Expenses to Average Net Assets
Including Preferred Shares (c)................ .85% .81% .91% 1.00%
Ratio of Net Investment Income to Average Net
Assets Applicable to Common Shares (d)........ 6.24% 6.43% 6.61% 5.54%
SENIOR SECURITIES:
Total Preferred Shares Outstanding.............. 6,000 6,000 6,000 6,000
Asset Coverage Per Preferred Share (e).......... $66,731 $68,560 $69,736 $70,006
Involuntary Liquidating Preference Per Preferred
Share......................................... $25,000 $25,000 $25,000 $25,000
Average Market Value Per Preferred Share........ $25,000 $25,000 $25,000 $25,000
</Table>
* Non-Annualized
(a)As required, effective November 1, 2001, the Trust has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
accreting market discount on fixed income securities. The effect of this
change for the year ended October 31, 2002 was to increase net investment
income by $.01, decrease net realized and unrealized gains and losses per
share by $.01 and increase the ratio of net investment income to average net
assets applicable to common shares by .03%. Per share, ratios and
supplemental data for periods prior to October 31, 2002 have not been
restated to reflect this change in presentation.
(b)Total return assumes an investment at the common share market price at the
beginning of the period indicated, reinvestment of all distributions for the
period in accordance with the Trust's dividend reinvestment plan, and sale of
all shares at the closing common share market price at the end of the period
indicated.
(c)Ratios do not reflect the effect of dividend payments to preferred
shareholders.
(d)Ratios reflect the effect of dividend payments to preferred shareholders.
(e)Calculated by subtracting the Trust's total liabilities (not including the
preferred shares) from the Trust's total assets and dividing this by the
number of preferred shares outstanding.
18
<Table>
<Caption>
YEAR ENDED OCTOBER 31,
- ------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------
$ 15.67 $ 17.61 $ 16.96 $ 16.12 $ 15.85 $ 14.39 $ 17.30
-------- ------- -------- -------- -------- -------- --------
1.27 1.25 1.26 1.26 1.27 1.28 1.30
.65 (1.97) .64 .83 .27 1.58 (2.92)
(.40) (.32) (.35) (.35) (.36) (.39) (.27)
-0- -0- -0- -0- -0- -0- -0-
-------- ------- -------- -------- -------- -------- --------
1.52 (1.04) 1.55 1.74 1.18 2.47 (1.89)
(.90) (.90) (.90) (.90) (.91) (1.01) (1.02)
-0- -0- -0- -0- -0- -0- -0-
-------- ------- -------- -------- -------- -------- --------
$ 16.29 $ 15.67 $ 17.61 $ 16.96 $ 16.12 $ 15.85 $ 14.39
======== ======= ======== ======== ======== ======== ========
$13.6875 $ 13.50 $ 16.50 $15.0625 $ 13.75 $ 13.625 $ 13.00
8.28% -13.29% 15.91% 16.54% 7.72% 12.70% -14.96%
$ 250.1 $ 240.5 $ 270.3 $ 260.3 $ 247.5 $ 243.3 $ 220.9
1.68% 1.62% 1.61% 1.64% 1.66% 1.75% 1.69%
8.04% 7.35% 7.25% 7.64% 7.96% 8.45% 8.14%
29% 30% 29% 49% 85% 70% 76%
1.03% 1.03% 1.03% 1.03% 1.03% 1.06% 1.05%
5.49% 5.48% 5.24% 5.51% 5.73% 5.87% 6.43%
6,000 6,000 3,000 3,000 3,000 3,000 3,000
$ 66,683 $65,086 $140,098 $136,771 $132,502 $131,094 $123,637
$ 25,000 $25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
$ 25,000 $25,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
</Table>
See Notes to Financial Statements 19
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen Municipal Opportunity Trust (the "Trust") is registered as a
diversified, closed-end management investment company under the Investment
Company Act of 1940 (the "1940 Act"), as amended. The Trust's investment
objective is to provide a high level of current income exempt from federal
income tax, consistent with preservation of capital. The Trust commenced
investment operations on April 24, 1992. Effective November 30, 2003, the
Trust's investment adviser, Van Kampen Investment Advisory Corp. merged into its
affiliate, Van Kampen Asset Management.
