<PAGE> 1
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST Two World Trade
Center
LETTER TO THE SHAREHOLDERS May 31, 1999 New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the annual report on the operations of Morgan Stanley
Dean Witter Municipal Income Opportunities Trust (OIA) for the fiscal year ended
May 31, 1999.
The financial markets have begun to recover from last year's global economic
difficulties. The turmoil which included the Asian crisis, the Russian debt
default and the near collapse of a major U.S. hedge fund has given way to more
normal financial conditions. The major catalyst for this 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.
These international economic problems precipitated a "flight to quality" rally
in fixed-income securities and U.S. Treasury yields reached 30-year lows in
October 1998. As the world markets recovered, foreign investors repatriated
funds and Treasury yields began to rise. Interest rates also rose in response to
the surprisingly robust domestic economic growth reported over the second half
of 1998. The bond market became concerned that the central bank might become
more restrictive by taking back some of the liquidity provided during the
crisis. On June 30, 1999, The Federal Reserve Board raised the Federal-Fund rate
25 basis points to 5.00 percent.
MUNICIPAL MARKET CONDITIONS
During 1998 municipal yields were less volatile than Treasury yields. This
pattern of stability continued into 1999. Long-term insured municipal index
yields stood at 5.30 percent at the end of May, only 30 basis points higher than
November 1998. In contrast, Treasury bond yields rose 80 basis points from 5.05
to 5.85 percent. During the past six months, the yield pickup for extending
tax-exempt maturities from one to 30 years averaged 225 basis points.
The modest rally of municipals during 1998 created a more favorable relationship
relative to Treasuries. Municipals underperformed
<PAGE> 2
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS May 31, 1999, continued
Treasuries, and the ratio of municipal yields to Treasury yields climbed to 99
percent by December. The higher the ratio, the more attractive municipals are
relative to Treasuries. Municipals have outperformed Treasuries this year and
the ratio declined to 91 percent by May. The high-to-low annual range of
municipal/Treasury yields for the past five years has averaged from 93 to 84
percent.
In addition to lagging 1998's Treasury rally, municipals also experienced a glut
of new-issue supply. Underwriting volume of $284 billion was up 28 percent from
the prior year and approached 1993's record. Issuers actively refinanced at
lower interest rates and refundings were 29 percent of total volume. This year's
rise in interest rates has reduced the amount of refunding activity. Refunding
volume was down 45 percent in the first five months of 1999. Total underwriting
declined 24 percent.
30-YEAR BOND YIELDS 1994 - 1999
<TABLE>
<CAPTION>
Insured U.S. Insured Municipal Yields as a
Municipal Yields Treasury Yields Percentage of U.S. Treasury Yields
<S> <C> <C> <C>
1994 5.40 6.34 85.17
5.40 6.24 86.54
5.80 6.66 87.09
6.40 7.09 90.27
6.35 7.32 86.75
6.25 7.43 84.12
6.50 7.61 85.41
6.25 7.39 84.57
6.30 7.45 84.56
6.55 7.81 83.87
6.75 7.96 84.80
7.00 8.00 87.50
6.75 7.88 85.66
1995 6.40 7.70 83.12
6.15 7.44 82.66
6.15 7.43 82.77
6.20 7.34 84.47
5.80 6.66 87.09
6.10 6.62 92.15
6.10 6.86 88.92
6.00 6.66 90.09
5.95 6.48 91.82
5.75 6.33 90.84
5.50 6.14 89.58
5.35 5.94 90.07
1996 5.40 6.03 89.55
5.60 6.46 86.69
5.85 6.66 87.84
5.95 6.89 86.36
6.05 6.99 86.55
5.90 6.89 85.63
5.85 6.97 83.93
5.90 7.11 82.98
5.70 6.93 82.25
5.65 6.64 85.09
5.50 6.35 86.61
5.60 6.63 84.46
1997 5.70 6.79 83.95
5.65 6.80 83.09
5.90 7.10 83.10
5.75 6.94 82.85
5.65 6.91 81.77
5.60 6.78 82.60
5.30 6.30 84.13
5.50 6.61 83.21
5.40 6.40 84.38
5.35 6.15 86.99
5.30 6.05 87.60
5.15 5.92 86.99
1998 5.15 5.80 88.79
5.20 5.92 87.84
5.25 5.93 88.53
5.35 5.95 89.92
5.20 5.80 89.66
5.20 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
</TABLE>
Source: Municipal Market Data - A Division of Thomson Financial Municipal Group
PERFORMANCE
The Fund's total net asset value (NAV) return for the 12-month period ending May
31, 1999 was 5.13 percent. This return is based on the NAV change plus
reinvestment of tax-free dividends totaling $0.59 per share. OIA's value on the
New York Stock Exchange increased from $8.6875 per share to $9.4375 per share
during the same period. Based on this change plus reinvestment of tax-free
dividends,
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS May 31, 1999, continued
[LARGEST SECTORS BAR GRAPH]
<TABLE>
<CAPTION>
LARGEST SECTORS as of May 31, 1999 (% of Net Assets)
<S> <C>
IDR/PCR* 21%
Mortgage 18%
Nursing & Health 16%
Hospital 8%
Retirement & Life Care 8%
Transportation 7%
*Industrial Development/Pollution Control Revenue
Portfolio structure is subject to change.
