<PAGE> 1
MUNICIPAL INCOME OPPORTUNITIES TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- - --------------------------------------------------------------------------------
When we last reported to shareholders of MUNICIPAL INCOME OPPORTUNITIES
TRUST (NYSE SYMBOL: OIA) on November 30, 1993, most economic indicators were
pointing toward a sustained recovery. Shortly after the beginning of the new
year, additional concerns surfaced regarding the potential for increased
inflationary pressure. The Federal Reserve Board responded to this scenario by
tightening monetary policy. Between February and April, the central bank raised
the federal-funds rate -- the interest rates that banks charge each other for
overnight loans -- from 3.00 percent to 4.25 percent in four separate moves. In
May, the discount rate -- the interest rate the Federal Reserve Board charges
member banks for loans -- was also increased, by 50 basis points, to 3.50
percent.
Long-term municipal bond yields, as measured by The Bond Buyer Revenue Bond
Index,* were little changed in December and January. However, in February and
March the Index rose 89 basis points to 6.39 percent as yields reached levels
not seen in over a year. Despite 15-20 basis point yield swings during April and
May, the municipal market began to show signs of stability and the Index closed
the period at 6.41 percent.
The municipal market is also influenced by unique supply and demand
conditions. New-issue underwriting totaled a record $290 billion in 1993. The
pace of new-issue activity in 1994 has slowed to an annual rate of $200 billion.
By way of comparison, approximately $260 billion will leave the market, as bonds
mature or are called for redemption. Municipal issuance for the first five
months of 1994 totaled $73 billion, 38 percent below the level for the
comparable period of last year. This imbalance has helped municipals outperform
U.S. government securities over the past two months.
PERFORMANCE
For the 12-month period ended May 31, 1994, the Fund paid shareholders
tax-free income dividends totaling $0.63 per share. OIA's total return for this
period was 6.17 percent. This calculation is based on a change in the Fund's New
York Stock Exchange (NYSE) market price from $8.25 per share on May 31, 1993 to
$8.125 per share on May 31, 1994 and includes the reinvestment of all dividends.
Over the same period, the Fund's net asset value (NAV) declined by roughly 1
percent from $8.58 per share to $8.47 per share. As of May 31, 1994, the Fund
was trading on the NYSE at a four percent discount to NAV.
PORTFOLIO STRUCTURE
Six non-performing loans represented 1.9 percent of the Fund's net assets
at the end of the period. These loans were concentrated in the industrial
development/pollution control, public facilities, retirement facilities,
housing, and nursing and health-related sectors. Five additional issues,
representing another 10 percent of net assets, are expected to be restructured
in the future. While these problem loans are currently paying interest, project
revenues appear insufficient to sustain current debt-service
- - ---------------
* The Bond Buyer Revenue Bond Index is an arithmetic average of the yields of 25
selected municipal revenue bonds with 30-year maturities. Ratings of these
bonds range from Aa1 to Baa1 by Moody's and AA+ to A- by S&P.
<PAGE> 2
levels. Over the last 12 months, $21.7 million in bonds were called for
redemption. The proceeds were reinvested in issues with yields ranging between 6
percent and 7.5 percent. The Fund's short-term (cash) position increased
substantially with the sale of two credits: Denver Airport and Philadelphia-
Methodist Hospital.
At the end of the period, the Fund's net assets exceeded $181 million. The
portfolio was diversified among 10 specific municipal sectors and 49 separate
issuers. Non-rated securities comprised 71 percent of the portfolio. The four
largest municipal sectors were nursing and health-related facilities, industrial
development/pollution control, single-family housing and retirement and lifecare
revenue bonds. These sectors represented 68 percent of the net assets. The
average maturity and call protection of the Fund's long-term holdings were 20
years and 7 years, respectively.
LOOKING AHEAD
A continuation of low new-issue supply coupled with significant bond calls
and maturities should sustain investor demand for municipals. However, the
overall direction of interest rates will primarily be determined by the strength
of the economy, the trend of inflation and the Federal Reserve Board's response
to economic conditions. The level of interest rates, the eventual resolution of
the Fund's problem loans (accruing and non-accruing) and bond redemption
activity are the key factors expected to influence the Fund's future results.
