<PAGE> 1
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST Two World Trade Center
LETTER TO THE SHAREHOLDERS August 31, 1999 New York, New York 10048
DEAR SHAREHOLDER:
In the wake of 1998's international economic difficulties, the financial markets
have benefited from global healing. The turmoil included the Asian financial
crisis, the Russian debt default and the orchestrated rescue of a major hedge
fund. This precipitated a flight to quality and U.S. Treasury securities bond
yields fell to 30-year lows. The major catalyst for the return to stability was
the liquidity provided by the Federal Reserve Board's 75-basis-point reduction
in the federal-funds rate during the fourth quarter of 1998.
The U.S. economy, led by consumer demand, has continued to experience robust
growth this year. Moving into 1999, higher materials prices and wage increases
caused the fixed-income markets to focus on the possibility that the central
bank would begin to take back some of the liquidity provided during last year's
crises. By the end of August, long-term interest rates were again at levels last
seen in the spring of 1998. During the summer the Federal Reserve changed
monetary policy and, in two separate moves, raised the federal-funds rate 50
basis points to 5.25 percent.
MUNICIPAL MARKET CONDITIONS
Last year's flight-to-quality rally primarily benefited U.S. Treasuries. As
global turmoil subsided and interest rates began to rise, Treasury yields
increased more than municipal yields. Long-term insured municipal index yields
have risen 70 basis points, from 5.05 percent to 5.75 percent, during the first
eight months of 1999. Over the same period, Treasury yields rose nearly 100
basis points to 6.05 percent.
The ratio of long-term municipal yields to Treasury yields declined from 99
percent at the end of 1998 to 94 percent by the end of August. The ratio is a
measure of relative performance that compares long-term insured municipal index
yields to benchmark 30-year Treasury yields. A declining ratio means municipals
have outperformed Treasuries. Over the
<PAGE> 2
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS August 31, 1999, continued
past five years the annual high ratio has averaged 93 percent and the annual low
ratio 84 percent of Treasuries.
Municipal performance was also aided by a slowdown in the pace of underwritings.
New-issue volume declined 22 percent in the first eight months of 1999.
Refunding activity, the most interest-rate-sensitive component of supply, was
down 51 percent.
30-YEAR BOND YIELDS 1994-1999
<TABLE>
<CAPTION>
Insured U.S. Insured Municipal Yields as a
Municipal Yields Treasury Yields Percent of U.S. Treasury Yields
<S> <C> <C> <C>
1994 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
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 84.8
7 8.00 87.5
6.75 7.88 85.66
1995 6.4 7.70 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
6.1 6.62 92.15
6.1 6.86 88.92
6 6.66 90.09
5.95 6.48 91.82
5.75 6.33 90.84
5.5 6.14 89.58
5.35 5.94 90.07
1996 5.4 6.03 89.55
5.6 6.46 86.69
5.85 6.66 87.84
5.95 6.89 86.36
6.05 6.99 86.55
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
5.6 6.63 84.46
1997 5.7 6.79 83.95
5.65 6.80 83.09
5.9 7.10 83.1
5.75 6.94 82.85
5.65 6.91 81.77
5.6 6.78 82.6
5.3 6.30 84.13
5.5 6.61 83.21
5.4 6.40 84.38
5.35 6.15 86.99
5.3 6.05 87.6
5.15 5.92 86.99
1998 5.15 5.80 88.79
5.2 5.92 87.84
5.25 5.93 88.53
5.35 5.95 89.92
5.2 5.80 89.66
5.2 5.65 92.04
5.18 5.71 90.72
5.03 5.27 95.45
4.95 5.00 99.00
5.05 5.16 97.87
5.00 5.06 98.81
5.05 5.10 99.02
1999 5.00 5.09 98.23
5.10 5.58 91.40
5.15 5.63 91.47
5.20 5.66 91.87
5.30 5.83 90.91
5.47 5.96 91.78
5.55 6.10
5.75 6.06
</TABLE>
Source: Municipal Market Data - A Division of Thomson Financial Municipal Group
and Bloomberg L.P.