</TABLE>
[CREDIT RATINGS PIE CHART]
<TABLE>
<CAPTION>
CREDIT RATINGS AS OF MAY 31, 1999
(% OF TOTAL LONG-TERM PORTFOLIO)
<S> <C>
Aaa or AAA 15%
Baa or BBB 14%
Aa or AA 10%
A or A 6%
Ba or BB 4%
N/R 51%
As measured by Moody's Investors Service, Inc. or Standard & Poor's Corp.
Portfolio structure is subject to change.
</TABLE>
[CALL STRUCTURE BAR GRAPH]
<TABLE>
<CAPTION>
CALL STRUCTURE as of May 31, 1999
(% of Total Long-Term Portfolio)
WEIGHTED AVERAGE CALL
PROTECTION: 8 YEARS
Years Bonds Callable Percent Callable
<S> <C>
1999 8%
2000 5%
2001 0%
2002 2%
2003 8%
2004 5%
2005 9%
2006 11%
2007 7%
2008 16%
2009 7%
2010+ 22%
Portfolio structure is subject to change.
</TABLE>
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS May 31, 1999, continued
OIA's total market return was 15.65 percent. As of May 31, 1999, share price was
a 8.73 percent premium to its NAV.
Monthly dividends for the second quarter of 1999 remained at $0.05 per share.
The Fund's level of undistributed net investment income was $0.182 per share on
May 31, 1999, versus $0.175 per share on November 30, 1998.
PORTFOLIO STRUCTURE
The Fund's investments were diversified among 15 long-term sectors and 64
credits. Non-rated securities comprise more than half of OIA's assets. All
issues are currently accruing interest. However, 3 credits totaling 6.9 percent
of net assets were accruing income but may experience difficulty with future
debt service payments.
At the end of May, the portfolio's average maturity was 19 years. Average
duration, a measure of sensitivity to interest rate changes, was 8.3 years. The
accompanying charts provide information on the Fund's call structure, largest
sectors and distribution by credit quality.
LOOKING AHEAD
The combination of a "flight to quality" and the flood of new municipal issues
made the municipal-to-Treasury yield relationship more favorable late last year
than it had been in the previous 10 years. Although municipals have outperformed
Treasuries thus far in 1999, we believe that municipals still offer investors
considerable value versus their historical relationship with Treasuries.
The Fund 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 Trust'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, whichever is
lower at the time of purchase.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley Dean
Witter Funds. Mr. Merin is also 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., the
Fund's Investment Advisor. He also serves as Chairman, Chief Executive Officer
and Director of Morgan Stanley Dean Witter Distributors Inc. and Morgan Stanley
Dean Witter Trust FSB.
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS May 31, 1999, continued
We appreciate your ongoing support of Morgan Stanley Dean Witter Municipal
Income Opportunities Trust and look forward to continuing to serve your
investment needs.
Very truly yours,
/S/ CHARLES A. FIUMEFREDDO /S/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On December 17, 1998, an annual meeting of the Fund's shareholders was held for
the purpose of voting on two separate matters, the results of which were as
follows:
(1) ELECTION OF TRUSTEES BY ALL SHAREHOLDERS:
<TABLE>
<S> <C>
Edwin J. Garn
For......................................................... 16,063,434
Withheld.................................................... 299,273
John R. Haire
For......................................................... 16,077,178
Withheld.................................................... 285,529
Michael E. Nugent
For......................................................... 16,089,538
Withheld.................................................... 273,169
Philip J. Purcell
For......................................................... 16,089,322
Withheld.................................................... 273,385
</TABLE>
The following Trustees were not standing for reelection at this meeting:
Michael Bozic, Charles A. Fiumefreddo, Wayne E. Hedien, Dr. Manuel H. Johnson,
and John L. Schroeder.