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION Municipal bonds are valued by independent pricing services
or dealers using the mean of the bid and asked prices or, in the absence of
market quotations, at fair value based upon yield data relating to municipal
bonds with similar characteristics and general market conditions. Securities
which are not valued by independent pricing services or dealers are valued at
fair value using procedures established in good faith by the Board of Trustees.
Short-term securities with remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value.
B. SECURITY TRANSACTIONS Security transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis. The
Trust may purchase and sell securities on a "when-issued" or "delayed delivery"
basis, with settlement to occur at a later date. The value of the security so
purchased is subject to market fluctuations during this period. The Trust will
segregate assets with the custodian having an aggregate value at least equal to
the amount of the when-issued or delayed delivery purchase commitments until
payment is made. At April 30, 2004, the Trust had no when-issued and delayed
delivery purchase commitments.
C. INVESTMENT INCOME Interest income is recorded on an accrual basis. Bond
premium is amortized and discount is accreted over the expected life of each
applicable security.
D. FEDERAL INCOME TAXES It is the Trust's policy to comply with the requirements
of 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.
20
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) continued
At April 30, 2004, the cost and related gross unrealized appreciation and
depreciation are as follows:
<Table>
Cost of investments for tax purposes........................ $373,314,092
============
Gross tax unrealized appreciation........................... 22,604,685
Gross tax unrealized depreciation........................... (1,144,339)
------------
Net tax unrealized appreciation on investments.............. $ 21,460,346
============
</Table>
E. DISTRIBUTION OF INCOME AND GAINS The Trust declares and pays monthly
dividends from net investment income to common shareholders. Net realized gains,
if any, are distributed annually on a pro rata basis to common and preferred
shareholders. Distributions from net realized gains for book purposes may
include short-term capital gains, which are included as ordinary income for tax
purposes.
The tax character of distributions paid during the year ended October 31,
2003 was as follows:
<Table>
<Caption>
2003
Distributions paid from:
Ordinary income........................................... $1,944,011
Long-term capital gain.................................... 5,824,969
----------
$7,768,980
==========
</Table>
As of October 31, 2003, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income............................... $1,280,181
Undistributed long-term capital gain........................ 3,842,712
</Table>
Net realized gains and losses may differ for financial and tax reporting
purposes primarily as a result of the deferral of losses relating to wash sale
transactions.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, Van Kampen Asset
Management (the "Adviser") provides investment advice and facilities to the
Trust for an annual fee payable monthly of .60% of the average daily net assets
of the Trust. In addition, the Trust pays a monthly administrative fee to Van
Kampen Investments Inc. or its affiliates (collectively "Van Kampen"), the
Trust's Administrator, at an annual rate of .05% of the average daily net assets
of the Trust. Effective June 1, 2004, the administrative fee was reduced from
..05% to .00%.
For the six months ended April 30, 2004, the Trust recognized expenses of
approximately $13,200 representing legal services provided by Skadden, Arps,
Slate, Meagher & Flom LLP, counsel to the Trust, of which a trustee of the Trust
is an affiliated person.
Under separate Accounting Services and Legal Services agreements, the
Adviser provides accounting and legal services to the Trust. The Adviser
allocates the cost of such services to each trust. For the six months ended
April 30, 2004, the Trust recognized expenses of
21
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) continued
approximately $21,300 representing Van Kampen's cost of providing accounting and
legal services to the Trust, which are reported as part of "Other" and "Legal"
expenses, respectively, in the Statement of Operations.
Certain officers and trustees of the Trust are also officers and directors
of Van Kampen. The Trust does not compensate its officers or trustees who are
officers of Van Kampen.