We would like to remind you that the Trustees have approved a procedure
whereby the Fund, when appropriate, may attempt to reduce or eliminate a market
value discount from net asset value by repurchasing shares in the open market or
in privately negotiated transactions at a price not above market value,
whichever is lower at the time of purchase.
We appreciate your ongoing support of MUNICIPAL INCOME OPPORTUNITIES TRUST
and look forward to continuing to serve your investment needs.
Very truly yours,
/S/ CHARLES A. FIUMEFREDDO
--------------------------
Charles A. Fiumefreddo
Chairman of the Board
<PAGE> 3
MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS May 31, 1994
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- - ---------- ------ -------- ------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (88.0%)
GENERAL OBLIGATION (1.0%)
$ 2,000 New York City, New York, 1994 Ser D.......................... 5.75 % 8/15/10 $ 1,871,740
- - --------- ------------
EDUCATIONAL FACILITIES REVENUE (2.0%)
3,000 New Jersey Educational Facilities Authority, Fairleigh
Dickinson University 1993 Ser C............................ 6.625 7/ 1/23 2,731,770
1,000 New York State Dormitory Authority, State University Refg Ser
1993 A..................................................... 5.25 5/15/15 873,470
- - --------- ------------
4,000 3,605,240
- - --------- ------------
HOSPITAL REVENUE (7.8%)
2,000 Corona, California, Vista Hospital System Inc Ser 1992 B
COPs....................................................... 9.50 7/ 1/20 2,163,460
3,500 Wilmington, Delaware, Osteopathic Hospital Association of
Delaware/Riverside Hospital Ser A 1988 (Prerefunded)....... 10.20 10/ 1/18 4,278,785
Illinois Health Facilities Authority,
1,600 Delnor Community Hospital Ser 1989 (Prerefunded)........... 8.00 5/15/19 1,833,904
1,065 Hinsdale Hospital Ser 1990 C............................... 9.50 11/15/19 1,239,170
1,935 Hinsdale Hospital Ser 1990 C (Prerefunded)................. 9.50 11/15/19 2,427,051
1,990 Buena Vista Industrial Development Authority, Virginia,
Stonewall Jackson Hospital Ser 1987........................ 8.375 11/ 1/14 2,157,399
- - --------- ------------
12,090 14,099,769
- - --------- ------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL
REVENUE (19.9%)
2,000 Delaware Economic Development Authority, Syntek Inc Ser 1989
(AMT)(a)................................................... 11.25 5/ 1/09 20,000
485 Metropolitan Washington Airports Authority, District of
Columbia, Caterair Intl Corp Ser 1991 (AMT)................ 10.125 9/ 1/11 506,568
1,595 Illinois Development Finance Authority, Custom Tapes Inc
Refg Ser 1989.............................................. 10.50 5/ 1/19 1,626,900
4,010 Detroit Economic Development Corporation, Michigan, North
Industrial Park LP Ser 1989................................ 11.375 2/15/14 4,338,940
1,730 Michigan Strategic Fund, Kasle Steel Corp Ser 1989 (AMT)..... 9.375 10/ 1/06 1,910,004
5,000 Cleveland, Ohio, Continental Airlines Inc Ser 1990 (AMT)..... 9.00 12/ 1/19 5,075,900
2,000 Dayton, Ohio, Emery Air Freight Corp Ser 1988 A.............. 12.50 10/ 1/09 2,280,000
1,250 Zanesville - Muskingum County Port Authority, Ohio, Anchor
Glass Container Corp Ser 1989 B (AMT)...................... 10.25 12/ 1/08 1,351,625
2,313 Butler County Industrial Development Authority, Pennsylvania,
Morgan Management Co Ser 1976.............................. 8.75 11/15/03 2,480,829
4,045 East Hempfield Township Industrial Development Authority,
Pennsylvania, Herley Microwave System Inc Ser 1989 A....... 10.40 6/ 1/04 4,529,996
Lexington County, South Carolina, Ellett Brothers
2,850 Refg Ser 1988.............................................. 10.625 9/ 1/02 3,057,680
4,250 Refg Ser 1988.............................................. 10.625 9/ 1/08 4,561,822