(2) RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS:
<TABLE>
<S> <C>
For......................................................... 15,985,547
Against..................................................... 87,179
Abstain..................................................... 289,981
</TABLE>
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (97.3%)
General Obligation (1.1%)
$ 2,000 New York City, New York, 1994 Ser D......................... 5.75% 08/15/10 $ 2,093,760
- -------- -----------
Educational Facilities Revenue (2.5%)
1,600 ABAG Finance Authority for Nonprofit Corporations,
California, National Center for International Schools COPs 7.50 05/01/11 1,729,104
1,750 New Jersey Educational Facilities Authority, Fairleigh
Dickinson University 1998 Ser G............................ 5.70 07/01/28 1,740,043
1,000 New York State Dormitory Authority, State University 1993
Ser A...................................................... 5.25 05/15/15 1,020,620
- -------- -----------
4,350 4,489,767
- -------- -----------
Electric Revenue (3.4%)
1,500 Alaska Industrial Development and Export Authority,
Snettisham Hydroelectric 1st Ser (AMT) (AMBAC)............. 5.00 01/01/27 1,410,270
5,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary
FSA)....................................................... 5.00 07/01/21 4,799,550
- -------- -----------
6,500 6,209,820
- -------- -----------
Hospital Revenue (7.9%)
2,000 Baxter County, Arkansas, Baxter County Regional Hospital
Impr & Refg Ser 1999 B..................................... 5.625 09/01/28 1,966,540
1,000 Kentucky Economic Development Finance Authority, Appalachian
Regional Healthcare Inc Refg & Impr Ser 1997............... 5.875 10/01/22 1,005,080
Massachusetts Health & Educational Facilities Authority,
2,000 Dana Farber Cancer Institute Ser G-1....................... 6.25 12/01/14 2,146,780
3,000 Dana Farber Cancer Institute Ser G-1....................... 6.25 12/01/22 3,246,150
1,250 New Hampshire Higher Educational & Health Facilities
Authority, Littleton Hospital Assn Ser 1998 A.............. 6.00 05/01/28 1,221,425
Cuyahoga County, Ohio,
1,250 Cleveland Clinic Foundation Ser 1999 B..................... 5.25 01/01/15 1,258,300
1,000 Cleveland Clinic Foundation Ser 1999 B..................... 5.00 01/01/31 933,910
3,000 Metropolitan Government of Nashville & Davidson County,
Health & Educational Facilities Board, Tennessee, Baptist
Hospital Ser 1998 A (MBIA)................................. 4.875 11/01/28 2,769,030
- -------- -----------
14,500 14,547,215
- -------- -----------
Industrial Development/Pollution Control Revenue (20.9%)
460 Metropolitan Washington Airports Authority, District of
Columbia & Virginia, CaterAir International Corp Ser 1991
(AMT)++.................................................... 10.125 09/01/11 473,239
2,350 Chicago, Illinois, Chicago O'Hare Int'l Airport/United
Airlines Inc Ser 1999 A.................................... 5.35 09/01/16 2,308,264
1,500 Iowa Finance Authority, ISPCO Inc Ser 1997 (AMT)............ 6.00 06/01/27 1,572,480
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 3,000 Massachusetts Industrial Finance Agency, Eastern Edison Co
Refg Ser 1993.............................................. 5.875% 08/01/08 $ 3,069,780
3,650 Detroit Economic Development Corporation, Michigan, North
Industrial Park LP Ser 1989................................ 11.375 02/15/14 3,760,814
1,290 Michigan Strategic Fund, Kasle Steel Corp Ser 1989 (AMT).... 9.375 10/01/06 1,321,324
3,600 Cleveland, Ohio, Continental Airlines Inc Ser 1990 (AMT).... 9.00 12/01/19 3,739,464
2,000 Dayton, Ohio, Emery Air Freight Corp Ser 1998 A............. 5.625 02/01/18 1,998,680
920 Zanesiville-Muskingum County Port Authority, Ohio, Anchor
Glass Container Corp Ser 1989 B (AMT)...................... 10.25 12/01/08 924,563
2,000 Beaver County Industrial Development Authority,
Pennsylvania, Toledo Edison Co Collateralized Ser 1995 B... 7.75 05/01/20 2,283,520
Lexington County, South Carolina,
