<PAGE> 1
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME Two World Trade Center
OPPORTUNITIES TRUST New York, New York 10048
LETTER TO THE SHAREHOLDERS May 31, 2000
DEAR SHAREHOLDER:
The U.S. economy continued its unprecedented expansion into the new year as real
personal consumption accelerated and unemployment reached a 30-year low. The
surge in oil prices also heightened the risk of inflation. In response, the
Federal Reserve Board raised the federal funds rate on six occasions over the
last eleven months to a nine-year high of 6.50 percent. Economic growth and a
less accommodative monetary policy caused long-term interest rates to increase
throughout 1999. In February, however, the U.S. Treasury announced plans to use
the federal budget surplus to reduce its debt. This announcement precipitated a
50 to 75 basis point drop in yields of longer Treasury maturities. Municipal
bond yields also declined but lagged the trend of Treasury yields. With data in
April still indicating a robust economy, long-term interest rates again
increased. By the end of May, however, interest rates had stabilized as the
financial markets began to perceive the possibility of an economic soft landing.
MUNICIPAL MARKET CONDITIONS
The long-term insured municipal index began 1999 near a record low yield of 5.05
percent but increased to 5.97 percent by calendar year-end. This index reached a
high of 6.18 percent in January 2000 and ended May at 5.91 percent. Because bond
prices move inversely to changes in interest rates, higher yields caused bond
prices to decline significantly last year and improve marginally in the first
five months of 2000.
The ratio of municipal yields as a percentage of Treasury yields has
historically been used as a measure of relative value. Over the past five years
the ratio has ranged between an average high of 93 percent and an average low of
85 percent. The increase in the ratio from 92 percent at the end of 1999 to 98
percent at the end of May 2000 can be attributed primarily to the magnitude of
the rally in long-term Treasuries. A rising yield ratio indicates weaker
relative performance by municipals.
<PAGE> 2
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS May 31, 2000, continued
During the first five months of 2000, new-issue underwriting volume was 25
percent lower than in the same period last year. Refunding activity, the most
interest-rate-sensitive component of supply, dropped more than 75 percent.
[30-YEAR BOND YIELDS]
1994 - 2000 GRAPH
<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>
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%
5.47% 5.96% 91.78%
5.55% 6.10% 90.98%
5.75% 6.06% 94.88%
5.85% 6.05% 96.69%
6.03% 6.16% 97.90%
6.00% 6.29% 95.39%
5.97% 6.48% 92.13%
2000 6.18% 6.49% 95.22%
6.04% 6.14% 98.37%
5.82% 5.83% 99.83%
5.91% 5.96% 99.16%
5.91% 6.01% 98.34%
</TABLE>
Source: Municipal Market Data - A Division of Thomson Financial Municipal Group
and Bloomberg L.P.
PERFORMANCE
The performance of Morgan Stanley Dean Witter Municipal Income Opportunities
Trust (OIA) was affected by the higher-interest-rate environment. For the
12-month period ended May 31, 2000, the Fund's net asset value (NAV) declined
from $8.69 to $7.79 per share. Based on this change plus a reinvestment of
tax-free dividends totaling $0.62 per share, the Fund's total NAV return was
-3.44 percent.
OIA's value on the New York Stock Exchange (NYSE) decreased from $9.4375 to
$8.25 per share during this period. Based on this change plus reinvestment of
tax-free dividends, OIA's total market return was -5.94 percent. OIA's share
price was at a 5.91 percent premium to its NAV on May 31, 2000.
Monthly dividends for the second calendar quarter of 2000, declared in March,
were unchanged at $0.0525 per share. The Fund's level of undistributed net
investment income was $0.135 per share on
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS May 31, 2000, continued
May 31, 2000, versus $0.182 per share 12 months earlier. Subsequent to the
fiscal year end, the Fund declared the same level of monthly dividends for July,
August and September.
PORTFOLIO STRUCTURE
The Fund's investments were diversified among 13 long-term sectors and 63
credits. At the end of May, the portfolio's average maturity was 18 years.