4,500 Pittslyvania County Industrial Development Authority,
Virginia, Multi Trade - Pittsylvania County Ser 1994 A
(AMT)(d)................................................... 7.45 1/ 1/09 4,499,550
- - --------- ------------
36,028 36,239,814
- - --------- ------------
MORTGAGE REVENUE -- MULTI-FAMILY (4.5%)
2,000 Dade County Housing Finance Authority, Florida, Arena Square
North & South 1989 Ser 2 (AMT)(a).......................... 10.25 5/ 1/19 400,000
Washington County Housing & Redevelopment Authority,
Minnesota, Courtly Park Townhomes
3,885 Ser 1989 A................................................. 9.75 6/15/19 2,408,700
1,165 Ser 1989 A (AMT)........................................... 10.25 6/15/19 722,300
24,080 Ser 1989 B................................................. 0.00 6/15/19 842,799
8,678 Ser 1989 B (AMT)........................................... 0.00 6/15/19 303,725
White Bear Lake, Minnesota, White Bear Woods Apts Phase II
3,715 Refg 1989 Ser A............................................ 9.75 6/15/19 2,600,500
23,786 Refg 1989 Ser B............................................ 0.00 6/15/19 891,972
- - --------- ------------
67,309 8,169,996
- - --------- ------------
</TABLE>
<PAGE> 4
MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS May 31, 1994 (continued)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- - ---------- ------ -------- ------------
<C> <S> <C> <C> <C>
MORTGAGE REVENUE -- SINGLE FAMILY (11.1%)
$ 5,000 Alaska Housing Finance Corporation, Inc 1993 1st Ser......... 5.90 % 12/ 1/33 $ 4,447,100
64,658 San Francisco, California, Ser 1982.......................... 0.00 10/ 1/14 6,996,060
785 Broward County Housing Finance Authority, Florida, Home Ser
1989 A..................................................... 10.00 10/ 1/03 802,231
63,465 New Hampshire Housing Finance Authority, Residential 1983 Ser
B.......................................................... 0.00 1/ 1/15 7,141,716
770 Rhode Island Housing & Mortgage Finance Corporation,
Homeownership 1988 Ser 1 - B (AMT)......................... 8.40 10/ 1/22 804,388
- - --------- ------------
134,678 20,191,495
- - --------- ------------
NURSING & HEALTH RELATED FACILITIES REVENUE (27.1%)
1,235 Vista, California, Long-Term Care Foundation of America
Ser 1989 COPs(a)(c)........................................ 9.875 1/ 1/20 741,000
Escambia County, Florida, Pensacola Care Development Centers
2,060 Ser 1989................................................... 10.25 7/ 1/11 2,333,362
9,025 Ser 1989 A................................................. 10.25 7/ 1/11 10,222,618
9,000 Flagler County Industrial Development Authority, Florida,
RHA/South Florida Properties Inc Ser 1988 A................ 10.50 12/ 1/18 9,690,750
1,500 Winchester, Indiana, Hoosier Care II Inc Ser 1990............ 10.375 6/ 1/20 1,588,425
2,565 Jefferson County, Kentucky, AHF/Kentucky - Iowa Inc Ser
1990....................................................... 10.25 1/ 1/20 2,760,530
1,600 Westside Habilitation Center, Louisiana, Intermediate Care
Facility for the Mentally Retarded Refg Ser 1993........... 8.375 10/ 1/13 1,623,632
3,600 Massachusetts Industrial Finance Agency, Vinfen Corp Ser
1993....................................................... 7.10 11/15/18 3,382,236
6,350 McCurtain County Development Authority, Oklahoma,
Heartway Corp Ser 1989 A - 2............................... 10.25 3/ 1/19 6,159,500
1,000 Bucks County Industrial Development Authority, Pennsylvania,
RHA/Mill Run Ser 1989...................................... 10.00 7/ 1/00 750,000
1,475 Maury County Health & Educational Facilities Board,
Tennessee, Southern Healthcare/Heritage Manor of Monteagle
Ser 1990E.................................................. 10.50 3/ 1/20 1,571,553
