<PAGE> 1
Two World Trade Center, New York, New York 10048
MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS November 30, 1995
DEAR SHAREHOLDER:
Bonds have rallied significantly since last year. Progressive tightening of
monetary policy by the Federal Reserve Board over the 12 months through February
1995 led to slower economic growth and caused bonds to advance. The trend toward
lower long-term interest rates was aided in July and December when the Federal
Reserve Board reduced the fed funds rate banks charge each other for overnight
loans.
MUNICIPAL MARKET CONDITIONS
Long-term municipal bond yields declined from a high of 7.37 percent in November
1994 to 5.78 percent at the end of November 1995, as tracked by The Bond Buyer
Revenue Bond Index*. This 159 basis point decline in yield corresponded to a 12
percent price increase for a callable bond with a 30-year maturity. Similarly,
yields on 1-year municipal notes moved from 4.51 percent to 3.59 percent. The
yield pickup for extending maturity from 1- to 30-years was 219 basis points in
November 1995.
Tax-exempt bonds began the year by outperforming U.S. Treasury bonds. The ratio
of the Revenue Bond Index yields to the 30-year U.S. Treasury bond yield moved
from 89 percent in December 1994 to 84 percent by the end of February 1995. A
declining ratio means that municipal bond prices have been stronger than U.S.
Treasury prices. In the spring the municipal market began to discount the risk
of comprehensive changes in the tax code created by flat tax rhetoric from
Washington. This caused municipals to weaken on a relative basis. The yield
ratio reached a high of 95 percent during the summer. Over the past 10 years,
long municipal yields have averaged 89 percent of U.S. Treasury yields.
- ---------------
*The Bond Buyer Revenue Bond Index is an arithmetic average of the yields of 25
selected municipal revenue bonds with 30-year maturities. Credit ratings of
these bonds range from Aa1 to Baa1 by Moody's Investors Service, Inc., and AA+
to A- by Standard & Poor's Corp.
<PAGE> 2
MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS November 30, 1995, continued
The municipal market continued to experience consolidation in 1995. Municipal
underwriting in the first 11 months of the year was down 12 percent from the
same period in 1994. This change followed a 44 percent drop in volume for all of
1994. The effects of lower volume and diminished new issue profitability were
also apparent in the decision by several major dealers to withdraw from the
municipal business.
TAX REFORM
Flat tax advocates have generated increased publicity for their proposals and
have influenced the municipal market since early 1995. Most of the discussion on
proposed tax-reform measures is based on theoretical concepts, containing broad
assumptions and lacking specific details. Basically, the various plans raise
questions about the fairness of changing from a progressive tax structure. Low
flat-tax rate plans call for the elimination of deductions of mortgage interest,
charitable contributions, property taxes, and state and local income taxes.
Should politicians make tax reform a central issue in the 1996 elections, media
coverage will expand from the financial page to the front page. If that happens,
municipal bonds could come under further pressure. For example, when major tax
reform turmoil occurred in 1986, municipal yields briefly exceeded taxable
yields.
In addition to the market risk associated with the flat-tax proposals, municipal
credits would also be negatively affected. If mortgage interest and property tax
deductions were eliminated, municipalities would experience a decline in their
property tax base. The loss of state and local income tax deductions would
increase the relative economic disadvantage that high tax states already face.
The flat tax represents an attempt to shift tax accountability from the federal
to local governments. Taxpayer recognition of the extent of change under
consideration may impede the passage of comprehensive tax reform.
PERFORMANCE
The net asset value (NAV) of Municipal Income Opportunities Trust (OIA) moved
from $8.53 to $8.49 per share during the six-month period ended November 30,
1995. Based on this NAV change plus reinvestment of tax-free dividends totaling
$0.32 per share, the Fund's total return was 3.25 percent. Over the same period,
the Fund's market price on the New York Stock Exchange appreciated from $8.25 to
$8.375 per share. Based on this market price change and reinvestment of tax-free
dividends, the Fund's total return was 5.43 percent. The Fund began the period
trading at a 3.28 percent discount to NAV and closed at a 1.35 percent discount.
Undistributed net investment income totaled $0.130 per share on November 30,
1995 versus $0.093 per share six months ago. Recently, the Trustees voted to
increase the monthly dividend from $0.0525 to $0.055 per share beginning with
the November 1995 payment. This revised dividend rate more accurately reflects
the Fund's current earnings.