Average duration, a measure of portfolio sensitivity to interest rates, was 8.1
years. Nonrated securities comprise more than half of OIA's assets. The bonds of
one issuer representing less than one percent of net assets were not accruing
interest. Three other issues, totaling 5.6 percent of net assets were accruing
income but may have difficulty with future debt service payments. The
accompanying charts and tables 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 has expressed concern about consumer wealth and rising
prices. We anticipate that the central bank will continue to focus on inflation
and may increase short-term rates if it feels that economic momentum is not
slowing significantly. We believe municipal bonds continue to offer
tax-conscious investors good long-term value.
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, 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.
<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>
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS May 31, 2000, continued
[LARGEST SECTORS BAR CHART]
LARGEST SECTORS as of May 31, 2000
(% of Net Assets)
<TABLE>
<S> <C>
Mortgage 20%
IDR/PCR 18%
Nursing & Health 12%
Retirement & Life Care 11%
Hospital 10%
Recreational Facilities 7%
Transportation 5%
</TABLE>
*Industrial Development/Pollution Control Revenue
Portfolio structure is subject to change.
[CREDIT RATINGS PIE CHART]
CREDIT RATINGS AS OF MAY 31, 2000
(% OF TOTAL LONG-TERM PORTFOLIO)
<TABLE>
<S> <C>
AAA or AAA 10%
AA or AA 12%
A or A 6%
BAA or BBB 12%
BA or BB 4%
NR 56%
</TABLE>
As measured by Moody's Investors Service, Inc. or Standard & Poor's Corp.
Portfolio structure is subject to change.
[GEOGRAPHIC SUMMARY OF INVESTMENTS TABLE]
Based on Market Value as a Percent of Net Assets
May 31, 2000
<TABLE>
<S> <C>
Alabama 0.8%
Alaska 2.2%
Arkansas 1.0%
California 4.4%
Colorado 4.8%
Connecticut 1.2%
District of Columbia 0.3%
Florida 9.2%
Illinois 5.2%
Iowa 0.9%
Kentucky 2.3%
Louisiana 2.9%
Maryland 1.2%
Massachusetts 7.2%
Michigan 6.6%
Minnesota 4.8%
Missouri 4.8%
New Hampshire 6.6%
New Jersey 3.5%
New York 5.8%
Ohio 3.4%
Pennsylvania 1.8%
South Carolina 3.4%
Tennessee 1.5%
Texas 2.7%
Utah 0.5%
Vermont 1.1%
Virginia 6.4%
West Virginia 1.2%
Joint Exemption* (0.3)
Total 97.4%
</TABLE>
*Joint exemptions have been included in each geographic location.
Portfolio structure is subject to change.
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
LETTER TO THE SHAREHOLDERS May 31, 2000, continued
CALL AND COST (BOOK) YIELD STRUCTURE
May 31, 2000
[CALL AND COST STRUCTURE TABLE]
WEIGHTED AVERAGE
CALL PROTECTION: 7 YEARS
PERCENT CALLABLE*
<TABLE>
<CAPTION>
YEARS BONDS CALLABLE
<S> <C>
2000 9%
2001 3%
2002 3%
2003 7%
2004 6%
2005 10%
2006 9%
2007 6%
2008 14%
2009 13%
2010+ 20%
</TABLE>
WEIGHTED AVERAGE
BOOK YIELD: 7.6%
CALL AND COST (BOOK) YIELD STRUCTURE
May 31, 2000
<TABLE>
<CAPTION>
COST (BOOK) YIELD **
<S> <C>
2000 10.3%
2001 10.9%
2002 6.6%
2003 7.1%
2004 9.6%
2005 6.8%
2006 7.0%
2007 6.0%
2008 6.1%
2009 6.3%
2010+ 12.8%
</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 10.9% on 3% of the bonds in the
long-term portfolio that are callable in 2001.
Portfolio structure is subject to change.
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On December 21, 1999, 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:
<TABLE>
<S> <C>
Michael Bozic
For......................................................... 17,386,152
Withheld.................................................... 334,141
Charles A. Fiumefreddo
For......................................................... 17,413,471
Withheld.................................................... 306,822
</TABLE>
The following Trustees were not standing for reelection at this meeting: Edwin
J. Garn, Wayne E. Hedien, Dr. Manuel H. Johnson, Michael E. Nugent, Philip J.
Purcell and John L. Schroeder.
