<PAGE> 1
MUNICIPAL INCOME OPPORTUNITIES TRUST Two World Trade Center, New York,
New York 10048
LETTER TO THE SHAREHOLDERS November 30, 1997
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of Municipal
Income Opportunities Trust (OIA) for the six-month period ended November 30,
1997.
Over the past six months the bond market rallied and the pace of economic growth
moderated. Inflation remained subdued and the Federal Reserve Board favored a
stable monetary policy following its tightening move in March. In addition, the
bond rally was supported by a shrinking federal budget deficit and a stronger
dollar. By August the bond market began to retreat on fears that record-setting
employment conditions might prompt the Federal Reserve Board to tighten interest
rates further. However, yields declined in October and November. The spreading
Asian currency crisis created turmoil in the international markets,
precipitating "flight-to-quality" demand for U.S. Treasuries.
MUNICIPAL MARKET CONDITIONS
Municipal yields followed the trend of Treasury yields but with less volatility.
Long-term insured revenue index yields declined from
BOND YIELDS 1994-1997
<TABLE>
<CAPTION>
Insured Municipal
30-Year 30-Year Revenue Yields
Insured Municipal U.S. Treasury as a Percentage of
Revenue Yields Yields U.S. Treasury Yields
<S> <C> <C> <C>
Dec '93 5.4 6.34 85.17%
5.4 6.24 86.54%
5.8 6.66 87.09%
6.4 7.09 90.27%
6.35 7.32 86.75%
6.25 7.43 84.12%
Jun '94 6.5 7.61 85.41%
6.25 7.39 84.57%
6.3 7.45 84.56%
6.55 7.81 83.87%
6.75 7.96 84.80%
7 8 87.50%
Dec '94 6.75 7.88 85.66%
6.4 7.7 83.12%
6.15 7.44 82.66%
6.15 7.43 82.77%
6.2 7.34 84.47%
5.8 6.66 87.09%
Jun '95 6.1 6.62 92.15%
6.1 6.86 88.92%
6 6.66 90.08%
5.95 6.48 91.82%
5.75 6.33 90.84%
5.5 6.14 89.56%
Dec '95 5.35 5.94 90.07%
5.4 6.03 89.55%
5.8 6.46 86.69%
5.85 6.66 87.84%
5.95 6.89 86.36%
6.05 6.99 86.55%
Jun '96 5.9 6.89 85.63%
5.85 6.97 83.93%
5.9 7.11 82.98%
5.7 6.93 82.25%
5.65 6.64 85.09%
5.5 6.35 86.61%
Dec '96 5.6 6.63 84.46%
5.7 6.79 83.95%
5.65 6.8 83.08%
5.9 7.1 83.10%
5.75 6.94 82.85%
5.65 6.91 81.77%
Jun '97 5.6 6.78 82.60%
5.3 6.3 84.00%
5.5 6.61 83.00%
5.4 6.4 84.40%
5.35 6.15 86.90%
5.3 6.05 87.60%
</TABLE>
<PAGE> 2
MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS November 30, 1997, continued
5.65 percent in May 1997 to 5.30 percent by the end of November. Yields on
1-year notes moved from 3.90 percent to 3.80 percent. Consequently, the yield
pickup for extending maturities from 1 to 30 years narrowed from 175 basis
points to 150 basis points over the past six months.
The ratio of 30-year insured revenue bond yields to 30-year U.S. Treasury yields
rose from 82 percent at the end of May 1997 to 88 percent in November. A rising
ratio means that municipals have underperformed Treasuries and have become
relatively more attractive. Over the past four years, this ratio has annually
ranged from an average low of 83 percent to an average high of 90 percent.
New-issue underwriting volume was slightly ahead of last year's pace in the
first half of 1997. The decline in interest rates led to a surge in refunding
activity in the third quarter. As a result, new-issue municipal volume was up 17
percent during the first 11 months of 1997. Refundings accounted for one-quarter
of total volume.