PERFORMANCE
The net asset value (NAV) of Morgan Stanley Dean Witter Municipal Income Trust
(TFA) declined from $10.21 to $ 9.61 per share during the fiscal year ended
August 31, 1999. This change plus reinvestment of tax-free dividends totaling
$0.46 per share and a long-term capital gain distribution of $0.06 per share
paid in December produced a total return based on NAV of -0.23 percent. TFA's
value on the New York Stock Exchange (NYSE) fell from $9.4375 to $7.8125 per
share during the same period. This change plus reinvestment of dividends and
distributions produced a total return based on market value of -12.25 percent.
On August 31, 1999, TFA's NYSE market price was at an 18.7 percent discount to
its net asset value.
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS August 31, 1999, continued
<TABLE>
<CAPTION>
LARGEST SECTORS AS OF AUGUST 31, 1999
(% OF NET ASSETS)
<S> <C>
TRANSPORTATION 15%
MORTGAGE 14%
GENERAL OBLIGATION 13%
ELECTRIC 10%
WATER & SEWER 9%
HOSPITAL 8%
REFUNDED 7%
IDR/PCR* 6%
EDUCATION 5%
</TABLE>
*INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
<TABLE>
<CAPTION>
CREDIT RATINGS AS OF AUGUST 31, 1999
(% OF TOTAL LONG-TERM PORTFOLIO)
<S> <C> <C> <C> <C>
Aaa OR AAA Aa OR AA A OR A Baa OR BBB NR
55% 24% 9% 9% 3%
</TABLE>
AS MEASURED BY MOODY'S INVESTORS SERVICE, INC. OR
STANDARD & POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
August 31, 1999
<TABLE>
<S> <C>
Alabama.................. 6.6%
Alaska................... 3.6
Arizona.................. 1.8
California............... 11.5
Colorado................. 3.2
Connecticut.............. 1.4
District of Columbia..... 0.7
Florida.................. 5.0
Georgia.................. 2.3
Hawaii................... 3.5
Illinois................. 4.4
Maryland................. 1.8
Massachusetts............ 5.9
Michigan................. 3.9
Missouri................. 0.7
Nevada................... 1.2
New Jersey............... 2.9
New York................. 9.6
North Carolina........... 3.3
North Dakota............. 0.7
Ohio..................... 2.3
Oklahoma................. 1.9
Pennsylvania............. 3.7
Rhode Island............. 0.3
South Carolina........... 0.7
Tennessee................ 2.6
Texas.................... 6.3
Utah..................... 3.9
Virginia................. 3.8
Washington............... 0.8
West Virginia............ 0.6
Joint Exemption*......... (1.1)
------
Total.................... 99.8%
======
</TABLE>
- ---------------------
* Joint exemption has been included in each geographic location.
Portfolio structure is subject to change.
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS August 31, 1999, continued
CALL AND COST (BOOK) YIELD STRUCTURE*
AUGUST 31, 1999
WEIGHTED AVERAGE
CALL PROTECTION: 7 YEARS
CALL STRUCTURE
<TABLE>
<CAPTION>
YEARS BONDS CALLABLE
<S> <C>
1999 1%
2000 3%
2001 1%
2002 3%
2003 5%
2004 10%
2005 17%
2006 9%
2007 19%
2008 11%
2009 6%
2010+ 15%
</TABLE>
WEIGHTED AVERAGE
BOOK YIELD: 5.91%
COST (BOOK) YIELD**
<TABLE>
<S> <C>
1999 9.69%
2000 7.90%
2001 7.74%
2002 5.34%
2003 5.87%
2004 5.48%
2005 6.02%
2006 5.90%
2007 5.90%
2008 5.51%
2009 5.36%
2010+ 5.98%
</TABLE>
* % BASED ON LONG-TERM PORTFOLIO.