(2) RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS:
<TABLE>
<S> <C>
For......................................................... 17,344,160
Against..................................................... 127,882
Abstain..................................................... 248,251
</TABLE>
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS May 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (91.9%)
Educational Facilities Revenue (2.6%)
$ 1,600 ABAG Finance Authority for Nonprofit Corporations,
California, National Center for International Schools
COPs....................................................... 7.50% 05/01/11 $ 1,653,728
1,000 Massachusetts Health & Educational Facilities Authority, The
Learning Center for Deaf Children Ser C.................... 6.125 07/01/29 840,180
1,000 New Jersey Educational Facilities Authority, Fairleigh
Dickinson University 1998 Ser G............................ 5.70 07/01/28 852,770
1,000 New York State Dormitory Authority, State University 1993
Ser A...................................................... 5.25 05/15/15 955,090
-------- ------------
4,600 4,301,768
-------- ------------
Electric Revenue (1.2%)
1,400 Alaska Industrial Development & Export Authority, Snettisham
Hydroelectric 1st Ser (AMT) (AMBAC)........................ 5.00 01/01/27 1,140,370
1,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary
FSA)....................................................... 5.00 07/01/21 860,870
-------- ------------
2,400 2,001,240
-------- ------------
Hospital Revenue (9.8%)
2,000 Baxter County, Arkansas, Baxter County Regional Hospital
Impr & Refg
Ser 1999 B................................................. 5.625 09/01/28 1,588,480
2,000 Kentucky Economic Development Finance Authority, Appalachian
Regional Healthcare Inc Refg & Impr Ser 1997............... 5.875 10/01/22 1,335,260
2,000 Maryland Health & Higher Educational Facilities Authority,
University of Maryland Medical Ser 2000.................... 6.75 07/01/30 1,971,980
Massachusetts Health & Educational Facilities Authority,
2,000 Dana Farber Cancer Institute Ser G-1....................... 6.25 12/01/14 1,979,360
3,000 Dana Farber Cancer Institute Ser G-1....................... 6.25 12/01/22 2,860,950
1,250 New Hampshire Higher Educational & Health Facilities
Authority, Littleton Hospital Assn Ser 1998 A.............. 6.00 05/01/28 963,925
2,000 New Jersey Health Care Facilities Financing Authority,
Raritan Bay Medical Center Ser 1994........................ 7.25 07/01/27 1,778,640
1,250 Cuyahoga County, Ohio, Cleveland Clinic Foundation Ser 1999
B.......................................................... 5.25 01/01/15 1,148,263
3,000 Metropolitan Government of Nashville & Davidson County,
Health & Educational Facilities Board, Tennessee, Baptist
Hospital Ser 1998 A (MBIA)................................. 4.875 11/01/28 2,410,950
-------- ------------
18,500 16,037,808
-------- ------------
Industrial Development/Pollution Control Revenue (18.2%)
460 Metropolitan Washington Airports Authority, District of
Columbia & Virginia, CaterAir International Corp Ser 1991
(AMT)++.................................................... 10.125 09/01/11 453,873
2,350 Chicago, Illinois, Chicago O'Hare Int'l Airport/United
Airlines Inc Ser 1999 A.................................... 5.35 09/01/16 1,958,890
1,500 Iowa Finance Authority, IPSCO Inc Ser 1997 (AMT)............ 6.00 06/01/27 1,454,670
3,000 Massachusetts Industrial Finance Agency, Eastern Edison Co
Refg Ser 1993.............................................. 5.875 08/01/08 2,947,350
3,550 Detroit Economic Development Corporation, Michigan, North
Industrial Park LP Ser 1989................................ 11.375 02/15/14 3,614,716
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS May 31, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,290 Michigan Strategic Fund, Kasle Steel Corp Ser 1989 (AMT).... 9.375% 10/01/06 $ 1,298,404
2,000 Dayton, Ohio, Emery Air Freight Corp Refg Ser 1998 A........ 5.625 02/01/18 1,736,200
775 Zanesville-Muskingum County Port Authority, Ohio, Anchor
Glass Container Corp Ser 1989 B (AMT)...................... 10.25 12/01/08 780,898
2,000 Beaver County Industrial Development Authority,
Pennsylvania, Toledo Edison Co Collateralized Ser 1995 B... 7.75 05/01/20 2,096,280
Lexington County, South Carolina,
1,415 Ellett Brothers Inc Refg Ser 1988.......................... 7.50 09/01/02 1,398,133