PERFORMANCE
During the six-month period ended November 30, 1997, the Fund's net asset value
(NAV) increased from $8.47 to $8.62. Based on this NAV change plus reinvestment
of tax-free dividends totaling $0.295 per share, the Fund's total NAV return was
5.16 percent. OIA's price on the New York Stock
CALL STRUCTURE AS OF NOVEMBER 30, 1997
(% OF TOTAL LONG-TERM PORTFOLIO)
PERCENT CALLABLE
WEIGHTED AVERAGE
CALL PROTECTION: 7 YEARS
YEARS BONDS CALLABLE
<TABLE>
<S> <C>
1998 9%
1999 10%
2000 13%
2001 14%
2002 9%
2003 1%
2004 11%
2005 14%
2006 12%
2007 4%
2008+ 3%
</TABLE>
<PAGE> 3
MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS November 30, 1997, continued
Exchange moved from $8.75 to $8.6875 per share. Based on this change in market
price plus reinvestment of dividends, the Fund's total market return was 2.60
percent. On November 30, 1997, the Fund was trading at a small premium to NAV.
Monthly dividends for the fourth quarter of 1997 were declared in September.
Over the past six months the level of undistributed net investment income
declined from $0.140 to $0.122 per share. Beginning with the October 1997
payment, the monthly dividend was reduced from $0.05 per share to $0.0475 per
share to more closely reflect the Fund's anticipated income.
PORTFOLIO STRUCTURE
The Fund's investments were diversified among 13 long-term sectors and 53
credits. Non-rated securities continued to comprise over 60 percent of the
Fund's portfolio. Over the past six months bonds with a market value of $8
million were purchased at book yields of less than 6 percent. Distributable
income declined when $8 million in proceeds was realized from redemptions of
bonds with book yields in excess of 10 percent.
The portfolio's average maturity was 18 years. The combination of older,
shorter-call issues and newer issues with longer call dates provided an average
of 7 years of call protection. The bonds of 3 issuers, representing 7 percent
of net assets, were not accruing interest. Four other issues, totaling 12
percent of net assets, were accruing income, but may face difficulties in
meeting future debt service requirements.
LARGEST SECTORS AS OF NOVEMBER 30, 1997
(% OF NET ASSETS)
<TABLE>
<S> <C>
IDR/PCR* 25%
NURSING & HEALTH 23%
MORTGAGE 14%
RETIREMENT & LIFE CARE 7%
TRANSPORTATION 7%
HOSPITAL 5%
TAX ALLOCATION 5%
ALL OTHERS 14%
</TABLE>
* INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
LOOKING AHEAD
So far this year, long-term municipal bonds have followed the trend of
Treasuries toward lower yields. The recent enactment of the Taxpayer Relief Act
of 1997 preserved the traditional tax-exempt benefits of municipal bond income.