** COST OR "BOOK" YIELD IS THE ANNUAL INCOME EARNED ON A PORTFOLIO INVESTMENT
BASED ON ITS ORIGINAL PURCHASE PRICE BEFORE FUND OPERATING EXPENSES. FOR
EXAMPLE, THE FUND EARNED A BOOK YIELD OF 7.9% ON 3% OF THE LONG-TERM
PORTFOLIO THAT IS CALLABLE IN 2000.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS August 31, 1999, continued
Monthly dividends for the fourth quarter of 1999 were declared in September.
Beginning with the October payment, the monthly dividend was increased from
$0.0375 to $0.0425 per share. The new dividend rate reflects the Fund's
estimated earnings over the next 6 to 12 months in relation to its level of
undistributed net investment income, which stood at $0.111 per share on August
31, 1999.
PORTFOLIO STRUCTURE
The Fund's net assets of $278 million were diversified among 14 long-term
sectors and 62 credits. Holdings in the refunded bond category comprised 7
percent of net assets. These bonds have been refinanced and will be redeemed on
the dates shown in the portfolio. At the end of August the portfolio's average
maturity was 18 years. Average duration, a measure of sensitivity to interest
rate changes, was 8.8 years. The accompanying charts provide current information
on the portfolio's credit quality, sector distribution and geographic
diversification. Optional call provisions by year with their respective cost
(book) yields are also shown.
LOOKING AHEAD
The Federal Reserve Board's recent interest-rate increases confirmed its
previously signaled intention of becoming less accommodative in the face of
continued strong domestic economic growth. It is anticipated that the central
bank may raise short-term interest rates further. However, we believe municipal
bonds continue to offer long-term investors good value, especially in
relationship to Treasuries.
The Fund's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps 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 may, when
appropriate, purchase shares in the open market or in privately negotiated
transactions at a price not above market value or net asset value, which ever is
lower at the time of purchase. During the 12-month period ended August 31, 1999,
the Fund purchased and retired 749,300 shares of common stock at a weighted
average market discount of 12.75 percent.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley Dean
Witter Funds. Mr. Merin is the President and Chief Operating Officer of Asset
Management for Morgan Stanley Dean Witter & Co. and President, Chief Executive
Officer and Director of Morgan Stanley Dean Witter Advisors Inc. He also serves
as Chairman, Chief Executive Officer and Director of Morgan Stanley Dean Witter
Distributors Inc. and Morgan Stanley Dean Witter Trust FSB.
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS August 31, 1999, continued
We appreciate your ongoing support of Morgan Stanley Dean Witter Municipal
Income Trust and look forward to continuing to serve your investment needs.
<TABLE>
<S> <C>
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
</TABLE>
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS August 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (94.0%)
General Obligation (12.6%)
$ 4,400 Moulton-Niguel Water District, California, 1993 Refg
(MBIA)..................................................... 5.00% 09/01/19 $ 4,089,756
2,000 District of Columbia, Ser 1999 A (FSA)...................... 5.375 06/01/24 1,876,380
5,000 Washington Suburban Sanitary District, Maryland, Gen Constr
Refg 1994.................................................. 5.00 06/01/10 4,991,400
5,000 Massachusetts, 1994 Ser A................................... 5.00 01/01/11 4,935,850