4,250 Ellett Brothers Inc Refg Ser 1988.......................... 7.50 09/01/08 4,095,214
Pittsylvania County Industrial Development Authority,
Virginia,
4,500 Multi-Trade of Pittsylvania County Ser 1994 A (AMT)........ 7.45 01/01/09 4,570,424
1,500 Multi-Trade of Pittsylvania County Ser 1994 A (AMT)........ 7.50 01/01/14 1,523,910
2,000 Upshur County, West Virginia, TJ International Inc Ser 1995
(AMT)...................................................... 7.00 07/15/25 2,018,700
-------- ------------
30,590 29,947,662
-------- ------------
Mortgage Revenue - Multi-Family (6.3%)
Washington County Housing & Redevelopment Authority,
Minnesota,
3,885 Courtly Park Ser 1989 A.................................... 9.75 06/15/19 3,041,567
1,165 Courtly Park Ser 1989 A (AMT).............................. 10.25 06/15/19 912,882
24,080 Courtly Park Ser 1989 B.................................... 0.00 06/15/19 261,268
8,678 Courtly Park Ser 1989 B (AMT).............................. 0.00 06/15/19 94,155
White Bear Lake, Minnesota,
3,715 White Bear Woods Apts Phase II Refg 1989 Ser A............. 9.75 06/15/19 3,262,735
20,514 White Bear Woods Apts Phase II Refg 1989 Ser B............. 0.00 06/15/19 222,578
3,000 Brookhaven Industrial Development Agency, New York,
Woodcrest Estates
Ser 1998 A (AMT)........................................... 6.375 12/01/37 2,506,590
-------- ------------
65,037 10,301,775
-------- ------------
Mortgage Revenue - Single Family (13.2%)
2,500 Alaska Housing Finance Corporation, 1997 Ser A (MBIA)....... 6.00 06/01/27 2,400,125
Colorado Housing Finance Authority,
1,915 1996 Ser B (AMT)........................................... 7.65 11/01/26 2,042,233
3,000 Ser 1998 D-2 (AMT)......................................... 6.35 11/01/29 2,948,820
50 Broward County Housing Finance Authority, Florida, Home Ser
1989 A..................................................... 10.00 10/01/03 50,055
45,600 New Hampshire Housing Finance Authority, Residential 1983
Ser........................................................ 0.00 01/01/15 9,930,767
2,000 Ohio Housing Finance Agency, Residential 1996 Ser B-2
(AMT)...................................................... 6.10 09/01/28 1,960,200
2,260 Virginia Housing Development Authority, 1992 Ser A.......... 7.10 01/01/22 2,309,765
-------- ------------
57,325 21,641,965
-------- ------------
Nursing & Health Related Facilities Revenue (11.9%)
Escambia County, Florida,
7,305 Pensacola Care Development Centers Ser 1989................ 10.25 07/01/11 7,454,387
1,670 Pensacola Care Development Centers Ser 1989 A.............. 10.25 07/01/11 1,704,152
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS May 31, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,000 Orange County Health Facilities Authority, Florida,
Westminister Community Care Services Inc Ser 1999.......... 6.75% 04/01/34 $ 864,870
2,415 Jefferson County, Kentucky, AHF/Kentucky-Iowa Inc Ser
1990....................................................... 10.25 01/01/20 2,490,203
1,500 Westside Habilitation Center, Louisiana, Intermediate Care
Facility for the Mentally Retarded Refg Ser 1993........... 8.375 10/01/13 1,570,335
1,040 Mount Vernon Industrial Development Agency, New York,
Meadowview at the Wartburg Civic Facility Ser 1999......... 6.00 06/01/09 964,215
Kirbyville Health Facilities Development Authority, Texas,
642 Heartway III Corp Ser 1998 B............................... 6.00 03/20/04 449,400
3,903 Heartway III Corp Ser 1998 A............................... 10.00 03/20/18 4,016,246
-------- ------------
19,475 19,513,808
-------- ------------
Recreational Facilities Revenue (6.6%)
2,000 West Jefferson Amusement & Public Park Authority, Alabama,
VisionLand
Ser 1999................................................... 6.375 02/01/29 1,318,860
2,000 Sacramento Financing Authority, California, Convention
Center Hotel
1999 Ser A................................................. 6.25 01/01/30 1,808,960
2,000 San Diego County, California, San Diego Natural History
Museum COPs................................................ 5.70 02/01/28 1,735,580
Mashantucket (Western) Pequot Tribe, Connecticut,
1,010 Special 1996 Ser A (a)..................................... 6.40 09/01/11 1,027,332
1,000 Special 1997 Ser B (a)..................................... 5.75 09/01/27 874,100
2,500 American National Fish & Wildlife Museum District, Missouri,