<PAGE> 4
MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS November 30, 1997, continued
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> 5
MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (96.7%)
General Obligation (1.1%)
$ 2,000 New York City, New York, 1994 Ser D..................................... 5.75% 08/15/10 $ 2,058,740
- -------- ------------
Educational Facilities Revenue (1.5%)
1,600 ABAG Finance Authority for Nonprofit Corporations, California, National
Center for International Schools COPs.................................. 7.50 05/01/11 1,683,808
1,000 New York State Dormitory Authority, State University Refg 1993 Ser A.... 5.25 05/15/15 997,710
- -------- ------------
2,600 2,681,518
- -------- ------------
Electric Revenue (2.6%)
5,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary FSA)....... 5.00 07/01/21 4,773,250
- -------- ------------
Hospital Revenue (4.5%)
1,000 Kentucky Economic Development Finance Authority, Appalachian Regional
Healthcare Inc Refg & Impr Ser 1997.................................... 5.875 10/01/22 1,007,330
Massachusetts Health & Educational Facilities Authority,
2,000 Dana Farber Cancer Institute Ser G - 1................................. 6.25 12/01/14 2,142,880
3,000 Dana Farber Cancer Institute Ser G - 1................................. 6.25 12/01/22 3,199,950
1,820 Buena Vista Industrial Development Authority, Virginia, Stonewall
Jackson Hospital Ser 1987.............................................. 8.375 11/01/14 1,860,167
- -------- ------------
7,820 8,210,327
- -------- ------------
Industrial Development/Pollution Control Revenue (24.7%)
480 Metropolitan Washington Airports Authority, District of Columbia,
CaterAir International Corp Ser 1991 (AMT)+............................ 10.125 09/01/11 493,104
1,535 Illinois Development Finance Authority, Custom Tapes Inc Refg Ser
1989................................................................... 10.50 05/01/19 1,565,669
1,500 Iowa Finance Authority, ISPCO Inc Ser 1997 (AMT)........................ 6.00 06/01/27 1,548,225
3,000 Massachusetts Industrial Finance Agency, Eastern Edison Co Refg Ser
1993................................................................... 5.875 08/01/08 3,060,930
3,820 Detroit Economic Development Corporation, Michigan, North Industrial
Park LP Ser 1989....................................................... 11.375 02/15/14 4,077,353
1,395 Michigan Strategic Fund, Kasle Steel Corp Ser 1989 (AMT)................ 9.375 10/01/06 1,457,605
3,600 Cleveland, Ohio, Continental Airlines Inc Ser 1990 (AMT)................ 9.00 12/01/19 3,919,391
2,000 Dayton, Ohio, Emery Air Freight Corp Ser 1988 A......................... 12.50 10/01/09 2,150,220
1,010 Zanesville-Muskingum County Port Authority, Ohio, Anchor Glass Container
Corp Ser 1989 B (AMT).................................................. 10.25 12/01/08 1,016,030
2,000 Beaver County Industrial Development Authority, Pennsylvania, Toledo
Edison Co Collateralized Ser 1995-B.................................... 7.75 05/01/20 2,301,360
3,225 East Hempfield Township Industrial Development Authority, Pennsylvania,
Herley Microwave System Inc Ser 1989 A................................. 10.40 06/01/04 3,345,325
4,000 Pennsylvania Economic Development Authority, McMillan Bloedel Ltd Ser
1995 (AMT)............................................................. 7.60 12/01/20 4,648,079
Lexington County, South Carolina,
2,220 Ellett Brothers Inc Refg Ser 1988...................................... 7.50 09/01/02 2,254,255
4,250 Ellett Brothers Inc Refg Ser 1988...................................... 7.50 09/01/08 4,337,890
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS November 30, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Pittsylvania County Industrial Development Authority, Virginia,
$ 4,500 Multi-Trade of Pittsylvania County Ser 1994 A (AMT).................... 7.45% 01/01/09 $ 4,934,520
1,500 Multi-Trade of Pittsylvania County Ser 1994 A (AMT).................... 7.50 01/01/14 1,646,385
2,000 Upshur County, West Virginia, TJ International Inc Ser 1995 (AMT)....... 7.00 07/15/25 2,193,020
