-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NoXSpZYT3wZYre253M4+AtcqNox3bs3Z0QQgv4iVJGv4kn1xppph0HIr3yBqIIai bHM7sbXCwEb31Zly9VyXMQ== 0000950123-96-001727.txt : 19960418 0000950123-96-001727.hdr.sgml : 19960418 ACCESSION NUMBER: 0000950123-96-001727 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951129 FILED AS OF DATE: 19960417 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MUNICIPAL INCOME OPPORTUNITIES TRUST/MA CENTRAL INDEX KEY: 0000835333 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133473972 STATE OF INCORPORATION: MA FISCAL YEAR END: 0530 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05597 FILM NUMBER: 96547766 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CTR STREET 2: C/O DEAN WITTER INTERCAPITAL INC CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123292550 FORMER COMPANY: FORMER CONFORMED NAME: ALLSTATE MUNICIPAL INCOME OPPORTUNITIES TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: ALLSTATE MUNICIPAL OPPORTUNITIES INCOME TRUST DATE OF NAME CHANGE: 19890206 N-30D 1 MUNICIPAL INCOME OPPORTUNITIES TRUST 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. 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. 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 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: 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
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: For................................................................................................ 14,632,660 Against............................................................................................ 151,146 Abstain............................................................................................ 349,270
(3) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS: For................................................................................................ 14,812,636 Against............................................................................................ 53,615 Abstain............................................................................................ 266,825
5 MUNICIPAL INCOME OPPORTUNITIES TRUST PORTFOLIO OF INVESTMENTS November 30, 1995 (unaudited)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- 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 - -------- ----------
SEE NOTES TO FINANCIAL STATEMENTS 6 MUNICIPAL INCOME OPPORTUNITIES TRUST PORTFOLIO OF INVESTMENTS November 30, 1995 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- 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 ----------
SEE NOTES TO FINANCIAL STATEMENTS 7 MUNICIPAL INCOME OPPORTUNITIES TRUST PORTFOLIO OF INVESTMENTS November 30, 1995 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- 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 - -------- ----------
SEE NOTES TO FINANCIAL STATEMENTS 8 MUNICIPAL INCOME OPPORTUNITIES TRUST PORTFOLIO OF INVESTMENTS November 30, 1995 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- 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 ---- ---------- ---- ----------
- --------------------- 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) 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% --- ---
SEE NOTES TO FINANCIAL STATEMENTS 9 MUNICIPAL INCOME OPPORTUNITIES TRUST FINANCIAL STATEMENTS 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 ---------- ----------
SEE NOTES TO FINANCIAL STATEMENTS 10 MUNICIPAL INCOME OPPORTUNITIES TRUST FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED FOR THE YEAR NOVEMBER 30, ENDED 1995 MAY 31, 1995 - -------------------------------------------------------------------------------------- (unaudited) 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 ---------- ---------- ---------- ----------
SEE NOTES TO FINANCIAL STATEMENTS 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 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. 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:
CAPITAL PAID PAR VALUE IN EXCESS OF SHARES OF SHARES PAR VALUE ---------- --------- ------------ 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 -------- -------- ---------- -------- -------- ----------
- --------------------- * 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. 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:
DECLARATION AMOUNT RECORD PAYABLE DATE PER SHARE DATE DATE - ------------------ --------- ----------------- ------------------ November 28, 1995 $ 0.055 December 8, 1995 December 22, 1995 January 2, 1996 $ 0.055 January 12, 1996 January 26, 1996
8. SELECTED QUARTERLY FINANCIAL DATA
QUARTERS ENDED ----------------------------------------- 11/30/95 8/31/95 ------------------ ------------------ PER PER TOTAL* SHARE TOTAL* SHARE ------- ------ ------- ------ 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) 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 ------- ------ ------- ------ ------- ------ ------- ------ 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) 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 ------- ------ ------- ------ ------- ------ ------- ------ 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
- --------------------- * Amounts in thousands. 15 MUNICIPAL INCOME OPPORTUNITIES TRUST FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
FOR THE SIX FOR THE YEAR ENDED MAY 31 MONTHS ENDED ----------------------------------------- NOVEMBER 30, 1995* 1995* 1994* - ---------------------------------------------------------------------------------------------------------------------------- (unaudited) 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% FOR THE YEAR ENDED MAY 31 ----------------------------------------------------------- 1993* 1992* 1991* - -------------------------------------------------------------------------------------------------------------------------- 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%
- --------------------- + 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 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 -----END PRIVACY-ENHANCED MESSAGE-----