4,760 Kirbyville, Health Facilities Development Corporation, Texas,
Heartway III Corp Ser 1988 A............................... 11.25 3/20/21 4,141,200
3,965 North Central Texas Health Facilities Development
Corporation, C C Young Memorial Home Ser 1988.............. 10.50 12/ 1/13 4,279,504
- - --------- ------------
48,135 49,244,310
- - --------- ------------
PUBLIC FACILITIES REVENUE (0.0%)
1,120 LaSalle County Jail Facilities Finance Corporation, Texas,
- - --------- Criminal Detention Center Ser 1989(a)...................... 9.75 8/ 1/09 11
------------
RETIREMENT FACILITIES & LIFECARE REVENUE (10.1%)
1,000 Colorado Health Facilities Authority, Liberty Heights Ser
A(a)....................................................... 10.00 7/ 1/19 550,000
Connecticut Development Authority, Seabury Life Care
3,230 Ser 1991................................................... 10.00 9/ 1/04 3,459,265
1,000 Ser 1991................................................... 10.00 9/ 1/16 1,062,890
4,965 Volusia County Health Facilities Authority, Florida, John
Knox Village Center 1988 Ser A(b).......................... 11.125 9/ 1/17 4,369,200
5,874 Ann Arbor Economic Development Corporation, Michigan, Glacier
Hills Inc Ser 1989......................................... 10.375 1/15/19 5,521,560
3,000 Independence Industrial Development Authority, Missouri,
Greenbriar Meadows Ser 1989 A (AMT)(a)..................... 10.25 8/ 1/19 1,800,000
1,500 Charlotte Housing Authority, North Carolina, Merrywood Senior
Adult Community Ser 1989 A (AMT)........................... 9.75 5/ 1/19 1,500,000
- - --------- ------------
20,569 18,262,915
- - --------- ------------
TAX ALLOCATION (4.5%)
2,000 Bridgeview, Illinois, Ser 1991............................... 9.50 1/ 1/11 2,137,880
Crestwood, Illinois,
3,000 Refg Ser 1994................................................ 7.00 12/ 1/04 2,850,150
3,350 Refg Ser 1994................................................ 7.25 12/ 1/08 3,191,277
- - --------- ------------
8,350 8,179,307
- - --------- ------------
TOTAL MUNICIPAL BONDS
334,279 (IDENTIFIED COST $169,338,025)...................................................... 159,864,597
- - ---------- ------------
</TABLE>
<PAGE> 5
MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS May 31, 1994 (continued)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- - ---------- ------ -------- ------------
<C> <S> <C> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATIONS (11.6%)
$ 7,100 Louisiana Offshore Terminal Authority, LOOP Inc Ser 1992 A
(Tender 6/1/94)............................................ 3.00%* 9/ 1/08 $ 7,100,000
10,500 Houston Health Facilities Development Corporation, Texas,
Methodist Hospital Ser 1991 (Tender 6/1/94)................ 3.00 * 12/ 1/21 10,500,000
3,500 Washington Health Care Facilities Authority, Fred Hutchinson
- - --------- Cancer Hospital Ser B (Tender 6/1/94)...................... 3.30 * 1/ 1/18 3,500,000
------------
TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS
21,100 (IDENTIFIED COST $21,100,000).......................................... 21,100,000
- - --------- ------------
$355,379 TOTAL INVESTMENTS (IDENTIFIED COST $190,438,025)(E).................... 99.6% 180,964,597
- - ---------
- - ---------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES......................... 0.4 780,397
------ ------------
NET ASSETS............................................................. 100.0% $181,744,994
====== ============
<FN>
- - ---------------
AMT -- Alternative Minimum Tax
COP -- Certificate of Participation
(a) Non-income producing, bond in default.
(b) Partial interest paid. Interest income is recorded as received.
(c) Resale is restricted to qualified accredited investors.
(d) Security purchased on a "when issued" basis.