- -------- ------------
42,035 44,949,361
- -------- ------------
Mortgage Revenue - Multi-Family (3.7%)
Washington County Housing & Redevelopment Authority, Minnesota,
3,885 Courtly Park Ser 1989 A................................................ 9.75 06/15/19 2,331,000
1,165 Courtly Park Ser 1989 A (AMT).......................................... 10.25 06/15/19 699,000
24,080 Courtly Park Ser 1989 B................................................ 0.00 06/15/19 240,800
8,678 Courtly Park Ser 1989 B (AMT).......................................... 0.00 06/15/19 86,779
White Bear Lake, Minnesota,
3,715 White Bear Woods Apts Phase II Refg 1989 Ser A......................... 9.75 06/15/19 3,157,750
22,401 White Bear Woods Apts Phase II Refg 1989 Ser B......................... 0.00 06/15/19 224,009
- -------- ------------
63,924 6,739,338
- -------- ------------
Mortgage Revenue - Single Family (10.5%)
3,000 Alaska Housing Finance Corporation, 1997 Ser A (MBIA)................... 6.00 06/01/27 3,103,350
15,131 San Francisco, California, Ser 1982..................................... 0.00 10/01/14 2,553,014
310 Broward County Housing Finance Authority, Florida, Home Ser 1989 A...... 10.00 10/01/03 310,505
New Hampshire Housing Finance Authority,
52,375 Residential 1983 Ser B................................................. 0.00 01/01/15 8,977,599
2,000 1997 Ser D (AMT)....................................................... 5.90 07/01/28 2,025,760
2,000 Ohio Housing Finance Agency, Residential 1996 Ser B - 2 (AMT)........... 6.10 09/01/28 2,096,100
- -------- ------------
74,816 19,066,328
- -------- ------------
Nursing & Health Related Facilities Revenue (22.7%)
Vista, California,
973 Long-Term Care Foundation of America Ser 1994 A COPs (a) (b)........... 8.50 01/01/20 603,442
117 Long-Term Care Foundation of America Ser 1994 B COPs (a) (b)........... 0.00 01/01/20 1,167
Escambia County, Florida,
8,290 Pensacola Care Development Centers Ser 1989............................ 10.25 07/01/11 7,995,622
1,895 Pensacola Care Development Centers Ser 1989 A.......................... 10.25 07/01/11 1,827,709
8,720 Flagler County Industrial Development Authority, Florida, RHA/South
Florida Properties Inc Ser 1988 A (b).................................. 10.50 12/01/18 7,035,732
1,460 Winchester, Indiana, Hoosier Care II Inc Ser 1990....................... 10.375 06/01/20 1,566,098
2,515 Jefferson County, Kentucky, AHF/Kentucky-Iowa Inc Ser 1990.............. 10.25 01/01/20 2,666,202
1,600 Westside Habilitation Center, Louisiana, Intermediate Care Facility for
the Mentally Retarded Refg Ser 1993.................................... 8.375 10/01/13 1,755,248
3,335 Massachusetts Industrial Finance Agency, Vinfen Corp Ser 1993........... 7.10 11/15/18 3,665,665
McCurtain County, Oklahoma,
4,950 Heartway Corp Ser 1997 A............................................... 9.50 03/01/19 5,382,184
835 Heartway Corp Ser 1997 B............................................... 0.00 03/01/19 559,467
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS November 30, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 3,725 Allegheny County Hospital Development Authority, Pennsylvania, Allegheny
Valley School Ser 1990................................................. 8.50% 02/01/15 $ 3,962,320
4,715 Kirbyville Health Facilities Development Corporation, Texas, Heartway
III Corp Ser 1988 A (b)................................................ 11.25 03/20/21 4,290,650
- -------- ------------
43,130 41,311,506
- -------- ------------
Retirement & Lifecare Facilities Revenue (7.1%)
Connecticut Development Authority,
2,950 Seabury Life Care Ser 1991............................................. 10.00 09/01/04 3,180,425
600 Seabury Life Care Ser 1996............................................. 8.75 09/01/06 616,404
1,000 Seabury Life Care Ser 1991............................................. 10.00 09/01/16 1,079,800
5,701 Ann Arbor Economic Development Corporation, Michigan, Glacier Hills Inc
Ser 1989............................................................... 8.375 01/15/19 5,838,679