1,815 Ellett Brothers Inc Refg Ser 1988.......................... 7.50 09/01/02 1,835,963
4,250 Ellett Brothers Inc Refg Ser 1988.......................... 7.50 09/01/08 4,334,108
2,000 Brazos River Authority, Texas, Texas Utilities Electric Co
Ser 1995 C (AMT)........................................... 5.55 06/01/30 1,954,860
Pittsylvania County Industrial Development Authority,
Virginia
4,500 Multi-Trade of Pittsylvania County Ser 1994 A (AMT)........ 7.45 01/01/09 4,888,080
1,500 Multi-Trade of Pittsylvania County Ser 1994 A (AMT)........ 7.50 01/01/14 1,630,650
2,000 Upshur County, West Virginia, TJ International Inc Ser 1995
(AMT)...................................................... 7.00 07/15/25 2,196,780
- -------- -----------
36,835 38,292,569
- -------- -----------
Mortgage Revenue - Multi-Family (5.3%)
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 3,157,749
21,237 White Bear Woods Apts Phase II Refg 1989 Ser B............. 0.00 06/15/19 212,367
3,000 Brookhaven Industrial Development Agency, New York,
Woodcrest Estates Ser 1998 A (AMT)......................... 6.375 12/01/37 2,962,230
- -------- -----------
65,760 9,689,925
- -------- -----------
Mortgage Revenue - Single Family (12.8%)
3,000 Alaska Housing Finance Corporation, 1997 Ser A (MBIA)....... 6.00 06/01/27 3,149,580
9,912 San Francisco, California, Ser 1982......................... 0.00 10/01/14 1,884,197
3,000 Colorado Housing Finance Authority, Ser 1998 D-2 (AMT)...... 6.35 11/01/29 3,251,550
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 135 Broward County Housing Finance Authority, Florida, Home Ser
1989 A..................................................... 10.00% 10/01/03 $ 135,238
New Hampshire Housing Finance Authority,
47,275 Residential 1983 Ser B..................................... 0.00 01/01/15 9,129,747
1,330 1997 Ser D (AMT)........................................... 5.90 07/01/28 1,376,523
2,000 Ohio Housing Finance Agency, Residential 1996 Ser B-2
(AMT)...................................................... 6.10 09/01/28 2,109,580
2,260 Virginia Housing Development Authority, 1992 Ser A.......... 7.10 01/01/22 2,325,156
- -------- -----------
68,912 23,361,571
- -------- -----------
Nursing & Health Related Facilities Revenue (16.3%)
Escambia County, Florida,
7,660 Pensacola Care Development Centers Ser 1989................ 10.25 07/01/11 7,644,910
1,755 Pensacola Care Development Centers Ser 1989 A.............. 10.25 07/01/11 1,751,543
1,405 Winchester, Indiana, Hoosier Care II Inc Ser 1990........... 10.375 06/01/20 1,479,142
2,455 Jefferson County, Kentucky, AHF/Kentucky-Iowa Inc Ser
1990....................................................... 10.25 01/01/20 2,569,378
1,500 Westside Habilitation Center, Louisiana, Intermediate Care
Facility for the Mentally Retarded Refg Ser 1993........... 8.375 10/01/13 1,654,425
McCurtain County, Oklahoma,
4,950 Heartway Corp Ser 1997 A................................... 9.50 03/01/19 5,282,640
835 Heartway Corp Ser 1997 B................................... 0.00# 03/01/19 555,517
3,725 Allegheny County Hospital Development Authority,
Pennsylvania, Allegheny Valley School Ser 1990............. 8.50 02/01/15 3,855,375
Kirbyville Health Facilities Development Authority, Texas,
642 Heartway III Corp Ser 1998 B............................... 0.00## 03/20/04 524,700
3,978 Heartway III Corp Ser 1998 A............................... 10.00 03/20/18 4,534,656
- -------- -----------
28,905 29,852,286
- -------- -----------
Public Facilities Revenue (2.2%)
2,000 West Jefferson Amusement & Public Park Authority, Alabama,
VisionLand Ser 1999........................................ 6.375 02/01/29 2,006,100
2,000 San Diego County, California, San Diego Natural History
Museum COPs................................................ 5.70 02/01/28 1,943,740
- -------- -----------
4,000 3,949,840
- -------- -----------
Retirement & Life Care Facilities Revenue (7.8%)
1,500 Massachusetts Development Finance Agency, Loomis Communities