(e) The aggregate cost for federal income tax purposes is $190,768,025; the
aggregate gross unrealized appreciation is $7,643,266 and the aggregate
gross unrealized depreciation is $17,446,694, resulting in net unrealized
depreciation of $9,803,428.
See Notes to Financial Statements
</TABLE>
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
May 31, 1994
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Alaska...................... 2.4% Kentucky.................... 1.5% Ohio........................ 4.8%
California.................. 5.4 Massachusetts............... 1.9 Oklahoma.................... 3.4
Colorado.................... 0.3 Michigan.................... 6.5 Pennsylvania................ 4.3
Connecticut................. 2.5 Minnesota................... 4.3 Rhode Island................ 0.4
Delaware.................... 2.4 Missouri.................... 1.0 South Carolina.............. 4.2
District of Columbia........ 0.3 New Hampshire............... 3.9 Tennessee................... 0.9
Florida..................... 15.3 New Jersey.................. 1.5 Texas....................... 10.4
Illinois.................... 8.4 New York.................... 1.5 Virginia.................... 3.7
Indiana..................... 0.9 North Carolina.............. 0.8 Washington.................. 1.9
Louisiana................... 4.8 ----
Total....................... 99.6%
====
</TABLE>
<PAGE> 6
MUNICIPAL INCOME OPPORTUNITIES TRUST
FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1994
- - -------------------------------------------
ASSETS:
Investments in securities, at value
(identified cost $190,438,025) (Note
1)....................................... $ 180,964,597
Cash....................................... 471,787
Receivable for:
Interest................................. 4,336,810
Investments sold......................... 706,605
Prepaid expenses and other assets.......... 28,226
-------------
TOTAL ASSETS....................... 186,508,025
-------------
LIABILITIES:
Payable for:
Investments purchased.................... 4,528,869
Investment advisory fee (Note 2)......... 79,305
Administration fee (Note 3).............. 47,583
Accrued expenses (Note 4).................. 107,274
-------------
TOTAL LIABILITIES.................. 4,763,031
-------------
NET ASSETS:
Paid-in-capital............................ 202,537,509
Accumulated undistributed net realized loss
on investments........................... (12,262,683)
Net unrealized depreciation on
investments.............................. (9,473,428)
Accumulated undistributed net investment
income................................... 943,596
-------------
NET ASSETS......................... $ 181,744,994
=============
NET ASSET VALUE PER SHARE,
21,460,172 shares outstanding (unlimited
shares authorized of $.01 par value)..... $8.47
=====
STATEMENT OF OPERATIONS For the year ended
May 31, 1994
- - -------------------------------------------
INVESTMENT INCOME:
INTEREST INCOME........................... $16,573,747
-----------
EXPENSES
Investment advisory fee (Note 2)......... 918,496
Administration fee (Note 3).............. 551,097
Professional fees........................ 459,163
Transfer agent fees and expenses......... 110,600
Shareholder reports and notices (Note
4)..................................... 50,045
Registration fees........................ 31,926
Trustees' fees and expenses (Note 4)..... 31,711
Organizational expenses (Note 1)......... 2,651
Other.................................... 81,020
-----------
TOTAL EXPENSES......................... 2,236,709
-----------
NET INVESTMENT INCOME................ 14,337,038
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 1):
Net realized loss on investments......... (12,233,056)
Net change in unrealized depreciation on
investments............................ 9,061,207
-----------
NET LOSS ON INVESTMENTS................ (3,171,849)
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.......... $11,165,189
===========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
year ended year ended
May 31, 1994 May 31, 1993
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................. $ 14,337,038 $ 13,848,270
Net realized gain (loss) on investments............................... (12,233,056) 525,048
Net change in unrealized depreciation on investments.................. 9,061,207 (8,174,711)
------------------- -------------------
Net increase in net assets resulting from operations.............. 11,165,189 6,198,607
------------------- -------------------
Dividends and distributions to shareholders from:
Net investment income................................................. (13,519,844) (14,250,702)
Net realized gain on investments...................................... -0- (537,654)
------------------- -------------------
Total dividends and distributions....................................... (13,519,844) (14,788,356)
------------------- -------------------
Net decrease from transactions in shares of beneficial interest (Note
6).................................................................... -0- (2,161,157)
------------------- -------------------
Total decrease.................................................... (2,354,655) (10,750,906)
NET ASSETS:
Beginning of period..................................................... 184,099,649 194,850,555
------------------- -------------------
END OF PERIOD (including undistributed net investment income of $943,596
and $126,402, respectively)............................................ $ 181,744,994 $ 184,099,649
=================== ===================
</TABLE>
See Notes to Financial Statements
<PAGE> 7
MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Municipal Income Opportunities Trust
(the "Fund") is registered under the Investment Company Act of 1940, as amended,
as a diversified, closed-end management investment company. It was organized on
June 22, 1988 as a Massachusetts business trust and commenced operations on
September 19, 1988.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- Portfolio securities are valued for the Fund
by an outside independent pricing service approved by the Fund's Trustees.