4,000 New York City, New York, 1995 Ser D (MBIA).................. 6.20 02/01/07 4,328,160
5,000 New York State, Refg Ser 1995 B............................. 5.625 08/15/09 5,196,400
5,000 North Carolina, Public School Building Ser 1999............. 4.60 04/01/17 4,444,000
5,125 Shelby County, Tennessee, Refg 1995 Ser A................... 5.625 04/01/11 5,250,614
- -------- -----------
35,525 35,112,560
- -------- -----------
Educational Facilities Revenue (5.0%)
5,000 California Public Works Board, University of California 1993
Refg Ser A................................................. 5.50 06/01/21 4,863,600
New York State Dormitory Authority,
2,500 State University Ser 1995 A................................ 6.50 05/15/05 2,716,200
2,500 State University Ser 1995 A................................ 6.50 05/15/06 2,730,525
4,000 State University Ser 1997.................................. 5.125 05/15/27 3,619,440
- -------- -----------
14,000 13,929,765
- -------- -----------
Electric Revenue (10.0%)
15,000 Southern California Public Power Authority, Mead-Adelanto
1994 Ser A (AMBAC)......................................... 5.15 07/01/15 14,634,300
Intermountain Power Agency, Utah,
2,000 Refg Ser 1998 A (MBIA)..................................... 5.25 07/01/15 1,947,440
10,000 Refg 1996 Ser D (Secondary FSA)............................ 5.00 07/01/21 8,936,200
2,500 Washington Public Power Supply System, Project #1 Refg Ser
1998 A..................................................... 5.125 07/01/17 2,313,800
- -------- -----------
29,500 27,831,740
- -------- -----------
Hospital Revenue (7.5%)
3,000 Birmingham-Carraway Special Care Facilities Financing
Authority, Alabama, Carraway Methodist Health Ser 1995 A
(Connie Lee)............................................... 5.875 08/15/15 3,029,280
2,500 Tampa, Florida, Catholic Health Ser 1998 A-2 (AMBAC)........ 4.875 11/15/28 2,157,350
3,000 Chatham County Hospital Authority, Georgia, Memorial Medical
Center Inc Ser 1996 A (AMBAC).............................. 5.25 01/01/16 2,857,500
3,815 Henderson, Nevada, Catholic Health West 1998 Ser A.......... 5.375 07/01/26 3,268,730
5,000 North Carolina Medical Care Commission, Presbyterian Health
Services Corp Refg Ser 1993................................ 5.50 10/01/20 4,748,650
5,000 Pennsylvania Higher Educational Facilities Authority,
University of Pennsylvania Ser A 1996...................... 5.75 01/01/22 4,695,000
- -------- -----------
22,315 20,756,510
- -------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS August 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Industrial Development/Pollution Control Revenue (6.1%)
$ 2,705 Lapeer Economic Development Corporation, Michigan, Dott
Manufacturing Co Ser 1989 A (AMT).......................... 10.65% 11/15/17 $ 1,758,250
3,050 New York City Industrial Development Agency, Japan Airlines
Co 1991 (AMT) (FSA)........................................ 6.00 11/01/15 3,138,481
2,000 New York State Energy Research & Development Authority, New
York State Electric & Gas Corp 1987 Ser A (AMT) (MBIA)..... 6.15 07/01/26 2,030,800
5,000 Tulsa Municipal Airport Trust, Oklahoma, American Airlines
Inc Ser 1988 (AMT)......................................... 7.375 12/01/20 5,212,300
5,000 Dallas-Fort Worth International Airport Facility Improvement
Corporation, Texas, American Airlines Inc Ser 1995......... 6.00 11/01/14 4,938,300
- -------- -----------
17,755 17,078,131
- -------- -----------
Mortgage Revenue - Multi-Family (2.2%)
5,000 New Jersey Housing & Mortgage Finance Agency, 1995 Ser A
(AMBAC).................................................... 6.00 11/01/14 5,157,400
940 Rhode Island Housing & Mortgage Finance Corporation, Rental