<PAGE> 3
MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS November 30, 1995, continued
PORTFOLIO STRUCTURE
Progress continues in reducing problem loans either not accruing interest or
facing restructuring. Two loans representing less than 0.3 percent of the Fund's
net assets were not accruing interest. This compares with five loans totaling
1.4 percent of net assets that were not earning interest in May. An additional
seven loans, totaling 9 percent of net assets, are currently accruing income but
may have problems meeting future debt service payments.
On November 30, 1995, the Fund's long-term portfolio was diversified among 13
long-term municipal sectors and 54 credits. The three largest sectors -- nursing
& health related facilities revenue, industrial development/pollution control
revenue and housing revenue bonds -- represented nearly 64 percent of the
portfolio. The average maturity and call protection of the Fund's long-term
holdings were 19 and 6 years, respectively. Net assets exceeded $179 million.
LOOKING AHEAD
The slower pace of economic growth in 1995 and the Federal Reserve Board's
latest interest rate moves have improved bond-market expectations. The
decreasing supply of new issues, combined with significant maturities and calls
for redemptions, should continue to be positive for the municipal market.
However, tax-reduction proposals are likely to continue to receive publicity and
may cloud the outlook for tax-exempt bonds. With long-term municipal securities
yielding more than 90 percent of the yield on U.S. Treasuries, the market has
already begun the process of discounting the risk that a flat tax might
eventually become law.
The Fund's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps to
support the market value of the Fund's shares. In addition, we would like to
remind you that the Trustees have approved a procedure whereby the Fund, when
appropriate, may purchase shares in the open market or in privately negotiated
transactions at a price not above market value or net asset 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> 4
MUNICIPAL INCOME OPPORTUNITIES TRUST
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On December 20, 1995, an annual meeting of the Fund's shareholders was held for
the purpose of voting on three separate issues, the results of which were as
follows:
(1) ELECTION OF TRUSTEES:
<TABLE>
<S> <C>
Edwin J. Garn
For................................................................................................ 14,898,819
Withheld........................................................................................... 234,257
John R. Haire
For................................................................................................ 14,898,519
Withheld........................................................................................... 234,557
Michael E. Nugent
For................................................................................................ 14,905,567
Withheld........................................................................................... 227,509
Philip J. Purcell
For................................................................................................ 14,903,867
Withheld........................................................................................... 229,209
</TABLE>
The following Trustees were not standing for reelection at this meeting:
Jack F. Bennett, Michael Bozic, Charles A. Fiumefreddo, Dr. Manuel H.
Johnson, Paul Kolton and John L. Schroeder.
(2) CONTINUANCE OF CURRENTLY EFFECTIVE INVESTMENT ADVISORY AGREEMENT:
<TABLE>
<S> <C>
For................................................................................................ 14,632,660
Against............................................................................................ 151,146
Abstain............................................................................................ 349,270
</TABLE>
(3) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS:
<TABLE>
<S> <C>
For................................................................................................ 14,812,636
Against............................................................................................ 53,615
Abstain............................................................................................ 266,825
</TABLE>
<PAGE> 5
MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS November 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (96.1%)
General Obligation (1.1%)
$ 2,000 New York City, New York, 1994 Ser D...................................... 5.75 % 08/15/10 $ 1,972,500
- -------- ----------
Educational Facilities Revenue (2.2%)
3,000 New Jersey Educational Facilities Authority, Fairleigh Dickinson
University 1993 Ser C................................................... 6.625 07/01/23 2,895,030
1,000 New York State Dormitory Authority, State University Refg Ser 1993 A..... 5.25 05/15/15 950,850
- -------- ----------
4,000 3,845,880
- -------- ----------
Hospital Revenue (6.8%)
2,000 Corona, California, Vista Hospital System Inc Ser 1992 B COPs............ 9.50 07/01/20 2,221,600
1,050 Illinois Health Facilities Authority, Hinsdale Hospital Ser 1990 C....... 9.50 11/15/19 1,244,607
Massachusetts Health & Educational Facilities Authority, Dana Farber