The pricing service has informed the Fund that in valuing the Fund's
portfolio securities, it uses both a computerized grid matrix of tax-exempt
securities and evaluations by its staff, in each case based on information
concerning market transactions and quotations from dealers which reflect
the bid side of the market each day. The Fund's portfolio securities are
thus valued by reference to a combination of transactions and quotations
for the same or other securities believed to be comparable in quality,
coupon, maturity, type of issue, call provisions, trading characteristics
and other features deemed to be relevant.
B. Accounting for Investments -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). In computing
net investment income, the Fund amortizes premiums and original issue
discounts on fixed income securities. Additionally, with respect to market
discount on bonds purchased after April 30, 1993, a portion of any capital
gain realized upon disposition is recharacterized as taxable investment
income. Realized gains and losses on security transactions are determined
on the identified cost method. Interest income is accrued daily, except
where collection is not expected.
C. Federal Income Tax Status -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable and nontaxable
income to its shareholders. Accordingly, no federal income tax provision is
required.
D. Dividends and Distributions to Shareholders -- The Fund records
dividends and distributions to its shareholders on the ex-dividend date.
The amount of dividends and distributions from net investment income and
net realized capital gains are determined in accordance with federal income
tax regulations, which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment; temporary differences do not require
reclassifications. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but
not for tax purposes are reported as dividends in excess of net investment
income or distributions in excess of net realized capital gains. To the
extent they exceed net investment income and net realized capital gains for
tax purposes, they are reported as distributions of paid-in-capital.
E. Organizational Expenses -- The Fund's Administrator paid the
organizational expenses of the Fund in the amount of $44,615. The Fund
reimbursed the Administrator for such expenses which were fully amortized
as of September 18, 1993.
<PAGE> 8
MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
- - --------------------------------------------------------------------------------
2. INVESTMENT ADVISORY AGREEMENT -- Pursuant to an Investment Advisory
Agreement (the "Advisory Agreement") with Dean Witter InterCapital Inc. (the
"Investment Adviser"), the Fund pays its Investment Adviser an advisory fee,
calculated weekly and payable monthly, by applying the annual rate of 0.50% to
the Fund's average weekly net assets.
Under the terms of the Advisory Agreement, the Investment Adviser manages
the Fund's assets. Also, the Investment Adviser pays the salaries of all
personnel, including officers of the Fund, who are employees of the Investment
Adviser.
3. ADMINISTRATION AGREEMENT -- Through December 31, 1993, pursuant to an
Administration Agreement with Dean Witter InterCapital Inc. (the "Former
Administrator"), the Fund paid an administration fee, calculated weekly and
payable monthly, by applying the annual rate of 0.30% to the Fund's average
weekly net assets. On January 1, 1994, the Administration Agreement between the
Former Administrator and the Fund had been terminated and a new Administration
Agreement had been entered into between Dean Witter Services Company Inc. (the
"Administrator"), a wholly-owned subsidiary of the Former Administrator, and the
Fund. The nature and scope of the services being provided to the Fund or any
fees being paid by the Fund under the new Agreement are identical to those of
the previous Agreement.