Ser 1999 A................................................. 5.75 07/01/23 1,465,515
5,552 Ann Arbor Economic Development Corporation, Michigan,
Glacier Hills Inc Ser 1989................................. 8.375 01/15/19 6,294,802
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
New Jersey Economic Development Authority,
$ 1,500 Fellowship Village Refg Ser 1998 A......................... 5.50% 01/01/25 $ 1,440,285
1,000 Franciscan Oaks Ser 1997................................... 5.70 10/01/17 1,004,730
2,000 United Methodist Homes of New Jersey, Ser 1998............. 5.125 07/01/25 1,832,040
2,000 Glen Cove Housing Authority, New York, The Mayfair at Glen
Cove Ser 1996 (AMT)........................................ 8.25 10/01/26 2,244,040
- -------- -----------
13,552 14,281,412
- -------- -----------
Tax Allocation Revenue (4.4%)
1,095 Bridgeview, Illinois, Tax Increment Ser 1995................ 9.00 01/01/11 1,249,187
Crestwood, Illinois,
3,000 Refg Ser 1994.............................................. 7.00 12/01/04 3,208,800
3,350 Refg Ser 1994.............................................. 7.25 12/01/08 3,567,817
- -------- -----------
7,445 8,025,804
- -------- -----------
Transportation Facilities Revenue (6.9%)
2,000 Foothills/Eastern Transportation Corridor Agency,
California, Toll Road Sr Lien Ser 1995 A................... 0.00 01/01/13 1,662,140
7,500 E-470 Public Highway Authority, Colorado, Ser 1997 B
(MBIA)..................................................... 0.00 09/01/15 3,244,950
2,000 Mid-Bay Bridge Authority, Florida, Sr Lien Crossover Refg
Ser 1993 A (AMBAC)......................................... 5.85 10/01/13 2,158,240
2,000 Massachusetts Turnpike Authority, Metropolitan Highway 1997
Ser A (MBIA)............................................... 5.00 01/01/37 1,874,780
1,700 Bi-State Development Agency of the Missouri-Illinois
Metropolitan District, Arch Parking Refg Ser 1997.......... 5.875 12/01/12 1,794,826
2,000 Pocahontas Parkway Association, Virginia, Route 895
Connector Ser 1998 A....................................... 5.50 08/15/28 1,951,560
- -------- -----------
17,200 12,686,496
- -------- -----------
Water & Sewer Revenue (1.8%)
2,000 Northern Palm Beach County Improvement District, Florida,
Water Control & Improvement #9A Ser 1996 A................. 7.30 08/01/27 2,165,960
6,000 Pittsburgh Water & Sewer Authority, Pennsylvania, First Lien
1998 Ser B (FGIC).......................................... 0.00 09/01/30 1,120,080
- -------- -----------
8,000 3,286,040
- -------- -----------
Other Revenue (2.2%)
2,000 Sacramento Financing Authority, California, Convention
Center Hotel 1999 Ser A.................................... 6.25 01/01/30 1,982,600
Mashantucket (Western) Pequot Tribe, Connecticut,
1,010 Special 1996 Ser A (a)..................................... 6.40 09/01/11 1,096,951
1,000 Special 1997 Ser B (a)..................................... 5.75 09/01/27 1,010,710
- -------- -----------
4,010 4,090,261
- -------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Refunded (1.8%)
$ 3,000 Ohio Turnpike Commission, 1996 Ser A (MBIA)................. 5.50% 02/15/06+ $ 3,254,730
- -------- -----------
284,969 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $182,054,051)................. 178,111,496
- -------- -----------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATION (0.4%)
800 Harris County Health Facilities Development Corporation,
- -------- Texas, Methodist Hospital Ser 1994 (Demand 06/01/99)
(Identified Cost $800,000)................................. 3.40* 12/01/25 800,000
-----------
$285,769 TOTAL INVESTMENTS (Identified Cost $182,854,051) (b)................... 97.7% 178,911,496
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 2.3 4,288,877
----- -----------
NET ASSETS.............................................................. 100.0% $183,200,373
===== ===========
</TABLE>
- ---------------------
<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
+ Prerefunded to call date shown.