Cancer Inst
2,000 Ser G-1................................................................. 6.25 12/01/14 2,068,300
3,000 Ser G-1................................................................. 6.25 12/01/22 3,073,830
1,500 North Central Texas Health Facilities Development Corporation, University
Medical Center Inc Ser 1987............................................. 7.75 04/01/17 1,561,305
1,905 Buena Vista Industrial Development Authority, Virginia, Stonewall Jackson
Hospital Ser 1987....................................................... 8.375 11/01/14 2,025,815
- -------- ----------
11,455 12,195,457
- -------- ----------
Industrial Development/Pollution Control Revenue (25.1%)
480 Metropolitan Washington Airports Authority, District of Columbia,
Caterair International Corp Ser 1991 (AMT)+............................. 10.125 09/01/11 508,723
1,575 Illinois Development Finance Authority, Custom Tapes Inc Refg Ser 1989... 10.50 05/01/19 1,625,022
3,000 Massachusetts Industrial Finance Agency, Eastern Edison Co Refg Ser
1993.................................................................... 5.875 08/01/08 2,998,110
3,955 Detroit Economic Development Corporation, Michigan, North Industrial Park
LP Ser 1989............................................................. 11.375 02/15/14 4,445,183
1,579 Michigan Strategic Fund, Kasle Steel Corp Ser 1989 (AMT)................. 9.375 10/01/06 1,704,587
3,600 Cleveland, Ohio, Continental Airlines Inc Ser 1990 (AMT)................. 9.00 12/01/19 3,673,152
2,000 Dayton, Ohio, Emery Air Freight Corp Ser 1988 A.......................... 12.50 10/01/09 2,321,260
1,175 Zanesville - Muskingum County Port Authority, Ohio, Anchor Glass
Container Corp Ser 1989 B (AMT)......................................... 10.25 12/01/08 1,259,294
1,000 Beaver County, Industrial Development Authority, Pennsylvania, Cleveland
Illuminating Co Refg Ser 1995........................................... 7.625 05/01/25 1,064,700
2,185 Butler County, Industrial Development Authority, Pennsylvania, Morgan
Management Co Ser 1976.................................................. 8.75 11/15/03 2,276,337
3,800 East Hempfield Township Industrial Development Authority, Pennsylvania,
Herley Microwave System Inc Ser 1989 A.................................. 10.40 06/01/04 4,308,440
4,000 Pennsylvania Economic Development Authority, McMillan Bloedel Ltd
Ser 1995 (AMT).......................................................... 7.60 12/01/20 4,469,000
Lexington County, South Carolina, Ellett Brothers Inc
2,850 Refg Ser 1988........................................................... 10.625 09/01/02 2,978,649
4,250 Refg Ser 1988........................................................... 10.625 09/01/08 4,442,398
4,500 Pittslyvania County Industrial Development Authority, Virginia, Multi
Trade Ser 1994 A (AMT).................................................. 7.45 01/01/09 4,844,745
2,000 Upshur County, West Virginia, TJ International Inc Ser 1995 (AMT)........ 7.00 07/15/25 2,077,180
- -------- ----------
41,949 44,996,780
- -------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS November 30, 1995 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Mortgage Revenue - Multi-Family (3.5%)
Washington County Housing & Redevelopment Authority, Minnesota,
$ 3,885 Ser 1989 A.............................................................. 9.75 % 06/15/19 $ 2,331,000
1,165 Ser 1989 A (AMT)........................................................ 10.25 06/15/19 699,000
24,080 Ser 1989 B.............................................................. 0.00 06/15/19 240,800
8,678 Ser 1989 B (AMT)........................................................ 0.00 06/15/19 86,779
White Bear Lake, Minnesota, White Bear Woods Apts Phase II
3,715 Refg 1989 Ser A......................................................... 9.75 06/15/19 2,600,500
23,786 Refg 1989 Ser B......................................................... 0.00 06/15/19 237,859
- -------- ----------
65,309 6,195,938
- -------- ----------
Mortgage Revenue - Single Family (10.5%)
5,000 Alaska Housing Finance Corporation, Insured 1993 First Ser............... 5.90 12/01/33 4,874,400
37,515 San Francisco, California, Ser 1982...................................... 0.00 10/01/14 4,885,593
530 Broward County Housing Finance Authority, Florida, Home Ser 1989 A....... 10.00 10/01/03 536,069
57,605 New Hampshire Housing Finance Authority, Residential 1983 Ser B.......... 0.00 01/01/15 7,723,102
770 Rhode Island Housing & Mortgage Finance Corporation, Homeownership
1988 Ser 1-B (AMT)...................................................... 8.40 10/01/22 804,396
- -------- ----------
101,420 18,823,560
- -------- ----------
Nursing & Health Related Facilities Revenue (25.2%)
Vista, California, Long-Term Care Foundation of America
980 Ser 1994 A COPs (a)..................................................... 8.50 01/01/20 786,129
117 Ser 1994 B COPs (a)..................................................... 0.00 01/01/20 1,167
Escambia County, Florida, Pensacola Care Development Centers
8,805 Ser 1989................................................................ 10.25 07/01/11 9,604,582
2,010 Ser 1989 A.............................................................. 10.25 07/01/11 2,192,528