2,000 Glen Cove Housing Authority, New York, The Mayfair at Glen Cove Ser 1996
(AMT).................................................................. 8.25 10/01/26 2,171,800
- -------- ------------
12,251 12,887,108
- -------- ------------
Tax Allocation (4.5%)
1,180 Bridgeview, Illinois, Ser 1995.......................................... 9.00 01/01/11 1,365,048
Crestwood, Illinois,
3,000 Refg Ser 1994.......................................................... 7.00 12/01/04 3,205,140
3,350 Refg Ser 1994.......................................................... 7.25 12/01/08 3,568,822
- -------- ------------
7,530 8,139,010
- -------- ------------
Transportation Facilities Revenue (6.8%)
2,000 Foothills/Eastern Transportation Corridor Agency, California, Toll Road
Sr Lien Ser 1995 A..................................................... 0.00 01/01/13 1,452,980
7,500 E-470 Public Highway Authority, Colorado, Ser 1997 B (MBIA)............. 0.00 09/01/15 2,957,175
2,000 Mid-Bay Bridge Authority, Florida, Sr Lien Crossover Refg Ser 1993 A.... 6.00 10/01/13 2,070,560
1,700 Bi-State Development Agency of the Missouri-Illinois Metropolitan
District, Arch Parking Refg Ser 1997................................... 5.875 12/01/12 1,756,491
4,000 Ohio Turnpike Commission, 1996 Ser A (MBIA)............................. 5.50 02/15/26 4,049,520
- -------- ------------
17,200 12,286,726
- -------- ------------
Other Revenue (2.9%)
Mashantucket (Western) Pequot Tribe, Connecticut,
2,000 Special 1996 Ser A (a)................................................. 6.40 09/01/11 2,210,500
1,000 Special 1997 Ser B (a)................................................. 5.75 09/01/27 1,007,210
2,000 Northern Palm Beach County Improvement District, Florida, Water Control
& Impr #9A Ser 1996 A.................................................. 7.30 08/01/27 2,170,540
- -------- ------------
5,000 5,388,250
- -------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS November 30, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Refunded (4.1%)
$ 2,000 San Joaquin Hills, California, Transportation Corridor, Toll Road Sr
Lien................................................................... 6.75% 01/01/03++ $ 2,246,220
960 Illinois Health Facilities Authority, Hinsdale Hospital Ser 1990 C
(ETM).................................................................. 9.50 11/15/19 1,120,819
North Central Texas Health Facilities Development Corporation,
1,900 C C Young Memorial Home Ser 1988....................................... 10.50 12/01/98++ 2,074,629
1,805 C C Young Memorial Home Ser 1988....................................... 10.50 12/01/98++ 1,970,898
- -------- ------------
6,665 7,412,566
- -------- ------------
289,971 TOTAL MUNICIPAL BONDS (Identified Cost $178,673,759)........................................... 175,904,028
- -------- ------------
SHORT-TERM MUNICIPAL OBLIGATION (0.8%)
1,500 Illinois Health Facilities Authority, Northwestern Memorial Hospital Ser
- -------- 1995 (Demand 12/01/97) (Identified Cost $1,500,000).................... 3.85* 08/15/25 1,500,000
------------
$291,471 TOTAL INVESTMENTS (Identified Cost $180,173,759) (c)................................... 97.5% 177,404,028
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.......................................... 2.5 4,468,457
----- ------------
NET ASSETS............................................................................. 100.0% $181,872,485
===== ============
</TABLE>
- ---------------------
<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to maturity.
+ Joint exemption in District of Columbia and Virginia.
++ Prerefunded to call date shown.
* Current coupon of variable rate demand obligation.
(a) Resale is restricted to qualified institutional investors.
(b) Non-income producing, bond in default.
(c) The aggregate cost for federal income tax purposes approximates identified cost. The aggregate gross
unrealized appreciation is $8,456,239 and the aggregate gross unrealized depreciation is $11,225,970,
resulting in net unrealized depreciation of $2,769,731.
