<PAGE> 1
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST Two World Trade
Center
LETTER TO THE SHAREHOLDERS November 30, 1998 New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the semiannual report of Morgan Stanley Dean Witter
Municipal Income Opportunities Trust (OIA) for the six-month period ended
November 30, 1998.
On December 21, 1998, the Fund changed its name from Municipal Income
Opportunities Trust to Morgan Stanley Dean Witter Municipal Income Opportunities
Trust. Details on the name change were mailed to shareholders in mid-December
under separate cover.
Since our last report six months ago, global financial turmoil, including the
Russian currency crisis, continued to affect the securities markets. The
resulting flight-to-quality bond rally pushed U.S. Treasury bond yields to
30-year lows. Municipal bond yields declined but lagged the downward trend of
Treasury yields.
The deflationary impact of the international financial crisis began to temper
U.S. economic growth prior to the summer's tumultuous market activity. Lower
commodity prices, cheaper imports and improved
BOND YIELDS 1994 - 1998
<TABLE>
<CAPTION>
30-Year Insured 30-Year U.S. Insured Municipal Yields as a
Municipal Yields Treasury Yields Percentage of U.S. Treasury Yields
<S> <C> <C> <C>
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
1994 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 87.5
6.75 7.88 85.66
6.4 7.7 83.12
6.15 7.44 82.66
6.15 7.43 82.77
6.2 7.34 84.47
5.8 6.66 87.09
1995 6.1 6.62 92.15
6.1 6.86 88.92
6 6.66 90.08
5.95 6.48 91.82
5.75 6.33 90.84
5.5 6.14 89.56
5.35 5.94 90.07
5.4 6.03 89.55
5.8 6.46 86.69
5.85 6.66 87.84
5.95 6.89 86.36
6.05 6.99 86.55
1996 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
5.7 6.79 83.95
5.65 6.8 83.08
5.9 7.1 83.1
5.75 6.94 82.85
5.65 6.91 81.77
1997 5.6 6.78 82.6
5.3 6.3 84.4
5.5 6.61 83
5.4 6.4 84
5.35 6.15 86.9
5.3 6.05 87.6
5.15 5.92 86.9
5.15 5.8 88.18
5.2 5.92 87.8
5.25 5.93 88.5
5.35 5.95 89.9
5.2 5.8 89.66
1998 5.2 5.65 92.04
5.18 5.71 90.72
5.03 5.27 95.45
4.95 5 99
5.05 5.16 97.87
</TABLE>
Source: Municipal Market Data
<PAGE> 2
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS November 30, 1998, continued
productivity offset the potential inflationary impact of strong domestic
employment. With inflation held in check, the Federal Reserve Board provided
liquidity to the markets by lowering short-term interest rates. Between the end
of September and the middle of November, the Federal Reserve Open Market
Committee had cut the federal-funds rate 75 basis points from 5.50 percent to
4.75 percent in three separate moves.
MUNICIPAL MARKET CONDITIONS
At the end of November the long-term insured municipal bond index yield stood at
5.00 percent. This Index yield declined 30 basis points from 5.30 percent over
the last 12 months. In contrast, the 30-year U.S. Treasury bond yield fell 100
basis points during the same period.
As municipals lagged the rally in Treasuries, the ratio of municipal yields to
Treasury yields rose sharply to 99 percent. A rising ratio means that the
attractiveness of municipals relative to Treasuries has improved. The rise in
this ratio is similar to the jump witnessed in 1986 when a radical legislative
proposal threatened the favorable tax advantage of municipal bonds.
The overall decline in interest rates led to a substantial increase in new issue
municipal volume. Municipal issuance was on a pace to challenge 1993's record of
$292 billion. Total municipal volume through November of $255 billion was ahead
28 percent versus the same period last year. Half the underwriting volume was
enhanced with bond insurance. Refundings represented 29 percent of total new
issuance.
PERFORMANCE
The Fund's net asset value (NAV) increased from $8.80 to $8.85 per share during
the six month period. Based on this net asset value change plus reinvestment of
tax-free dividends of $0.29 per share, the Fund's total NAV return was 3.89
percent. OIA's price on the New York Stock Exchange increased from $8.6875 to
$9.625 per share. Based on this change in market price plus reinvestment of
dividends, OIA's total market return was 14.32 percent. On November 30, 1998,
OIA traded at a 8.76 percent premium to NAV.