1989 Ser B (AMT)........................................... 7.95 10/01/20 961,131
- -------- -----------
5,940 6,118,531
- -------- -----------
Mortgage Revenue - Single Family (11.4%)
10,000 Alaska Housing Finance Corporation, 1997 D Ser A (MBIA)..... 6.00 06/01/27 10,101,800
2,250 Colorado Housing Finance Authority, 1997 Ser B-2 (AMT)...... 7.00 05/01/26 2,427,975
10,000 Hawaii Housing Finance & Development Corporation,
FNMA-Collateralized 1997 Ser A (AMT)....................... 5.75 07/01/30 9,718,100
2,075 Chicago, Illinois, GNMA-Backed Ser 1997-A (AMT)............. 7.25 09/01/28 2,292,398
1,800 Missouri Housing Development Commission, GNMA-Backed 1997
Ser A-2 (AMT).............................................. 7.30 03/01/28 1,990,224
1,985 North Dakota Housing Finance Agency, 1990 Ser B (AMT)....... 7.75 07/01/24 2,062,733
730 Ohio Housing Finance Agency, GNMA-Backed 1990 Ser C (AMT)... 7.85 09/01/21 757,871
2,230 Virginia Housing Development Authority, 1992 Ser A.......... 7.10 01/01/17 2,281,669
- -------- -----------
31,070 31,632,770
- -------- -----------
Public Facilities Revenue (1.3%)
3,495 Illinois, Civic Center Dedicated Tax Ser 1991 (AMBAC)....... 6.25 12/15/20 3,756,950
- -------- -----------
Resource Recovery Revenue (2.0%)
5,000 Greater Detroit Resource Recovery Authority, Michigan, 1996
Ser A (AMBAC).............................................. 6.25 12/13/08 5,470,850
- -------- -----------
Retirement & Life Care Facilities Revenue (2.1%)
1,900 Charleston County, South Carolina, Sandpiper Village Inc
Refg Ser 1988.............................................. 8.00 11/01/13 1,837,528
4,250 Riverside County Public Financing Authority, California, Air
Force Village West Inc COPs................................ 5.80 05/15/29 3,917,693
- -------- -----------
6,150 5,755,221
- -------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS August 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Transportation Facilities Revenue (14.8%)
$ 15,000 E-470 Public Highway Authority, Colorado, Ser 1997 B
(MBIA)..................................................... 0.00% 09/01/14 $ 6,503,250
4,000 Regional Transportation Authority, Illinois, Refg Ser 1999
(FSA)...................................................... 5.75 06/01/21 4,064,400
770 Southwestern Development Authority, Illinois, Tri-City
Regional Port District Ser 1989 A (AMT) (a)................ 7.90 07/01/14 793,624
3,000 Massachusetts Turnpike Authority, Metropolitan Highway 1997
Ser A (MBIA)............................................... 5.00 01/01/37 2,610,450
4,150 Wayne County, Michigan, Charter Airport Ser 1998 B.......... 4.875 12/01/23 3,619,131
3,000 Delaware River Port Authority, New Jersey & Pennsylvania,
Ser 1995 (FGIC)++.......................................... 5.50 01/01/26 2,958,690
3,000 Ohio Turnpike Commission, Ser 1998 B (FGIC)................. 4.50 02/15/24 2,463,120
5,000 Austin, Texas, Airport Prior Lien Ser 1995 A (AMT) (MBIA)... 6.125 11/15/25 5,081,550
5,000 Dallas-Fort Worth International Airport, Texas, Refg Ser
1995 (FGIC)................................................ 5.625 11/01/15 5,003,450
2,000 Pocahontas Parkway Association, Virginia, Route 895
Connector 1998 Ser A....................................... 5.50 08/15/28 1,830,160
6,000 Virginia Transportation Board, US Route 28 Ser 1992......... 6.50 04/01/18 6,362,940
- -------- -----------
50,920 41,290,765
- -------- -----------
Water & Sewer Revenue (8.5%)
10,000 Jefferson County, Alabama, Sewer Ser 1997 (FGIC)............ 5.75 02/01/22 9,962,000
5,000 Phoenix Civic Improvement Corporation, Arizona, Jr Lien
Water Ser 1994............................................. 5.45 07/01/19 4,910,450