Bond Insurance:
- ---------------
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS November 30, 1997 (unaudited) continued
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
November 30, 1997
<TABLE>
<S> <C>
Alaska................... 1.7%
California............... 4.7
Colorado................. 1.6
Connecticut.............. 4.5
District of Columbia..... 0.3
Florida.................. 11.8
Illinois................. 7.7
Indiana.................. 0.9
Iowa..................... 0.8
Kentucky................. 2.0
Louisiana................ 1.0%
Massachusetts............ 6.6
Michigan................. 6.2
Minnesota................ 3.7
Missouri................. 1.0
New Hampshire............ 6.1
New York................. 2.9
Ohio..................... 7.3
Oklahoma................. 3.3
Pennsylvania............. 7.8
South Carolina........... 3.6%
Texas.................... 4.6
Utah..................... 2.6
Virginia................. 4.6
West Virginia............ 1.2
Joint Exemption.......... (1.0)+
----
Total.................... 97.5%
====
</TABLE>
- ---------------------
+ Joint exemption has been included in both geographic locations.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
MUNICIPAL INCOME OPPORTUNITIES TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1997 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $180,173,759).......... $177,404,028
Cash..................................... 273,416
Receivable for:
Interest............................. 4,367,854
Investments sold..................... 75,000
Prepaid expenses......................... 7,269
------------
TOTAL ASSETS......................... 182,127,567
------------
LIABILITIES:
Payable for:
Investment advisory fee.............. 74,742
Administration fee................... 44,845
Accrued expenses......................... 135,495
------------
TOTAL LIABILITIES.................... 255,082
------------
NET ASSETS........................... $181,872,485
============
COMPOSITION OF NET ASSETS:
Paid-in-capital.......................... $199,754,364
Net unrealized depreciation.............. (2,769,731)
Accumulated undistributed net investment
income.................................. 2,582,232
Accumulated net realized loss............ (17,694,380)
------------
NET ASSETS........................... $181,872,485
============
NET ASSET VALUE PER SHARE,
21,089,872 shares outstanding
(unlimited shares authorized of
$.01 par value)......................... $8.62
=====
STATEMENT OF OPERATIONS
For the six months ended
November 30, 1997 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME.......................... $ 6,764,870
------------
EXPENSES
Investment advisory fee.................. 452,591
Administration fee....................... 271,554
Professional fees........................ 100,981
Transfer agent fees and expenses......... 41,400
Shareholder reports and notices.......... 25,211
Registration fees........................ 16,261
Trustees' fees and expenses.............. 7,289
Custodian fees........................... 4,199
Other.................................... 6,421
------------
TOTAL EXPENSES....................... 925,907
Less: expense offset..................... (4,188)
------------
NET EXPENSES......................... 921,719
------------
NET INVESTMENT INCOME................ 5,843,151
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................ (662,788)
Net change in unrealized depreciation.... 4,313,609
------------
NET GAIN............................. 3,650,821
------------
NET INCREASE............................. $ 9,493,972
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11
MUNICIPAL INCOME OPPORTUNITIES TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
NOVEMBER 30, 1997 MAY 31, 1997
- -------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 5,843,151 $ 13,192,585
Net realized gain (loss)............................. (662,788) 883,533
Net change in unrealized depreciation................ 4,313,609 2,410,485
------------ ------------
NET INCREASE..................................... 9,493,972 16,486,603
Dividends from net investment income................. (6,221,375) (13,180,877)
------------ ------------
NET INCREASE..................................... 3,272,597 3,305,726
NET ASSETS:
Beginning of period.................................. 178,599,888 175,294,162
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$2,582,232 and $2,960,456, respectively)......... $181,872,485 $178,599,888
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 12
MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1997 (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's investment objective is to provide a
high level of current income which is exempt from federal income tax. The Fund
was organized as a Massachusetts business trust on June 22, 1988 and commenced
operations on September 19, 1988.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued by an outside
independent pricing service approved by the Trustees. The pricing service has
informed the Fund that in valuing the 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 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
<PAGE> 13
MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1997 (unaudited) continued
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 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 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 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, 1997 aggregated
$8,502,950 and $7,859,065, respectively.