Monthly dividends for the fourth calendar quarter of 1998 were declared in
September. Beginning with the October 1998 dividend, the monthly dividend
increased from $0.0475 per share to $0.05 per share to more closely reflect the
Fund's anticipated income. The level of undistributed net investment income
increased from $0.16 to $0.17 per share.
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS November 30, 1998, continued
PORTFOLIO STRUCTURE
On November 30, 1998 OIA's investments were diversified among 14 specific
long-term sectors and 61 credits. As illustrated in the accompanying chart of
bond calls, weighted average call protection was 8 years. The average maturity
of the portfolio was 18 years. Non-rated securities comprised more than half of
the Fund's assets. All the issues in the portfolio are currently accruing
interest. However, three credits totaling 6.8 percent of net assets were
accruing income, but may face difficulties meeting future debt service
requirements.
<TABLE>
<CAPTION>
LARGEST SECTORS as of November 30, 1998
(% of Net Assets)
<S> <C>
IDR/PCR* 22%
Nursing & Health 18%
Mortgage 17%
Retirement & Life Care 8%
Transportation 8%
Hospital 6%
Refunded 5%
All Others 16%
* Industrial Development/Pollution Control Revenue
Portfolio structure is subject to change.
</TABLE>
LOOKING AHEAD
Global economic conditions have kept inflationary pressures under control and
have
<TABLE>
<CAPTION>
CALL STRUCTURE as of November 30, 1998
(% of Total Long-Term Portfolio)
WEIGHTED AVERAGE
CALL PROTECTION: 8 YEARS
Years Bonds Callable Percent Callable
<S> <C>
1999 9%
2000 5%
2001 3%
2002 2%
2003 10%
2004 6%
2005 9%
2006 10%
2007 7%
2008 15%
2009+ 24%
Portfolio structure is subject to change.
</TABLE>
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS November 30, 1998, continued
contributed to lower interest rates. The fixed income markets appear concerned
about the risk of reflation as countries seek to stimulate economic growth.
However, the ability of the Fed to maintain stability by responding with
appropriate monetary policy is encouraging. With the municipal relationship to
Treasuries more favorable than it has been in 10 years, the outlook for
municipal bonds is positive.
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 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.
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
CHARLES A. FIUMEFREDDO
Chairman of the Board
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (97.2%)
General Obligation (1.1%)
$ 2,000 New York City, New York, 1994 Ser D......................... 5.75 % 08/15/10 $ 2,117,820
- -------- -----------
Educational Facilities Revenue (2.4%)
1,600 ABAG Finance Authority for Nonprofit Corporations,
California, National Center for International Schools
COPs....................................................... 7.50 05/01/11 1,740,432
1,750 New Jersey Educational Facilities Authority, Fairleigh
Dickinson University 1998 Ser G............................ 5.70 07/01/28 1,751,365
1,000 New York State Dormitory Authority, State University Refg
1993 Ser A................................................. 5.25 05/15/15 1,054,280
- -------- -----------
4,350 4,546,077
- -------- -----------
Electric Revenue (3.4%)
1,500 Alaska Industrial Development Export Authority, Snettisham
Hydroelectric 1st Ser (AMT) (AMBAC)........................ 5.00 01/01/27 1,449,435
5,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary
FSA)....................................................... 5.00 07/01/21 4,939,800
- -------- -----------
6,500 6,389,235
- -------- -----------
Hospital Revenue (5.8%)
1,000 Kentucky Economic Development Finance Authority, Appalachian
Regional Healthcare Inc Refg & Impr Ser 1997............... 5.875 10/01/22 1,033,790
Massachusetts Health & Educational Facilities Authority,
2,000 Dana Farber Cancer Institute Ser G-1....................... 6.25 12/01/14 2,215,860
3,000 Dana Farber Cancer Institute Ser G-1....................... 6.25 12/01/22 3,299,160
1,250 New Hampshire Higher Educational & Health Facilities
Authority, Littleton Hospital Assn Ser 1998 A.............. 6.00 05/01/28 1,270,075
3,000 Metropolitan Government of Nashville & Davidson County,
Health & Educational Facilities Board, Tennessee, Baptist
Hospital Ser 1998 A (MBIA)................................. 4.875 11/01/28 2,896,860
- -------- -----------
10,250 10,715,745
- -------- -----------
Industrial Development/Pollution Control Revenue (22.0%)
460 Metropolitan Washington Airports Authority, District of
Columbia, CaterAir International Corp Ser 1991 (AMT)++..... 10.125 09/01/11 478,547