Under the terms of the Administration Agreement, the Administrator
maintains certain of the Fund's books and records and furnishes, at its own
expense, such office space, facilities, equipment, clerical help, bookkeeping
and certain legal services as the Fund may reasonably require in the conduct of
its business. In addition, the Administrator pays the salaries of all personnel,
including officers of the Fund, who are employees of the Administrator.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and the proceeds from sales of portfolio securities for the year ended
May 31, 1994, excluding short-term investments, aggregated $27,253,279 and
$42,188,105, respectively.
On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Fund who will have
served as independent Trustees for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension costs for
the year ended May 31, 1994, included in Trustees' fees and expenses in the
Statement of Operations, amounted to $10,536. At May 31, 1994, the Fund had an
accrued pension liability of $42,557 which is included in accrued expenses in
the Statement of Assets and Liabilities.
Dean Witter Trust Company, an affiliate of the Investment Adviser and
Administrator, is the Fund's transfer agent. At May 31, 1994, the Fund had
transfer agent fees and expenses payable of approximately $14,000.
Bowne & Co., Inc. is an affiliate of the Fund by virtue of a common Fund
Trustee and Director of Bowne & Co., Inc. During the year ended May 31, 1994,
the Fund paid Bowne & Co., Inc. $8,341 for printing of shareholders reports.
5. FEDERAL INCOME TAX STATUS -- At May 31, 1994, the Fund had a net capital
loss carryover of approximately $1,493,000 which will be available through May
31, 2002 to offset future capital gains to the extent provided by regulations.
Capital losses incurred after October 31 ("Post-October losses") within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The
<PAGE> 9
MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
- - --------------------------------------------------------------------------------
Fund incurred and elected to defer a net capital loss of approximately
$10,448,000 during such period in fiscal 1994. To the extent that this capital
loss carryover is used to offset future capital gains, it is probable that the
gains so offset will not be distributed to shareholders.
The Fund had temporary book/tax differences primarily attributable to
Post-October loss deferrals and capital loss deferrals on wash sales.
6. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
Par Capital
Value Paid in
of Excess of
Shares Shares Par Value
---------- -------- ------------
<S> <C> <C> <C>
Balance, May 31, 1992............................... 21,729,572 $217,295 $204,481,371
Treasury shares purchased and retired (weighted
average discount 8.79%)*.......................... (269,400) (2,694) (2,158,463)
---------- -------- ------------
Balance, May 31, 1993 and May 31, 1994.............. 21,460,172 $214,601 $202,322,908
========== ========= =============
<FN>
- - ---------------
* The Trustees have voted to retire the shares repurchased.
</TABLE>
7. DIVIDENDS -- The Fund has declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
Declaration Amount Per Record Payable
Date Share Date Date
-------------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
May 31, 1994 $ 0.0525 June 10, 1994 June 24, 1994
June 28, 1994 $ 0.0525 July 8, 1994 July 22, 1994
</TABLE>
8. SELECTED QUARTERLY FINANCIAL DATA -- (unaudited)
<TABLE>
<CAPTION>
Quarters Ended*
-------------------------------------------------------------------------
5/31/94 2/28/94 11/30/93 8/31/93
---------------- ---------------- ---------------- ----------------
Per Per Per Per
Total Share Total Share Total Share Total Share
------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income............. $ 4,138 $ 0.19 $ 4,139 $ 0.19 $ 3,999 $ 0.19 $ 4,298 $ 0.20
Net investment income............... 3,364 0.16 3,675 0.17 3,506 0.16 3,792 0.18
Net realized and unrealized gain
(loss) on investments............. (1,390) (0.07) (2,373) (0.11) (23) 0.00 614 0.03
</TABLE>
<TABLE>
<CAPTION>
Quarters Ended*
-------------------------------------------------------------------------
5/31/93 2/28/93 11/30/92 8/31/92
---------------- ---------------- ---------------- ----------------
Per Per Per Per
Total Share Total Share Total Share Total Share
------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income............. $ 3,322 $ 0.15 $ 4,082 $ 0.19 $ 4,378 $ 0.20 $ 4,254 $ 0.20
Net investment income............... 2,708 0.12 3,575 0.17 3,852 0.18 3,713 0.17
Net realized and unrealized gain
(loss) on investments............. (5,037) (0.23) 660 0.03 (674) (0.03) (2,599) (0.11)
<FN>
- - ---------------
* Totals expressed in thousands of dollars.