++ Joint exemption in locations shown.
* Current coupon of variable rate demand obligation.
# Currently a zero coupon bond; will convert to 10.00% on
09/01/99.
## Currently a zero coupon bond; will convert to 6.00% on
03/20/00.
(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 $7,251,976 and the aggregate gross
unrealized depreciation is $11,194,531, resulting in
unrealized depreciation of $3,942,555.
Bond Insurance:
- --------------------------------------
AMBAC AMBAC Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999, continued
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
May 31, 1999
<TABLE>
<S> <C>
Alabama.................. 1.1%
Alaska................... 2.5
Arkansas................. 1.1
California............... 5.0
Colorado................. 3.5
Connecticut.............. 1.2
District of Columbia..... 0.3
Florida.................. 7.5
Illinois................. 5.6
Indiana.................. 0.8
Iowa..................... 0.9
Kentucky................. 2.0
Louisiana................ 0.9
Massachusetts............ 6.4
Michigan................. 6.2
Minnesota................ 3.7
Missouri................. 1.0
New Hampshire............ 6.4
New Jersey............... 3.3
New York................. 4.5
Ohio..................... 7.7
Oklahoma................. 3.2
Pennsylvania............. 4.0
South Carolina........... 3.4
Tennessee................ 1.5
Texas.................... 4.3
Utah..................... 2.6
Virginia................. 6.2
West Virginia............ 1.2
Joint Exemption*......... (0.3)
----
Total.................... 97.7%
====
</TABLE>
- ---------------------
* Joint exemptions have been included in each geographic location.
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999
ASSETS:
Investments in securities, at value
(identified cost $182,854,051)............................. $178,911,496
Cash........................................................ 114,304
Receivable for:
Interest................................................. 3,938,043
Investments sold......................................... 525,781
Prepaid expenses and other assets........................... 22,759
------------
TOTAL ASSETS............................................. 183,512,383
------------
LIABILITIES:
Payable for:
Investment advisory fee.................................. 78,051
Administration fee....................................... 46,830
Accrued expenses and other payables......................... 187,129
------------
TOTAL LIABILITIES........................................ 312,010
------------
NET ASSETS............................................... $183,200,373
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $199,765,973
Net unrealized depreciation................................. (3,942,555)
Accumulated undistributed net investment income............. 3,840,791
Accumulated undistributed net realized loss................. (16,463,836)
------------
NET ASSETS............................................... $183,200,373
============
NET ASSET VALUE PER SHARE,
21,089,872 shares outstanding
(unlimited shares authorized of $0.01 par value)........... $8.69
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the year ended May 31, 1999
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $14,582,283
-----------
EXPENSES
Investment advisory fee..................................... 929,592
Administration fee.......................................... 557,755
Transfer agent fees and expenses............................ 85,637
Professional fees........................................... 82,441
Shareholder reports and notices............................. 42,507
Registration fees........................................... 32,689
Trustees' fees and expenses................................. 19,024
Custodian fees.............................................. 8,617
Other....................................................... 17,544
-----------
TOTAL EXPENSES........................................... 1,775,806
Less: expense offset........................................ (8,588)
-----------
NET EXPENSES............................................. 1,767,218
-----------
NET INVESTMENT INCOME.................................... 12,815,065
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 2,248,027
Net change in unrealized appreciation....................... (4,915,467)
-----------
NET LOSS................................................ (2,667,440)
-----------
NET INCREASE................................................ $10,147,625
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MAY 31, 1999 MAY 31, 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................................. $12,815,065 $12,758,689
Net realized gain (loss)............................... 2,248,027 (1,687,435)
Net change in unrealized appreciation/depreciation..... (4,915,467) 8,056,252
----------- -----------
NET INCREASE....................................... 10,147,625 19,127,506
Dividends to shareholders from net investment income... (12,442,790) (12,231,856)
----------- -----------
NET INCREASE (DECREASE)............................ (2,295,165) 6,895,650
NET ASSETS:
Beginning of period.................................... 185,495,538 178,599,888
----------- -----------
END OF PERIOD
(Including undistributed net investment income of
$3,840,791 and $3,468,516, respectively)........... $183,200,373 $185,495,538
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Municipal Income Opportunities Trust (the "Fund"),
formerly Municipal Income Opportunities 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 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.