1,515 Illinois Development Finance Authority, Custom Tapes Inc
Refg Ser 1989.............................................. 10.50 05/01/19 1,525,469
1,500 Iowa Finance Authority, ISPCO Inc Ser 1997 (AMT)............ 6.00 06/01/27 1,589,010
3,000 Massachusetts Industrial Finance Agency, Eastern Edison Co
Refg Ser 1993.............................................. 5.875 08/01/08 3,111,780
3,740 Detroit Economic Development Corporation, Michigan, North
Industrial Park LP Ser 1989................................ 11.375 02/15/14 3,846,964
1,290 Michigan Strategic Fund, Kasle Steel Corp Ser 1989 (AMT).... 9.375 10/01/06 1,334,803
3,600 Cleveland, Ohio, Continental Airlines Inc Ser 1990 (AMT).... 9.00 12/01/19 3,811,679
2,000 Dayton, Ohio, Emery Air Freight Corp Ser 1998 A............. 5.625 02/01/18 2,025,480
960 Zanesville-Muskingum County Port Authority, Ohio, Anchor
Glass Container Corp Ser 1989 B (AMT)...................... 10.25 12/01/08 972,442
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 2,000 Beaver County Industrial Development Authority,
Pennsylvania, Toledo Edison Co Collateralized Ser 1995-B... 7.75 % 05/01/20 $ 2,284,060
2,890 East Hempfield Township Industrial Development Authority,
Pennsylvania, Herley Microwave System Inc Ser 1989 A....... 10.40 06/01/04 2,998,722
Lexington County, South Carolina,
1,815 Ellett Brothers Inc Refg Ser 1988.......................... 7.50 09/01/02 1,852,407
4,250 Ellett Brothers Inc Refg Ser 1988.......................... 7.50 09/01/08 4,405,890
2,000 Brazos River Authority, Texas, Texas Utility Electric Co Ser
1995 C (AMT)............................................... 5.55 06/01/30 1,976,520
Pittsylvania County Industrial Development Authority,
Virginia
4,500 Multi-Trade of Pittsylvania County Ser 1994 A (AMT)........ 7.45 01/01/09 4,965,525
1,500 Multi-Trade of Pittsylvania County Ser 1994 A (AMT)........ 7.50 01/01/14 1,656,540
2,000 Upshur County, West Virginia, TJ International Inc Ser 1995
(AMT)...................................................... 7.00 07/15/25 2,234,460
- -------- -----------
39,020 41,070,298
- -------- -----------
Mortgage Revenue - Multi-Family (3.6%)
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
21,538 White Bear Woods Apts Phase II Refg 1989 Ser B............. 0.00 06/15/19 215,378
- -------- -----------
63,061 6,730,706
- -------- -----------
Mortgage Revenue - Single Family (13.1%)
3,000 Alaska Housing Finance Corporation, 1997 Ser A (MBIA)....... 6.00 06/01/27 3,189,840
11,225 San Francisco, California, Ser 1982......................... 0.00 10/01/14 2,077,971
3,000 Colorado Housing Finance Authority, Ser 1998 D-2 (AMT)...... 6.35 11/01/29 3,294,570
205 Broward County Housing Finance Authority, Florida, Home Ser
1989 A..................................................... 10.00 10/01/03 205,387
New Hampshire Housing Finance Authority,
48,550 Residential 1983 Ser B..................................... 0.00 01/01/15 9,147,306
1,980 1997 Ser D (AMT)........................................... 5.90 07/01/28 2,090,444
2,000 Ohio Housing Finance Agency, Residential 1996 Ser B-2
(AMT)...................................................... 6.10 09/01/28 2,134,900
2,260 Virginia Housing Development Authority, 1992 Ser A.......... 7.10 01/01/22 2,346,016
- -------- -----------
72,220 24,486,434
- -------- -----------
Nursing & Health Related Facilities Revenue (18.0%)
Escambia County, Florida,
7,990 Pensacola Care Development Centers Ser 1989................ 10.25 07/01/11 7,960,677
1,830 Pensacola Care Development Centers Ser 1989 A.............. 10.25 07/01/11 1,823,284
1,445 Winchester, Indiana, Hoosier Care II Inc Ser 1990........... 10.375 06/01/20 1,541,815
2,485 Jefferson County, Kentucky, AHF/Kentucky-Iowa Inc Ser
1990....................................................... 10.25 01/01/20 2,640,983
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,500 Westside Habilitation Center, Louisiana, Intermediate Care
Facility for the Mentally Retarded Refg Ser 1993........... 8.375% 10/01/13 $ 1,681,920
New Jersey Economic Development Authority,
1,000 Franciscan Oaks Ser 1997................................... 5.70 10/01/17 1,000,330
2,000 United Methodist Homes of New Jersey Ser 1998.............. 5.125 07/01/25 1,895,760
McCurtain County, Oklahoma,
4,950 Heartway Corp Ser 1997 A................................... 9.50 03/01/19 5,410,994
835 Heartway Corp Ser 1997 B................................... 0.00# 03/01/19 563,917
3,725 Allegheny County Hospital Development Authority,