8,825 Flager County Industrial Development Authority, Florida, RHA/South
Florida Properties Inc Ser 1988 A....................................... 10.50 12/01/18 9,424,041
1,500 Winchester, Indiana, Hoosier Care II Inc Ser 1990........................ 10.375 06/01/20 1,617,405
2,565 Jefferson County, Kentucky, AHF/Kentucky - Iowa Inc Ser 1990............. 10.25 01/01/20 2,648,875
1,600 Westside Habilitation Center, Louisiana, Intermediate Care Facility for
the Mentally Retarded Refg Ser 1993..................................... 8.375 10/01/13 1,703,568
3,475 Massachusetts Industrial Finance Agency, Vinfen Corp Ser 1993............ 7.10 11/15/18 3,541,824
6,295 McCurtain County Development Authority, Oklahoma, Heartway Corp
Ser 1989 A-2............................................................ 10.25 03/01/19 4,406,500
1,455 Maury County Health & Educational Facilities Board, Tennessee, Southern
Healthcare/Heritage Manor of Monteagle, Ser 1990 E...................... 10.50 03/01/20 1,650,014
4,715 Kirbyville Health Facilities Development Corporation, Texas, Heartway III
Corp Ser 1988 A......................................................... 11.25 03/20/21 3,206,200
3,865 North Central Texas Health Facilities Development Corporation, C C Young
Memorial Home Ser 1988.................................................. 10.50 12/01/13 4,375,180
- -------- ----------
46,207 45,158,013
- -------- ----------
Public Facilities Revenue (0.0%)
1,120 La Salle County Jail Facilities Finance Corporation, Texas, Criminal
- -------- Detention Center Ser 1989 (b)........................................... 9.75 08/01/09 11
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS November 30, 1995 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Resource Recovery Revenue (1.7%)
Greater Detroit Resource Recovery Authority, Michigan,
$ 1,000 Ser A................................................................... 9.25 % 12/13/08 $ 1,032,880
2,000 Ser G................................................................... 9.25 12/13/08 2,065,760
- -------- ----------
3,000 3,098,640
- -------- ----------
Retirement & Lifecare Facilities Revenue (9.1%)
1,000 Colorado Health Facilities Authority, Liberty Heights 1990 Ser A (b)..... 10.00 07/01/19 500,000
Connecticut Development Authority, Seabury Life Care
3,230 Ser 1991................................................................ 10.00 09/01/04 3,268,793
1,000 Ser 1991................................................................ 10.00 09/01/16 1,014,710
4,965 Volusia County Health Facilities Authority, Florida, John Knox Village
Center 1988 Ser A....................................................... 11.125 09/01/17 4,468,500
5,765 Ann Arbor Economic Development Corporation, Michigan, Glacier Hills Inc
Ser 1989................................................................ 8.375 01/15/19 5,584,267
1,500 Charlotte Housing Authority, North Carolina, Merrywood Senior Adult
Community Ser 1989 A (AMT).............................................. 9.75 05/01/19 1,518,525
- -------- ----------
17,460 16,354,795
- -------- ----------
Tax Allocation (4.4%)
1,200 Bridgeview, Illinois, Ser 1991........................................... 9.00 01/01/11 1,301,724
Crestwood, Illinois,
3,000 Refg Ser 1994........................................................... 7.00 12/01/04 3,120,060
3,350 Refg Ser 1994........................................................... 7.25 12/01/08 3,430,367
- -------- ----------
7,550 7,852,151
- -------- ----------
Transportation Facilities Revenue (2.9%)
Foothills/Eastern Transportation Corridor Agency, California, Toll Road
Sr Lien
2,000 Ser 1995 A.............................................................. 0.00 01/01/13 1,159,860
2,000 Ser 1995 A.............................................................. 6.00 01/01/34 1,958,820
2,000 Mid-Bay Bridge Authority, Florida, Sr Lien Crossover Refg Ser 1993 A..... 6.00 10/01/13 2,020,520
- -------- ----------
6,000 5,139,200
- -------- ----------
Refunded (3.6%)
3,500 Wilmington, Delaware, Osteopathic Hospital Association of
Delaware/Riverside Hospital Ser A 1988.................................. 10.20 10/01/18 4,093,705
2,000 Bridgeview, Illinois, Ser 1991........................................... 9.50 01/01/11 2,357,760
- -------- ----------
5,500 6,451,465
- -------- ----------
312,970 TOTAL MUNICIPAL BONDS (Identified Cost $177,346,420)............................................. 172,084,390
- --------
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS November 30, 1995 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATION (1.5%)
$ 2,600 Louisiana Offshore Terminal Authority, LOOP Inc Ser 1992 A
- -------- (Demand 12/01/95) (Identified Cost $2,600,000).......................... 3.80 %* 09/01/08 $ 2,600,000
----------
$315,570 TOTAL INVESTMENTS (Identified Cost $179,946,420)(c)..................................... 97.6% 174,684,390
- --------
- --------
OTHER ASSETS IN EXCESS OF LIABILITIES..................................................... 2.4 4,367,764
---- ----------
NET ASSETS............................................................................... 100.0% $179,052,154
---- ----------
---- ----------
</TABLE>
- ---------------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Current coupon of variable rate security.