Ser 1999................................................... 7.00 09/01/19 2,372,100
1,700 Bi-State Development Agency of the Missouri-Illinois
Metropolitan District, Arch Parking Refg Ser 1997.......... 5.875 12/01/12 1,630,334
-------- ------------
12,210 10,767,266
-------- ------------
Retirement & Life Care Facilities Revenue (11.0%)
1,000 St Johns County Industrial Development Authority, Florida,
Glenmoor
Ser 1999 A................................................. 8.00 01/01/30 955,920
1,500 Massachusetts Development Finance Agency, Loomis Communities
Ser 1999 A................................................. 5.75 07/01/23 1,191,150
5,464 Ann Arbor Economic Development Corporation, Michigan,
Glacier Hills Inc Ser 1989................................. 8.375 01/15/19 5,822,111
New Jersey Economic Development Authority,
1,000 Fellowship Village Refg Ser 1998 A......................... 5.50 01/01/25 761,480
1,000 Franciscan Oaks Ser 1997................................... 5.70 10/01/17 828,550
2,000 United Methodist Homes of New Jersey Ser 1998.............. 5.125 07/01/25 1,429,000
2,000 Glen Cove Housing Authority, New York, Mayfair at Glen Cove
Ser 1996 (AMT)............................................. 8.25 10/01/26 2,082,060
3,250 Suffolk County Industrial Development Agency, New York,
Jefferson's Ferry
Ser 1999................................................... 7.25 11/01/28 3,062,410
2,100 Vermont Economic Development Authority, Wake Robin Corp Ser
1999 A..................................................... 6.75 03/01/29 1,867,887
-------- ------------
19,314 18,000,568
-------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS May 31, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Tax Allocation Revenue (4.0%)
Crestwood, Illinois,
$ 3,000 Refg Ser 1994.............................................. 7.00% 12/01/04 $ 3,082,710
3,350 Refg Ser 1994.............................................. 7.25 12/01/08 3,429,831
-------- ------------
6,350 6,512,541
-------- ------------
Transportation Facilities Revenue (5.2%)
4,000 Foothill/Eastern Transportation Corridor Agency, California,
Ser 1999................................................... 0.00 01/15/27 1,969,120
7,500 E-470 Public Highway Authority, Colorado, Ser 1997 B
(MBIA)..................................................... 0.00 09/01/15 2,929,650
2,000 Mid-Bay Bridge Authority, Florida, Sr Lien Crossover Refg
Ser 1993 A (AMBAC)......................................... 5.85 10/01/13 2,013,680
2,000 Pocahontas Parkway Association, Virginia, Route 895
Connector Ser 1998 A....................................... 5.50 08/15/28 1,581,780
-------- ------------
15,500 8,494,230
-------- ------------
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 2,068,180
6,000 Pittsburgh Water & Sewer Authority, Pennsylvania, First Lien
1998 Ser B (FGIC).......................................... 0.00 09/01/30 892,320
-------- ------------
8,000 2,960,500
-------- ------------
Refunded (0.1%)
100 Alaska Industrial Development & Export Authority, Snettisham
-------- Hydroelectric 1st Ser (AMT)(AMBAC)......................... 5.00 01/01/11+ 96,024
------------
259,401 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $167,677,520)................. 150,577,155
-------- ------------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (5.5%)
3,200 Louisiana Public Facilities Authority, Kenner Hotel Ser 1985
(Demand 06/01/00).......................................... 4.45* 12/01/15 3,200,000
2,000 Massachusetts Health & Educational Facilities Authority,
Capital Asset Ser D (MBIA) (Demand 06/01/00)............... 4.45* 01/01/35 2,000,000
3,900 Missouri Health & Educational Facilities Authority,
Washington University
Ser C (Demand 06/01/00).................................... 4.25* 09/01/30 3,900,000
-------- ------------
9,100 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost
$9,100,000).................................................................... 9,100,000
-------- ------------
$268,501 TOTAL INVESTMENTS (Identified Cost $176,777,520) (b).................. 97.4% 159,677,155
========
OTHER ASSETS IN EXCESS OF LIABILITIES................................... 2.6 4,233,052
----- ------------
NET ASSETS............................................................. 100.0% $163,910,207
===== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS May 31, 2000, continued
---------------------
<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.