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS May 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 (the "Investment Advisor"), an affiliate of Morgan Stanley 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 Advisor pays the salaries of all personnel,
including officers of the Fund, who are employees of the Investment Advisor.
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.
17
<PAGE> 18
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued
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 May 31, 1999 aggregated $29,356,440
and $30,729,108, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor and
Administrator, is the Fund's transfer agent. At May 31, 1999 the Fund had
transfer agent fees and expenses payable of approximately $4,000.
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 year ended May 31, 1999 included in
Trustees' fees and expenses in the Statement of Operations amounted to $6,413.
At May 31, 1999, the Fund had an accrued pension liability of $51,980 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, 1997....................................... 21,089,872 $210,898 $199,543,466
Reclassification due to permanent book/tax differences...... -- -- 11,609
---------- -------- ------------
Balance, May 31, 1998 and May 31, 1999...................... 21,089,872 $210,898 $199,555,075
========== ======== ============
</TABLE>
6. FEDERAL INCOME TAX STATUS
During the year end May 31, 1999, the Fund utilized approximately $1,268,000 of
its net capital loss carryover. At May 31, 1999, the Fund had a net capital loss
carryover of approximately $16,464,000, which may be used to offset future
capital gains to the extent provided by regulations, which is available through
May 31 of the following years:
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
- -------------------------------------------
2003 2004 2006
------- ------ ----
<S> <C> <C>
$10,521 $5,243 $700
======= ====== ====
</TABLE>
18
<PAGE> 19
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued
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>
March 30, 1999 $0.05 June 4, 1999 June 18, 1999
June 29, 1999 $0.05 July 9, 1999 July 23, 1999
June 29, 1999 $0.05 August 6, 1999 August 20, 1999
June 29, 1999 $0.05 September 3, 1999 September 17, 1999
</TABLE>
19
<PAGE> 20
MORGAN STANLEY DEAN WITTER 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 YEAR ENDED MAY 31*
----------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of the period.................... $ 8.80 $ 8.47 $8.31 $ 8.53 $8.47
------ ------ ----- ------ -----
Income (loss) from investment operations:
Net investment income...................................... 0.61 0.60 0.63 0.69 0.68
Net realized and unrealized gain (loss).................... (0.13) 0.31 0.16 (0.26) 0.01
------ ------ ----- ------ -----
Total income from investment operations..................... 0.48 0.91 0.79 0.43 0.69
------ ------ ----- ------ -----
Less dividends from net investment income................... (0.59) (0.58) (0.63) (0.65) (0.63)
------ ------ ----- ------ -----
Net asset value, end of period.............................. $ 8.69 $ 8.80 $8.47 $ 8.31 $8.53
====== ====== ===== ====== =====
Market value, end of period................................. $9.438 $8.688 $8.75 $8.875 $8.25
====== ====== ===== ====== =====
TOTAL RETURN+............................................... 15.65% 5.87% 5.82% 15.95% 9.81%
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.96%(1) 1.04% 1.08% 0.97% 1.04%
Net investment income....................................... 6.89% 6.98% 7.44% 8.24% 8.10%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $183,200 $185,496 $178,600 $175,294 $179,843
Portfolio turnover rate..................................... 16% 20% 19% 8% 5%
</TABLE>
- ---------------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total return is based upon the current market value on the last day of each
period reported. Dividends are assumed to be reinvested at the prices
obtained under the Fund's dividend reinvestment plan.
(1) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE> 21
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter
Municipal Income Opportunities Trust (the "Fund"), formerly Municipal Income
Opportunities Trust, at May 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 owned at
May 31, 1999 by correspondence with the custodian, provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
July 6, 1999
1999 FEDERAL TAX NOTICE (unaudited)
For the year ended May 31, 1999, all of the Fund's dividends
from net investment income were exempt interest dividends,
excludable from gross income for Federal income tax purposes.
21
<PAGE> 22
(This Page Intentionally Left Blank)
<PAGE> 23
(This Page Intentionally Left Blank)
<PAGE> 24
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 OPPORTUNITIES TRUST
Annual Report
May 31, 1999