The Trust provides deferred compensation and retirement plans for its
trustees who are not officers of Van Kampen. Under the deferred compensation
plan, trustees may elect to defer all or a portion of their compensation to a
later date. Benefits under the retirement plan are payable upon retirement for a
ten-year period and are based upon each trustee's years of service to the Trust.
The maximum annual benefit per trustee under the plan is $2,500.
3. CAPITAL TRANSACTIONS
At April 30, 2004 and October 31, 2003, paid in surplus related to common shares
aggregated $226,773,592 and $226,692,205, respectively.
Transactions in common shares were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
Beginning Shares........................................ 15,352,891 15,352,891
Shares Issued Through Dividend Reinvestment............. 4,793 -0-
---------- ----------
Ending Shares........................................... 15,357,684 15,352,891
========== ==========
</Table>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from sales of investments,
excluding short-term investments, were $33,510,052 and $41,337,978,
respectively.
5. DERIVATIVE FINANCIAL INSTRUMENTS
A derivative financial instrument in very general terms refers to a security
whose value is "derived" from the value of an underlying asset, reference rate
or index.
In order to seek to manage the interest rate exposure of the Trust's
portfolio in a changing interest rate environment, the Trust may purchase or
sell financial futures contracts or engage in transactions involving interest
rate swaps, caps, floors or collars. The Trust expects to enter into these
transactions primarily as a hedge against anticipated interest rate or
fixed-income market changes, for duration management or for risk management
purposes, but may also enter into these transactions to generate additional
income. All of the Trust's portfolio holdings, including derivative instruments,
are marked to market each day with the change in value reflected in unrealized
appreciation/depreciation. Upon disposition, a realized gain or loss is
recognized accordingly, except when taking delivery of a security underlying a
futures contract. In this instance, the recognition of gain or loss is postponed
until the disposal of the security underlying the futures contract. Risks may
arise as a result of the potential inability of the counterparties to meet the
terms of their contracts.
Summarized below are the specific types of derivative financial instruments
used by the Trust.
22
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2004 (UNAUDITED) continued
A. 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 typically closes
the contract prior to the delivery date. These contracts are generally used to
manage the portfolio's effective maturity and duration.
Upon entering into futures contracts, the Trust maintains, in a segregated
account with its custodian, an amount of cash or liquid securities with a value
equal to a percentage of the contract amount with either a futures commission
merchant pursuant to rules and regulations promulgated under the 1940 Act, or
with its custodian in an account in the broker's name. This amount is known as
initial margin. During the period the futures contract is open, payments are
received from or made to the broker based upon changes in the value of the
contract (the variation margin).
Transactions in futures contracts, each with a par value of $100,000, for
the six months ended April 30, 2004, were as follows:
<Table>
<Caption>
CONTRACTS
Outstanding at October 31, 2003............................. 584
Futures Opened.............................................. 1,117
Futures Closed.............................................. (1,189)
------
Outstanding at April 30, 2004............................... 512
======
</Table>
The futures contracts outstanding as of April 30, 2004, and the description
and unrealized appreciation/depreciation were as follows:
<Table>
<Caption>
UNREALIZED
APPRECIATION/
CONTRACTS DEPRECIATION
SHORT CONTRACTS:
U.S. Treasury Notes 5-Year Futures June 2004 (Current
Notional Value of $109,938 per contract).................. 425 $581,479
U.S. Treasury Notes 10-Year Futures June 2004 (Current
Notional Value of $110,500 per contract).................. 87 166,988
--- --------
512 $748,467
=== ========
</Table>
6. PREFERRED SHARES
The Trust has outstanding 6,000 Auction Preferred Shares ("APS") in two series
of 3,000 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 April 30, 2004 was 1.05%. During the six months ended April
30, 2004, the rates ranged from 0.880% to 1.850%.