</TABLE>
<PAGE> 10
MUNICIPAL INCOME OPPORTUNITIES TRUST
FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
For the period
For the year ended May 31, September 19, 1988*
--------------------------------------------------------- through
1994 1993 1992 1991 1990 May 31, 1989
--------- --------- --------- --------- --------- -------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period................ $ 8.58 $ 8.97 $ 9.39 $ 9.44 $ 9.56 $ 9.40
--------- --------- --------- --------- --------- -------------------
Net investment income.... 0.67 0.64 0.74 0.79 0.81 0.45
Net realized and
unrealized gain (loss)
on investments......... (0.15) (0.34) (0.43) (0.02) (0.09) 0.09
--------- --------- --------- --------- --------- -------------------
Total from investment
operations............... 0.52 0.30 0.31 0.77 0.72 0.54
--------- --------- --------- --------- --------- -------------------
Less dividends,
distributions and other
charges:
Dividends from net
investment income...... (0.63) (0.66) (0.73) (0.82) (0.84) (0.37)
Distributions from net
realized gains on
investments............ -0- (0.03) -0- -0- -0-** -0-
Offering costs charged
against capital........ -0- -0- -0- -0- -0- (0.01)
--------- --------- --------- --------- --------- -------------------
Total dividends,
distributions and other
charges.................. (0.63) (0.69) (0.73) (0.82) (0.84) (0.38)
--------- --------- --------- --------- --------- -------------------
Net asset value, end of
period................... $ 8.47 $ 8.58 $ 8.97 $ 9.39 $ 9.44 $ 9.56
======== ======== ======== ======== ======== ================
Market value, end of
period................... $ 8.125 $ 8.25 $ 9.325 $ 9.875 $ 10.25 $ 10.50
======== ======== ======== ======== ======== ================
TOTAL INVESTMENT RETURN+..... 6.17% (4.71)% 2.64% 4.99% 6.11% 7.74%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)........... $ 181,745 $ 184,100 $ 194,851 $ 202,418 $ 199,173 $ 194,698
Ratio of expenses to
average net assets....... 1.22% 1.15% 1.08% 1.10% 1.10% 1.11%(2)
Ratio of net investment
income to average net
assets................... 7.80% 7.27% 8.00% 8.37% 8.61% 7.03%(2)
Portfolio turnover rate.... 16% 2% 4% 7% 8% 9%
<FN>
- - ---------------
* Commencement of operations.
** Includes distributions of $.0003 per share.
+ Total investment return is based upon the current market value on the last
day of each period reported. Dividends and distributions are assumed to be
reinvested at the prices obtained under the Fund's dividend reinvestment
plan. Total investment return does not reflect sales charges or brokerage
commissions.
(1) Not annualized.
(2) Annualized.
See Notes to Financial Statements
</TABLE>
1994 FEDERAL TAX NOTICE (unaudited)
During the year ended May 31, 1994, the Fund paid to shareholders $0.63 per
share from net investment income. All of the Fund's dividends from net
investment income were exempt interest dividends, excludable from gross income
for Federal income tax purposes.
<PAGE> 11
MUNICIPAL INCOME OPPORTUNITIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- - --------------------------------------------------------------------------------
To the Shareholders and Trustees of Municipal Income Opportunities Trust
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Municipal Income Opportunities
Trust (the "Fund") at May 31, 1994, 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 five years in the
period then ended and for the period September 19, 1988 (commencement of
operations) through May 31, 1989, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at May 31, 1994 by correspondence with the
custodian and broker, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York
July 8, 1994
<PAGE> 12
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
LEGAL COUNSEL
Sheldon Curtis
Two World Trade Center
New York, New York 10048
INDEPENDENT ACCOUNTANTS
Price Waterhouse
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT ADVISER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
MUNICIPAL
INCOME
OPPORTUNITIES
TRUST
Annual Report
May 31, 1994