+ Joint exemption in the District of Columbia and Virginia.
(a) Resale is restricted to qualified institutional investors.
(b) Non-income producing, bond in default.
(c) The aggregate cost for federal income tax purposes is $180,276,420;
the aggregate gross unrealized appreciation is $8,626,264 and the
aggregate gross unrealized depreciation is $14,218,294, resulting in
net unrealized depreciation of $5,592,030.
-------------------------------------------------------------------------------
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
November 30, 1995 (unaudited)
<TABLE>
<S> <C>
Alaska............... 2.7%
California........... 6.2
Colorado............. 0.3
Connecticut.......... 2.4
Delaware............. 2.3
District of
Columbia............ 0.3
Florida.............. 15.8
Illinois............. 7.3
Indiana.............. 0.9
Kentucky............. 1.5
Louisiana............ 2.4%
Massachusetts........ 6.5
Michigan............. 8.3
Minnesota............ 3.5
New Hampshire........ 4.3
New Jersey........... 1.6
New York............. 1.6
North Carolina....... 0.8
Ohio................. 4.1
Oklahoma............. 2.5
Pennsylvania......... 6.8%
Rhode Island......... 0.4
South Carolina....... 4.1
Tennessee............ 0.9
Texas................ 5.1
Virginia............. 3.8
West Virginia........ 1.2
---
Total................ 97.6%
---
---
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
MUNICIPAL INCOME OPPORTUNITIES TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1995 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $179,946,420).......... $174,684,390
Receivable for:
Interest.............................. 4,877,154
Investments sold...................... 2,826,925
Prepaid expenses and other assets........ 6,921
----------
TOTAL ASSETS.......................... 182,395,390
----------
LIABILITIES:
Payable for:
Investments purchased................. 3,026,000
Investment advisory fee............... 83,160
Administration fee.................... 49,896
Accrued expenses and other payables...... 184,180
----------
TOTAL LIABILITIES..................... 3,343,236
----------
NET ASSETS:
Paid-in-capital.......................... 199,754,364
Net unrealized depreciation.............. (5,262,030)
Accumulated undistributed net
investment.............................. 2,737,080
Accumulated net realized loss............ (18,177,260)
----------
NET ASSETS............................ $179,052,154
----------
----------
NET ASSET VALUE PER SHARE,
21,089,872 shares outstanding
(unlimited shares authorized of
$.01 par value)......................... $8.49
----
----
STATEMENT OF OPERATIONS
For the six months ended November 30, 1995 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME.......................... $ 8,332,300
----------
EXPENSES
Investment advisory fee.................. 448,830
Administration fee....................... 269,298
Transfer agent fees and expenses......... 47,020
Professional fees........................ 43,518
Trustees' fees and expenses.............. 16,644
Registration fees........................ 16,464
Shareholder reports and notices.......... 14,040
Other.................................... 8,943
----------
TOTAL EXPENSES........................ 864,757
----------
NET INVESTMENT INCOME................. 7,467,543
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................ 602,562
Net change in unrealized depreciation.... (2,165,055)
----------
NET LOSS.............................. (1,562,493)
----------
NET INCREASE............................. $ 5,905,050
----------
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
MUNICIPAL INCOME OPPORTUNITIES TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX
MONTHS ENDED FOR THE YEAR
NOVEMBER 30, ENDED
1995 MAY 31, 1995
- --------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................. $ 7,467,543 $ 14,408,367
Net realized gain (loss).......................... 602,562 (6,508,935)
Net change in unrealized depreciation............. (2,165,055) 6,376,453
---------- ----------
NET INCREASE.................................. 5,905,050 14,275,885
Dividends from net investment income.............. (6,695,851) (13,394,825)
Net decrease from transactions in shares of
beneficial interest.............................. -- (2,783,099)
---------- ----------
TOTAL DECREASE................................ (790,801) (1,902,039)