2,000 Lee County, Florida, Water & Sewer 1999 Ser A (AMBAC)....... 4.75 10/01/23 1,736,200
2,000 Northern Palm Beach County Improvement District, Florida,
Water Control & Impr #9A Ser 1996 A........................ 6.80 08/01/06 2,128,740
4,000 Fulton County, Georgia, Water & Sewerage Ser 1998 (FGIC).... 4.75 01/01/28 3,409,040
1,510 Massachusetts Water Resources Authority, 1993 Ser C......... 5.25 12/01/20 1,395,285
- -------- -----------
24,510 23,541,715
- -------- -----------
Other Revenue (3.4%)
4,000 Mashantucket (Western) Pequot Tribe, Connecticut, Special
1997 Ser B (a)............................................. 5.75 09/01/27 3,787,560
3,000 New York Local Government Assistance Corporation, Ser 1995
A.......................................................... 6.00 04/01/24 3,056,460
3,000 Philadelphia, Pennsylvania, Gas Works Second Ser 1999
(FSA)...................................................... 5.00 07/01/23 2,709,780
- -------- -----------
10,000 9,553,800
- -------- -----------
Refunded (7.1%)
5,000 Birmingham Water Works & Sewer Board, Alabama, Ser 1994..... 5.50 01/01/04+ 5,272,950
5,000 Southern California Public Power Authority, Palo Verde Ser A
(AMBAC) (ETM).............................................. 5.00 07/01/15 4,778,300
1,230 Illinois Health Facilities Authority, Glen Oaks Medical
Center Inc Refg 1990 Ser D (ETM)........................... 9.50 11/15/15 1,336,764
1,490 Massachusetts Water Resources Authority, 1993 Ser C......... 5.25 12/01/04+ 1,568,806
2,920 Cleveland, Ohio, Waterworks Impr & Refg Ser H 1996 (MBIA)... 5.75 01/01/06+ 3,132,897
1,875 Shelby County, Tennessee, Refg 1995 Ser A................... 5.625 04/01/05+ 1,982,213
1,650 Fayette County, West Virginia, MPC Inc Refg Ser 1990........ 9.75 02/01/00+ 1,714,284
- -------- -----------
19,165 19,786,214
- -------- -----------
275,345 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $260,777,953)................. 261,615,522
- -------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS August 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (5.8%)
$ 8,000 Collier County Health Facilities Authority, Florida,
Cleveland Clinic Foundation Ser 1999 (Demand 09/01/99)..... 3.10*% 01/01/33 $ 8,000,000
5,800 Massachusetts Health & Educational Facilities Authority,
Capital Assets Ser D (MBIA) (Demand 09/01/99).............. 2.80* 01/01/35 5,800,000
2,450 Gulf Coast Waste Disposal Authority, Texas, Exxon Corp Ser
1995 (Demand 09/01/99)..................................... 2.95* 06/01/20 2,450,000
- -------- -----------
16,250 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost
$16,250,000)................................................................... 16,250,000
- -------- -----------
$291,595 TOTAL INVESTMENTS (Identified Cost $277,027,953) (b)................... 99.8% 277,865,522
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES......................... 0.2 609,972
----- -----------
NET ASSETS............................................................. 100.0% $278,475,494
===== ===========
</TABLE>
- ---------------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to maturity.
+ Prerefunded to call date shown.
++ Joint exemption in locations shown.
* Current coupon of variable rate demand obligation.
(a) Resale is restricted to qualified institutional investors.
(b) The aggregate cost for federal income tax purposes
approximates identified cost. The aggregate gross unrealized
appreciation is $5,755,671 and the aggregate gross
unrealized depreciation is $4,918,102, resulting in net
unrealized appreciation of $837,569.
Bond Insurance:
- ---------------
AMBAC AMBAC Assurance Corporation.