(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 $1,440,945 and the aggregate gross
unrealized depreciation is $18,541,310, resulting in net
unrealized depreciation of $17,100,365.
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
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2000
ASSETS:
Investments in securities, at value
(identified cost $176,777,520)............................. $159,677,155
Cash........................................................ 323,293
Receivable for:
Interest................................................ 3,493,178
Investments sold........................................ 689,691
Prepaid expenses and other assets........................... 22,686
------------
TOTAL ASSETS............................................ 164,206,003
------------
LIABILITIES:
Payable for:
Investment advisory fee................................. 74,244
Administration fee...................................... 44,546
Accrued expenses and other payables......................... 177,006
------------
TOTAL LIABILITIES....................................... 295,796
------------
NET ASSETS.............................................. $163,910,207
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $199,281,239
Net unrealized depreciation................................. (17,100,365)
Accumulated undistributed net investment income............. 2,835,821
Accumulated net realized loss............................... (21,106,488)
------------
NET ASSETS.............................................. $163,910,207
============
NET ASSET VALUE PER SHARE,
21,027,672 shares outstanding
(unlimited shares authorized of $0.01 par value)........... $7.79
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the year ended May 31, 2000
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $ 13,666,918
------------
EXPENSES
Investment advisory fee..................................... 867,619
Administration fee.......................................... 520,571
Transfer agent fees and expenses............................ 60,898
Professional fees........................................... 56,745
Shareholder reports and notices............................. 37,241
Registration fees........................................... 32,482
Trustees' fees and expenses................................. 18,965
Custodian fees.............................................. 8,181
Other....................................................... 18,787
------------
TOTAL EXPENSES.......................................... 1,621,489
Less: expense offset........................................ (8,165)
------------
NET EXPENSES............................................ 1,613,324
------------
NET INVESTMENT INCOME................................... 12,053,594
------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss........................................... (4,642,652)
Net change in unrealized depreciation....................... (13,157,810)
------------
NET LOSS................................................ (17,800,462)
------------
NET DECREASE................................................ $ (5,746,868)
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE> 14
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, 2000 MAY 31, 1999
<CAPTION>
------------------------------------------------------------------------------------
<S> <C> <C>
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................................. $ 12,053,594 $ 12,815,065
Net realized gain (loss)............................... (4,642,652) 2,248,027
Net change in unrealized depreciation.................. (13,157,810) (4,915,467)
------------ ------------
NET INCREASE (DECREASE)............................ (5,746,868) 10,147,625
Dividends to shareholders from net investment income... (13,058,564) (12,442,790)
Decrease from transactions in shares of beneficial
interest.............................................. (484,734) --
------------ ------------
NET DECREASE....................................... (19,290,166) (2,295,165)
NET ASSETS:
Beginning of period.................................... 183,200,373 185,495,538
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$2,835,821 and $3,840,791, respectively)........... $163,910,207 $183,200,373
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 2000
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Municipal Income Opportunities Trust (the "Fund") is
registered under the Investment Company Act of 1940, as amended, as a
diversified, closed-end management investment company. The Fund's investment
objective is to provide a high level of current income which is exempt from
federal income tax. The Fund was organized as a Massachusetts business trust on
June 22, 1988 and commenced operations on September 19, 1988.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued by an outside
independent pricing service approved by the Trustees. The pricing service has
informed the Fund that in valuing the portfolio securities, it uses both a
computerized matrix of tax-exempt securities and evaluations by its staff, in
each case based on information concerning market transactions and quotations
from dealers which reflect the bid side of the market each day. The portfolio
securities are thus valued by reference to a combination of transactions and
quotations for the same or other securities believed to be comparable in
quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. Short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted and premiums are amortized over the life of the
respective securities. Interest income is accrued daily except where collection
is not expected.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 2000, 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/ADMINISTRATION AGREEMENTS
Pursuant to an Investment Advisory Agreement with Morgan Stanley Dean Witter
Advisors Inc. (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.