<PAGE> 14
MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1997 (unaudited) continued
Dean Witter Trust FSB, an affiliate of the Investment Adviser and Administrator,
is the Fund's transfer agent. At November 30, 1997, the Fund had transfer agent
fees and expenses payable of approximately $21,000.
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, 1997
included in Trustees' fees and expenses in the Statement of Operations amounted
to $1,545. At November 30, 1997, the Fund had an accrued pension liability of
$47,927 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 IN
PAR VALUE EXCESS OF
SHARES OF SHARES PAR VALUE
---------- --------- ------------
<S> <C> <C> <C>
Balance, May 31, 1996, 1997 and November 30, 1997............................... 21,089,872 $210,898 $199,543,466
========== ======== ============
</TABLE>
6. FEDERAL INCOME TAX STATUS
At May 31, 1997, the Fund had a net capital loss carryover of approximately
$17,032,000 to offset future capital gains to the extent provided by regulations
through May 31 of the following years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
---------------------------
2002 2003 2004
---- ------- ------
<S> <C> <C>
$610 $11,179 $5,243
==== ======= ======
</TABLE>
7. DIVIDENDS
The Fund declared the following dividends from net investment income:
<TABLE>
<CAPTION>
DECLARATION AMOUNT RECORD PAYABLE
DATE PER SHARE DATE DATE
- ------------------- --------- ----------------- ------------------
<S> <C> <C> <C>
September 23, 1997 $0.0475 December 3, 1997 December 17, 1997
December 30, 1997 $0.0475 January 9, 1998 January 23, 1998
</TABLE>
<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, 1997* 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of the period........... $ 8.47 $ 8.31 $ 8.53 $ 8.47
------ ------ ------ ------
Net investment income.............................. 0.28 0.63 0.69 0.68
Net realized and unrealized gain (loss)............ 0.17 0.16 (0.26) 0.01
------ ------ ------ ------
Total from investment operations................... 0.45 0.79 0.43 0.69
------ ------ ------ ------
Less dividends and distributions from:
Net investment income........................... (0.30) (0.63) (0.65) (0.63)
Net realized gain............................... -- -- -- --
------ ------ ------ ------
Total dividends and distributions.................. (0.30) (0.63) (0.65) (0.63)
------ ------ ------ ------
Net asset value, end of period..................... $ 8.62 $ 8.47 $ 8.31 $ 8.53
====== ====== ====== ======
Market value, end of period........................ $8.688 $ 8.75 $8.875 $ 8.25
====== ====== ====== ======
TOTAL INVESTMENT RETURN+........................... 2.60%(1) 5.82% 15.95% 9.81%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................................... 1.02%(2) 1.08% 0.97% 1.04%
Net investment income.............................. 6.45%(2) 7.44% 8.24% 8.10%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............ $181,872 $178,600 $175,294 $179,843
Portfolio turnover rate............................ 5%(1) 19% 8% 5%
<CAPTION>
FOR THE YEAR ENDED MAY 31*
--------------------------
1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of the period........... $ 8.58 $ 8.97
------ ------
Net investment income.............................. 0.67 0.64
Net realized and unrealized gain (loss)............ (0.15) (0.34)
------ ------
Total from investment operations................... 0.52 0.30
------ ------
Less dividends and distributions from:
Net investment income........................... (0.63) (0.66)
Net realized gain............................... -- (0.03)
------ ------
Total dividends and distributions.................. (0.63) (0.69)
------
Net asset value, end of period..................... $ 8.47 $ 8.58
====== ======
Market value, end of period........................ $8.125 $ 8.25
====== ======
TOTAL INVESTMENT RETURN+........................... 6.17% (4.71)%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................................... 1.22% 1.15%
Net investment income.............................. 7.80% 7.27%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............ $181,745 $184,100
Portfolio turnover rate............................ 16% 2%
</TABLE>
- ---------------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 16
TRUSTEES
- -------------------------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
- -------------------------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- -------------------------------------------------
Dean Witter Trust FSB
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, 1997