Pennsylvania, Allegheny Valley School Ser 1990............. 8.50 02/01/15 3,906,966
Kirbyville Health Facilities Development Authority, Texas,
4,014 Heartway III Corp Ser 1988 A............................... 10.00 03/20/18 4,676,162
642 Heartway III Corp Ser 1988 B............................... 0.00## 03/20/04 521,529
- -------- -----------
32,416 33,624,337
- -------- -----------
Retirement & Life Care Facilities Revenue (8.0%)
Connecticut Development Authority,
2,635 Seabury Life Care Ser 1991................................. 10.00 09/01/04 2,918,289
600 Seabury Life Care Ser 1996................................. 8.75 09/01/06 646,482
1,000 Seabury Life Care Ser 1991................................. 10.00 09/01/16 1,107,510
5,631 Ann Arbor Economic Development Corporation, Michigan,
Glacier Hills Inc Ser 1989................................. 8.375 01/15/19 6,560,678
1,500 New Jersey Economic Development Authority, Fellowship
Village Refg Ser 1998 A.................................... 5.50 01/01/25 1,465,410
2,000 Glen Cove Housing Authority, New York, The Mayfair at Glen
Cove Ser 1996 (AMT)........................................ 8.25 10/01/26 2,238,460
- -------- -----------
13,366 14,936,829
- -------- -----------
Tax Allocation Revenue (4.4%)
1,095 Bridgeview, Illinois, Ser 1995.............................. 9.00 01/01/11 1,270,715
Crestwood, Illinois,
3,000 Refg Ser 1994.............................................. 7.00 12/01/04 3,250,290
3,350 Refg Ser 1994.............................................. 7.25 12/01/08 3,612,171
- -------- -----------
7,445 8,133,176
- -------- -----------
Transportation Facilities Revenue (7.5%)
2,000 Foothills/Eastern Transportation Corridor Agency,
California, Toll Road Sr Lien Ser 1995 A................... 0.00 01/01/13 1,665,800
7,500 E-470 Public Highway Authority, Colorado, Ser 1997 B
(MBIA)..................................................... 0.00 09/01/15 3,306,000
2,000 Mid-Bay Bridge Authority, Florida, Sr Lien Crossover Refg
Ser 1993 A (AMBAC)......................................... 5.85 10/01/13 2,231,500
3,000 Massachusetts Turnpike Authority, Metropolitan Highway 1997
Ser A (MBIA)............................................... 5.00 01/01/37 2,925,090
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,700 Bi-State Development Agency of the Missouri-Illinois
Metropolitan District, Arch Parking Refg Ser 1997.......... 5.875% 12/01/12 $ 1,827,177
2,000 Pocahontas Parkway Association, Virginia, Route 895
Connector Ser 1998 A....................................... 5.50 08/15/28 1,999,820
- -------- -----------
18,200 13,955,387
- -------- -----------
Water & Sewer Revenue (0.7%)
6,000 Pittsburgh Water & Sewer Authority, Pennsylvania, First Lien
1998 Ser B (FGIC).......................................... 0.00 09/01/30 1,190,160
- -------- -----------
Other Revenue (2.3%)
Mashantucket (Western) Pequot Tribe, Connecticut,
1,010 Special 1996 Ser A (a)..................................... 6.40 09/01/11 1,117,080
1,000 Special 1997 Ser B (a)..................................... 5.75 09/01/27 1,040,590
2,000 Northern Palm Beach County Improvement District, Florida,
Water Control & Impr #9A Ser 1996 A........................ 7.30 08/01/27 2,203,940
- -------- -----------
4,010 4,361,610
- -------- -----------
Refunded (4.9%)
900 Illinois Health Facilities Authority, Hindsdale Hospital Ser
1990 C (ETM)............................................... 9.50 11/15/19 1,016,118
3,270 Massachusetts Industrial Finance Agency, Vinfen Corp Ser
1993....................................................... 7.10 11/15/03+ 3,737,316
4,000 Ohio Turnpike Commission, 1996 Ser A (MBIA)................. 5.50 02/15/06+ 4,413,800
- -------- -----------
8,170 9,167,234
- -------- -----------
287,008 TOTAL TAX- EXEMPT MUNICIPAL BONDS (Identified Cost $180,328,668)................ 181,425,048
- -------- -----------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATION (0.6%)
1,200 Massachusetts Health & Educational Facilities Authority,
- -------- Capital Assets Ser D (MBIA) (Demand 12/01/98) (Identified
Cost $1,200,000)........................................... 2.95* 01/01/35 1,200,000
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
$288,208 TOTAL INVESTMENTS (Identified Cost $181,528,668) (b)................... 97.8% $182,625,048
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 2.2 4,056,678
----- ------------
NET ASSETS.............................................................. 100.0% $186,681,726
====== ============
</TABLE>
- ---------------------
<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to maturity.