NET ASSETS:
Beginning of period............................... 179,842,955 181,744,994
---------- ----------
END OF PERIOD
(Including undistributed net investment income
of $2,737,080 and $1,965,388, respectively)... $179,052,154 $179,842,955
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11
MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1995 (unaudited)
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. The Fund was organized as a Massachusetts
business trust on June 22, 1988 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 Trustees. The pricing
service has informed the Fund that in valuing the Fund's portfolio securities,
it uses both a computerized 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. Short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted and premiums are amortized over the life of the
respective securities. 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
<PAGE> 12
MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1995 (unaudited) continued
nature, such amounts are reclassified within the capital accounts based on their
federal tax-basis treatment; temporary differences do not require
reclassification. 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.
2. INVESTMENT ADVISORY AGREEMENT
Pursuant to an Investment Advisory Agreement with Dean Witter InterCapital Inc.
(the "Investment Adviser"), an affiliate of Dean Witter Services Company Inc.
(the "Administrator"), the Fund pays 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 Agreement, in addition to managing the Fund's
investments, the Investment Adviser pays the salaries of all personnel,
including officers of the Fund, who are employees of the Investment Adviser.
3. ADMINISTRATION AGREEMENT
Pursuant to an Administration Agreement with the Administrator, the Fund pays an
administration fee, calculated weekly and payable monthly, by applying the
annual rate of 0.30% to the Fund's average weekly net assets.
Under the terms of the Administration Agreement, the Administrator maintains
certain of the Fund's books and records and furnishes, at its own expense,
office space, facilities, equipment, clerical, bookkeeping and certain legal
services and pays the salaries of all personnel, including officers of the Fund
who are employees of the Administrator. The Administrator also bears the cost of
telephone services, heat, light, power and other utilities provided to the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended November 30, 1995 aggregated
$14,760,100 and $5,759,945, respectively.
<PAGE> 13
MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1995 (unaudited) continued
Dean Witter Trust Company, an affiliate of the Investment Adviser and
Administrator, is the Fund's transfer agent. At November 30, 1995, the Fund had
transfer agent fees and expenses payable of approximately $20,000.
The Fund has 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 six months ended November 30, 1995
included in Trustees' fees and expenses in the Statement of Operations amounted
to $5,999. At November 30, 1995, the Fund had an accrued pension liability of
$54,839 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL PAID
PAR VALUE IN EXCESS OF
SHARES OF SHARES PAR VALUE
---------- --------- ------------
<S> <C> <C> <C>
Balances, May 31, 1993 and 1994................................................. 21,460,172 $214,601 $202,322,908
Treasury shares purchased and retired (weighted average discount 9.12%)*........ (370,300) (3,703 ) (2,779,442)
-------- -------- ----------
Balances, May 31, 1995 and November 30, 1995.................................... 21,089,872 $210,898 $199,543,466
-------- -------- ----------
-------- -------- ----------
</TABLE>
- ---------------------
* The Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS
At May 31, 1995, the Fund had a net capital loss carryover of approximately
$12,672,000 of which $1,493,000 will be available through May 31, 2002 and
$11,179,000 will be available through May 31, 2003 which may be used 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
Fund incurred and will elect to defer net capital losses of approximately
$5,778,000 during fiscal 1995. As of May 31, 1995, the Fund had temporary
book/tax differences primarily attributable to post-October losses and capital
loss deferrals on wash sales.