Connie Lee Connie Lee Insurance Company - A wholly owned subsidiary of AMBAC
Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1999
ASSETS:
Investments in securities, at value
(identified cost $277,027,953)............................. $277,865,522
Cash........................................................ 489,257
Receivable for:
Interest................................................ 3,665,884
Investments sold........................................ 115,000
Prepaid expenses and other assets........................... 19,255
-----------
TOTAL ASSETS............................................ 282,154,918
-----------
LIABILITIES:
Payable for:
Investment purchased.................................... 3,319,196
Shares of beneficial interest repurchased............... 87,105
Investment advisory fee................................. 83,458
Administration fee...................................... 47,877
Accrued expenses and other payables......................... 141,788
-----------
TOTAL LIABILITIES....................................... 3,679,424
-----------
NET ASSETS.............................................. $278,475,494
===========
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $274,092,693
Net unrealized appreciation................................. 837,569
Accumulated undistributed net investment income............. 3,218,326
Accumulated undistributed net realized gain................. 326,906
-----------
NET ASSETS.............................................. $278,475,494
===========
NET ASSET VALUE PER SHARE,
28,990,250 shares outstanding
(unlimited shares authorized of $.01 par value)............ $9.61
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the year ended August 31, 1999
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $16,594,945
----------
EXPENSES
Investment advisory fee..................................... 992,600
Administration fee.......................................... 570,492
Transfer agent fees and expenses............................ 133,566
Professional fees........................................... 102,923
Shareholder reports and notices............................. 70,312
Registration fees........................................... 28,927
Trustees' fees and expenses................................. 22,229
Custodian fees.............................................. 14,807
Other....................................................... 22,213
----------
TOTAL EXPENSES.......................................... 1,958,069
Less: expense offset........................................ (14,778)
----------
NET EXPENSES............................................ 1,943,291
----------
NET INVESTMENT INCOME................................... 14,651,654
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 388,315
Net change in unrealized appreciation....................... (18,209,101)
----------
NET LOSS................................................ (17,820,786)
----------
NET DECREASE................................................ $(3,169,132)
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 1999 AUGUST 31, 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................................. $14,651,654 $14,846,017
Net realized gain...................................... 388,315 2,028,297
Net change in unrealized appreciation.................. (18,209,101) 8,504,893
----------- -----------
NET INCREASE (DECREASE)............................ (3,169,132) 25,379,207
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................. (13,478,373) (16,273,738)
Net realized gain...................................... (1,853,866) (2,821,505)
----------- -----------
TOTAL DIVIDENDS AND DISTRIBUTIONS.................. (15,332,239) (19,095,243)
----------- -----------
Net decrease from transactions in shares of
beneficial interest................................... (6,526,596) (4,488,741)
----------- -----------
NET INCREASE (DECREASE)............................ (25,027,967) 1,795,223
NET ASSETS:
Beginning of period.................................... 303,503,461 301,708,238
----------- -----------
END OF PERIOD
(Including undistributed net investment income of
$3,218,326 and $2,045,045, respectively)........... $278,475,494 $303,503,461
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS August 31, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Municipal Income Trust (the "Fund"), formerly
Municipal Income Trust, 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 current income which is exempt from
federal income tax. The Fund was organized as a Massachusetts business trust on
June 16, 1987 and commenced operations on September 29, 1987.
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.
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS August 31, 1999, continued
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require 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 Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Advisor"), the Fund pays the Investment Advisor
an advisory fee, calculated weekly and payable monthly, by applying the
following annual rates to the Fund's weekly net assets: 0.35% to the portion of
the Fund's weekly net assets not exceeding $250 million and 0.25% to the portion
of the Fund's weekly net assets exceeding $250 million.
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 Morgan Stanley Dean Witter Services
Company Inc. (the "Administrator") an affiliate of the Investment Advisor, the
Fund pays an administration fee, calculated weekly and payable monthly, by
applying the following annual rates to the Fund's weekly net assets: 0.20% to
the portion of the Fund's weekly net assets not exceeding $250 million; 0.15% to
the portion of the Fund's weekly net assets exceeding $250 million but not
exceeding $500 million; 0.12% to the portion of the Fund's weekly net assets
exceeding $500 million but not exceeding $750 million; and 0.10% to the portion
of the Fund's weekly net assets exceeding $750 million.
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS August 31, 1999, continued
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 year ended August 31, 1999 aggregated
$47,433,174 and $66,126,398, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor and
Administrator, is the Fund's transfer agent. At August 31, 1999, the Fund had
transfer agent fees and expenses payable of approximately $6,900.