+ Prerefunded to call date shown.
++ Joint exemption in District of Columbia and Virginia.
* 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 $10,438,967 and the aggregate gross
unrealized depreciation is $9,342,587, resulting in net
unrealized appreciation of $1,096,380.
Bond Insurance:
- ---------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998 (unaudited) continued
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
November 30, 1998
<TABLE>
<S> <C>
Alaska................... 2.5%
California............... 2.9
Colorado................. 3.5
Connecticut.............. 3.7
District of Columbia..... 0.2
Florida.................. 7.7
Illinois................. 5.7
Indiana.................. 0.8
Iowa..................... 0.9
Kentucky................. 2.0
Louisiana................ 0.9
Massachusetts............ 8.8
Michigan................. 6.3
Minnesota................ 3.6
Missouri................. 1.0
New Hampshire............ 6.7
New Jersey............... 3.3
New York................. 2.9
Ohio..................... 7.2
Oklahoma................. 3.2
Pennsylvania............. 5.6
South Carolina........... 3.4
Tennessee................ 1.6
Texas.................... 3.8
Utah..................... 2.6
Virginia................. 6.1
West Virginia............ 1.2
Joint Exemption*......... (0.3)
------
Total.................... 97.8%
======
</TABLE>
- ---------------------
* Joint exemptions have been included in each geographic location.
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1998 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $181,528,668)............................. $182,625,048
Cash........................................................ 343,010
Receivable for:
Interest................................................ 3,957,170
Investments sold........................................ 38,793
Prepaid expenses............................................ 6,380
------------
TOTAL ASSETS............................................ 186,970,401
------------
LIABILITIES:
Payable for:
Investment advisory fee................................. 79,163
Administration fee...................................... 47,498
Accrued expenses............................................ 162,014
------------
TOTAL LIABILITIES....................................... 288,675
------------
NET ASSETS.............................................. $186,681,726
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $199,765,973
Net unrealized appreciation................................. 1,096,380
Accumulated undistributed net investment income............. 3,687,514
Accumulated net realized loss............................... (17,868,141)
------------
NET ASSETS.............................................. $186,681,726
============
NET ASSET VALUE PER SHARE,
21,089,872 shares outstanding
(unlimited shares authorized of $.01 par value)............ $8.85
=====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended November 30, 1998 (unaudited)
NET INVESTMENT INCOME
INTEREST INCOME............................................. $7,208,171
----------
EXPENSES
Investment advisory fee..................................... 467,038
Administration fee.......................................... 280,223
Transfer agent fees and expenses............................ 38,947
Professional fees........................................... 38,358
Registration fees........................................... 16,389
Shareholder reports and notices............................. 12,258
Trustees' fees and expenses................................. 9,651
Custodian fees.............................................. 4,033
Other....................................................... 10,361
----------
TOTAL EXPENSES.......................................... 877,258
Less: expense offset........................................ (4,014)
----------
NET EXPENSES............................................ 873,244
----------
NET INVESTMENT INCOME................................... 6,334,927
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 843,722
Net change in unrealized appreciation....................... 123,468
----------
NET GAIN................................................ 967,190
----------
NET INCREASE................................................ $7,302,117
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
NOVEMBER 30, 1998 MAY 31, 1997
- ---------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 6,334,927 $ 12,758,689
Net realized gain (loss)............................. 843,722 (1,687,435)
Net change in unrealized appreciation/depreciation... 123,468 8,056,252
------------ ------------
NET INCREASE..................................... 7,302,117 19,127,506
Dividends from net investment income................. (6,115,929) (12,231,856)
------------ ------------
NET INCREASE..................................... 1,186,188 6,895,650
NET ASSETS:
Beginning of period.................................. 185,495,538 178,599,888
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$3,687,514 and $3,468,516, respectively)......... $186,681,726 $185,495,538
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Municipal Income Opportunities Trust (the "Fund"),
formerly Municipal Income Opportunities Trust (the Fund changed its name
effective December 21, 1998), 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.