The Trust pays annual fees equivalent to .25% of the preferred share
liquidation value for the remarketing efforts associated with the preferred
auctions. These fees are included as a component of "Preferred Share
Maintenance" expense in the Statement of Operations.
The APS are redeemable at the option of the Trust in whole or in part at the
liquidation value of $25,000 per share plus accumulated and unpaid dividends.
The Trust is subject to certain asset coverage tests and the APS are subject to
mandatory redemption if the tests are not met.
23
VAN KAMPEN MUNICIPAL OPPORTUNITY TRUST
BOARD OF TRUSTEES AND IMPORTANT ADDRESSES
BOARD OF TRUSTEES
DAVID C. ARCH
J. MILES BRANAGAN
JERRY D. CHOATE
ROD DAMMEYER
LINDA HUTTON HEAGY
R. CRAIG KENNEDY
HOWARD J KERR
MITCHELL M. MERIN*
JACK E. NELSON
RICHARD F. POWERS, III*
HUGO F. SONNENSCHEIN
WAYNE W. WHALEN*- Chairman
SUZANNE H. WOOLSEY
INVESTMENT ADVISER
VAN KAMPEN ASSET MANAGEMENT
1221 Avenue of the Americas
New York, New York 10020
CUSTODIAN AND TRANSFER AGENT
STATE STREET BANK
AND TRUST COMPANY
c/o EquiServe
P.O. Box 43011
Providence, Rhode Island 02940-3011
LEGAL COUNSEL
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
333 West Wacker Drive
Chicago, Illinois 60606
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
180 North Stetson Avenue
Chicago, Illinois 60601
* "Interested persons" of the Trust, as defined in the Investment Company Act
of 1940, as amended.
24
Van Kampen
Privacy Notice
The Van Kampen companies and investment products* respect your right to privacy.
We also know that you expect us to conduct and process your business in an
accurate and efficient manner. To do so, we must collect and maintain certain
nonpublic personal information about you. This is information we collect from
you on applications or other forms, and from the transactions you conduct with
us, our affiliates, or third parties. We may also collect information you
provide when using our Web site, and text files (also known as "cookies") may be
placed on your computer to help us to recognize you and to facilitate
transactions you initiate. We do not disclose any nonpublic personal information
about you or any of our former customers to anyone, except as permitted by law.
For instance, so that we may continue to offer you Van Kampen investment
products and services that meet your investing needs, and to effect transactions
that you request or authorize, we may disclose the information we collect to
companies that perform services on our behalf, such as printers and mailers that
assist us in the distribution of investor materials. These companies will use
this information only for the services for which we hired them, and are not
permitted to use or share this information for any other purpose. To protect
your nonpublic personal information internally, we permit access to it only by
authorized employees, and maintain physical, electronic and procedural
safeguards to guard your nonpublic personal information.
* Includes Van Kampen Investments Inc., Van Kampen Asset Management, Van
Kampen Advisors Inc., Van Kampen Funds Inc., Van Kampen Investor Services
Inc., Van Kampen System Inc. and Van Kampen Exchange Corp., as well as the
many Van Kampen mutual funds and Van Kampen unit investment trusts.
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
www.vankampen.com
(VAN KAMPEN INVESTMENTS LOGO)
Copyright (C)2004 Van Kampen
Funds Inc. All rights reserved.
Member NASD/SIPC.
VMO SAR 6/04 RN04-00751P-Y04/04
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. [Reserved.]
Item 9. Controls and Procedures
(a) The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Trust in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a) Code of Ethics - Not applicable for semi-annual reports.
(b)(1) A certification for the Principal Executive Officer of the registrant is
attached hereto as part of EX-99.CERT.
(b)(2) A certification for the Principal Financial Officer of the registrant is
attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Van Kampen Municipal Opportunity Trust
By: /s/ Ronald E. Robison
----------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: June 22, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
----------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: June 22, 2004
By: /s/ John L. Sullivan
---------------------
Name: John L. Sullivan
Title: Principal Financial Officer
Date: June 22, 2004