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 year ended August 31, 1999, included
in Trustee's fees and expenses in the Statement of Operations amounted to
$5,897. At August 31, 1999, the Fund had an accrued pension liability of
$51,834, 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, August 31, 1997.................................... 30,214,250 $302,143 $284,805,887
Treasury shares purchased and retired (weighted average
discount 5.97%)*........................................... (474,700) (4,747) (4,483,994)
---------- -------- ------------
Balance, August 31, 1998.................................... 29,739,550 297,396 280,321,893
Treasury shares purchased and retired (weighted average
discount 12.75%)*.......................................... (749,300) (7,493) (6,519,103)
---------- -------- ------------
Balance, August 31, 1999.................................... 28,990,250 $289,903 $273,802,790
========== ======== ============
</TABLE>
- ---------------------
* The Trustees have voted to retire the shares purchased.
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS August 31, 1999, continued
6. 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>
June 29, 1999 $0.0375 September 3, 1999 September 17, 1999
September 28, 1999 $0.0425 October 8, 1999 October 22, 1999
September 28, 1999 $0.0425 November 5, 1999 November 19, 1999
September 28, 1999 $0.0425 December 3, 1999 December 17, 1999
</TABLE>
17
<PAGE> 18
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED AUGUST 31*
-----------------------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $10.21 $ 9.99 $9.72 $9.92 $10.16
------ ------ ----- ----- ------
Income (loss) from investment operations:
Net investment income...................................... 0.50 0.50 0.57 0.60 0.66
Net realized and unrealized gain (loss).................... (0.61) 0.34 0.26 (0.12) 0.04
------ ------ ----- ----- ------
Total income (loss) from investment operations.............. (0.11) 0.84 0.83 0.48 0.70
------ ------ ----- ----- ------
Less dividends and distributions from:
Net investment income...................................... (0.46) (0.54) (0.58) (0.60) (0.60)
Net realized gain.......................................... (0.06) (0.09) -- ** (0.09) (0.34)
------ ------ ----- ----- ------
Total dividends and distributions........................... (0.52) (0.63) (0.58) (0.69) (0.94)
------ ------ ----- ----- ------
Anti-dilutive effect of acquiring treasury shares........... 0.03 0.01 0.02 0.01 --
------ ------ ----- ----- ------
Net asset value, end of period.............................. $ 9.61 $10.21 $9.99 $9.72 $ 9.92
====== ====== ===== ===== ======
Market value, end of period................................. $7.813 $ 9.44 $9.50 $9.25 $ 9.00
====== ====== ===== ===== ======
TOTAL RETURN+............................................... (12.25)% 6.16% 9.23% 10.75% 7.78%
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.66 %(1) 0.66%(1) 0.63%(1) 0.64%(1) 0.65%
Net investment income....................................... 4.94 % 4.92% 5.68% 6.03% 6.70%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $278,475 $303,503 $301,708 $301,835 $313,768
Portfolio turnover rate..................................... 16 % 13% 22% 33% 14%
</TABLE>
- ---------------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
** Does not reflect a distribution of $0.0024.
+ 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 prices obtained under the Fund's dividend reinvestment plan.
Total investment return does not reflect brokerage commissions.
(1) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE> 19
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter
Municipal Income Trust (the "Fund"), at August 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
October 8, 1999
1999 FEDERAL TAX NOTICE (unaudited)
During the year ended August 31, 1999, the Fund paid to shareholders $0.46 per
share from tax-exempt income.
For the year ended August 31, 1999, the Fund paid to shareholders $0.06 per
share from long-term capital gains.
19
<PAGE> 20
TRUSTEES
- ----------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
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
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- ----------------------------------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- ----------------------------------
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- ----------------------------------
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
MORGAN STANLEY
DEAN WITTER
MUNICIPAL
INCOME TRUST
Annual Report
August 31, 1999