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited) 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.
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited) 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 six months ended November 30, 1998 aggregated
$12,364,920 and $12,674,662, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor and
Administrator, is the Fund's transfer agent. At November 30, 1998 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 six months ended November 30, 1998
included in Trustees' fees and expenses in the Statement of Operations amounted
to $3,509. At November 30, 1998, the Fund had an accrued pension liability of
$50,536 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 November 30, 1998................. 21,089,872 $210,898 $199,555,075
========== ======== ============
</TABLE>
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited) continued
6. FEDERAL INCOME TAX STATUS
At May 31, 1998, the Fund had a net capital loss carryover of approximately
$17,732,000, 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>
AMOUNT IN THOUSANDS
-------------------------------------------
2002 2003 2004 2005
-------- -------- -------- --------
<S> <C> <C> <C>
$610 $11,179 $5,243 $700
==== ======= ====== ====
</TABLE>
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 $980,000 during the fiscal 1998. As of May 31, 1998, the Fund had
temporary book/tax differences primarily attributable to post-October losses.
7. DIVIDENDS
The Fund declared the following dividends from net investment income:
<TABLE>
<CAPTION>
DECLARATION AMOUNT RECORD PAYABLE
DATE PER SHARE DATE DATE
- ------------------ --------- ----------------- ------------------
<S> <C> <C> <C>
September 29, 1998 $0.05 December 4, 1998 December 18, 1998
December 29, 1998 $0.05 January 8, 1999 January 22, 1999
December 29, 1998 $0.05 February 5, 1999 February 12, 1999
December 29, 1998 $0.05 March 5, 1999 March 19, 1999
</TABLE>
17
<PAGE> 18
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 SIX FOR THE YEAR ENDED MAY 31*
MONTHS ENDED ----------------------------------------------------
NOVEMBER 30, 1998* 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <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 $ 8.58
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income............................. 0.30 0.60 0.63 0.69 0.68 0.67
Net realized and unrealized gain (loss)........... 0.04 0.31 0.16 (0.26) 0.01 (0.15)
------ ------ ------ ------ ------ ------
Total income from investment operations............ 0.34 0.91 0.79 0.43 0.69 0.52
------ ------ ------ ------ ------ ------
Less dividends from net investment income.......... (0.29) (0.58) (0.63) (0.65) (0.63) (0.63)
------ ------ ------ ------ ------ ------
Net asset value, end of period..................... $ 8.85 $ 8.80 $ 8.47 $ 8.31 $ 8.53 $ 8.47
====== ====== ====== ====== ====== ======
Market value, end of period........................ $9.625 $8.688 $ 8.75 $8.875 $ 8.25 $8.125
====== ====== ====== ====== ====== ======
TOTAL RETURN+...................................... 14.32%(1) 5.87% 5.82% 15.95% 9.81% 6.17%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................................... 0.92%(2)(3) 1.04% 1.08% 0.97% 1.04% 1.22%
Net investment income.............................. 6.63%(2) 6.98% 7.44% 8.24% 8.10% 7.80%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............ $186,682 $185,496 $178,600 $175,294 $179,843 $181,745
Portfolio turnover rate............................ 7%(1) 20% 19% 8% 5% 16%
</TABLE>
- ---------------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total investment return is based upon the current market value on the last
day of each period reported. Dividends and distributions are assumed to be
reinvested at the prices obtained under the Fund's dividend reinvestment
plan.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effects of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE> 19
(This Page Intentionally Left Blank)
<PAGE> 20
TRUSTEES MORGAN STANLEY
- ---------------------------------------- DEAN WITTER
Michael Bozic MUNICIPAL
Charles A. Fiumefreddo INCOME
Edwin J. Garn OPPORTUNITIES
John R. Haire TRUST
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
- ----------------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- ----------------------------------------
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 ADVISOR
- ----------------------------------------
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein Semiannual Report
have been taken from the records of the November 30, 1998
Fund without examination by the
independent accountants and accordingly
they do not express an opinion thereon.