<PAGE> 14
MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1995 (unaudited) continued
7. DIVIDENDS
The Fund has declared the following dividends from net investment income:
<TABLE>
<CAPTION>
DECLARATION AMOUNT RECORD PAYABLE
DATE PER SHARE DATE DATE
- ------------------ --------- ----------------- ------------------
<S> <C> <C> <C>
November 28, 1995 $ 0.055 December 8, 1995 December 22, 1995
January 2, 1996 $ 0.055 January 12, 1996 January 26, 1996
</TABLE>
8. SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------
11/30/95 8/31/95
------------------ ------------------
PER PER
TOTAL* SHARE TOTAL* SHARE
------- ------ ------- ------
<S> <C> <C> <C> <C>
Total investment income............................................................ $ 4,165 $ 0.20 $ 4,167 $ 0.19
Net investment income.............................................................. 3,736 0.18 3,732 0.17
Net realized and unrealized loss................................................... (390) (0.02) (1,172) (0.05)
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------------------------------
5/31/95 2/28/95 11/30/94 8/31/94
------------------ ------------------ ------------------ ------------------
PER PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income............... $ 4,108 $ 0.20 $ 4,067 $ 0.19 $ 4,001 $ 0.19 $ 4,078 $ 0.19
Net investment income................. 3,765 0.17 3,638 0.18 3,482 0.16 3,523 0.17
Net realized and unrealized gain
(loss)............................... 13,045 0.61 (7,325) (0.34) (5,434) (0.25) (418) (0.01)
<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)............................... (1,390) (0.07) (2,373) (0.11) (23) -- 614 0.03
</TABLE>
- ---------------------
* Amounts in thousands.
<PAGE> 15
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 SIX FOR THE YEAR ENDED MAY 31
MONTHS ENDED -----------------------------------------
NOVEMBER 30, 1995* 1995* 1994*
- ----------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period....................................... $ 8.53 $ 8.47 $ 8.58
----- ----- -----
Net investment income...................................... 0.35 0.68 0.67
Net realized and unrealized gain (loss).................... (0.07) 0.01 (0.15)
----- ----- -----
Total from investment operations........................... 0.28 0.69 0.52
----- ----- -----
Less dividends and distributions from:
Net investment income..................................... (0.32) (0.63) (0.63)
Net realized gain......................................... -- -- --
----- ----- -----
Total dividends and distributions.......................... (0.32) (0.63) (0.63)
----- ----- -----
Net asset value, end of period............................. $ 8.49 $ 8.53 $ 8.47
----- ----- -----
----- ----- -----
Market value, end of period................................ $8.375 $ 8.25 $8.125
----- ----- -----
----- ----- -----
TOTAL INVESTMENT RETURN+................................... 5.43%(1) 9.81% 6.17%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................... 0.96%(2) 1.04% 1.22%
Net investment income...................................... 8.32%(2) 8.10% 7.80%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................... $179,052 $179,843 $181,745
Portfolio turnover rate.................................... 3%(1) 5% 16%
<CAPTION>
FOR THE YEAR ENDED MAY 31
-----------------------------------------------------------
1993* 1992* 1991*
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period....................................... $ 8.97 $ 9.39 $ 9.44
----- ----- -----
Net investment income...................................... 0.64 0.74 0.79
Net realized and unrealized gain (loss).................... (0.34) (0.43) (0.02)
----- ----- -----
Total from investment operations........................... 0.30 0.31 0.77
----- ----- -----
Less dividends and distributions from:
Net investment income..................................... (0.66) (0.73) (0.82)
Net realized gain......................................... (0.03) -- --
----- ----- -----
Total dividends and distributions.......................... (0.69) (0.73) (0.82)
----- ----- -----
Net asset value, end of period............................. $ 8.58 $ 8.97 $ 9.39
----- ----- -----
----- ----- -----
Market value, end of period................................ $ 8.25 $9.325 $9.875
----- ----- -----
----- ----- -----
TOTAL INVESTMENT RETURN+................................... (4.71)% 2.64% 4.99%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................... 1.15% 1.08% 1.10%
Net investment income...................................... 7.27% 8.00% 8.37%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................... $184,100 $194,851 $202,418
Portfolio turnover rate.................................... 2% 4% 7%
</TABLE>
- ---------------------
+ 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 brokerage commissions.
* The per share amounts were computed using an average number of shares
outstanding during the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 16
TRUSTEES
- -----------------------------------------------
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
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
INDEPENDENT ACCOUNTANTS
- -----------------------------------------------
Price Waterhouse LLP
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
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
MUNICIPAL
INCOME
OPPORTUNITIES
TRUST
SEMIANNUAL REPORT
NOVEMBER 30, 1995