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.
3. 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, 2000 aggregated $20,997,723
and $33,000,610, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor and
Administrator, is the Fund's transfer agent. At May 31, 2000 the Fund had
transfer agent fees and expenses payable of approximately $700.
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
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 2000, continued
five years of service. Aggregate pension costs for the year ended May 31, 2000
included in Trustees' fees and expenses in the Statement of Operations amounted
to $5,973. At May 31, 2000, the Fund had an accrued pension liability of $52,591
which is included in accrued expenses in the Statement of Assets and
Liabilities.
4. 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, 1998 and May 31, 1999...................... 21,089,872 $210,898 $199,555,075
Treasury shares purchased and retired (weighted average
discount 4.17%)*........................................... (62,200) (622) (484,112)
---------- -------- ------------
Balance, May 31, 2000....................................... 21,027,672 $210,276 $199,070,963
========== ======== ============
</TABLE>
---------------------
* The Trustees have voted to retire the shares purchased.
5. FEDERAL INCOME TAX STATUS
At May 31, 2000, the Fund had a net capital loss carryover of approximately
$16,551,000, 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 2008
--------------------- -------- -------- --------
<S> <C> <C> <C>
$10,521 $5,243 $700 $ 87
======= ====== ==== ======
</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 $4,556,000 during fiscal 2000. As of May 31, 2000, the Fund had
temporary book/tax differences primarily attributable to post-October losses.
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>
March 28, 2000 $0.0525 June 9, 2000 June 23, 2000
June 27, 2000 $0.0525 July 7, 2000 July 21, 2000
June 27, 2000 $0.0525 August 4, 2000 August 18, 2000
June 27, 2000 $0.0525 September 8, 2000 September 22, 2000
</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 YEAR ENDED MAY 31*
----------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of the period.................... $ 8.69 $ 8.80 $ 8.47 $ 8.31 $ 8.53
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income...................................... 0.57 0.61 0.60 0.63 0.69
Net realized and unrealized gain (loss).................... (0.85) (0.13) 0.31 0.16 (0.26)
-------- -------- -------- -------- --------
Total income (loss) from investment operations.............. (0.28) 0.48 0.91 0.79 0.43
-------- -------- -------- -------- --------
Less dividends from net investment income................... (0.62) (0.59) (0.58) (0.63) (0.65)
-------- -------- -------- -------- --------
Net asset value, end of period.............................. $ 7.79 $ 8.69 $ 8.80 $ 8.47 $ 8.31
======== ======== ======== ======== ========
Market value, end of period................................. $ 8.250 $ 9.438 $ 8.688 $ 8.75 $ 8.875
======== ======== ======== ======== ========
TOTAL RETURN+............................................... (5.94)% 15.65% 5.87% 5.82% 15.95%
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.93% 0.96%(1) 1.04% 1.08% 0.97%
Net investment income....................................... 6.95% 6.89% 6.98% 7.44% 8.24%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $163,910 $183,200 $185,496 $178,600 $175,294
Portfolio turnover rate..................................... 13% 16% 20% 19% 8%
</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
18
<PAGE> 19
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") at May 31, 2000, 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 accounting
principles generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 2000 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
June 30, 2000
-------------------------------------------------------------
2000 FEDERAL TAX NOTICE (unaudited)
For the year ended May 31, 2000, all of the Fund's dividends
from net investment income were exempt interest dividends,
excludable from gross income for Federal income tax purposes.
-------------------------------------------------------------
19
<PAGE> 20
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
CHANGE IN INDEPENDENT ACCOUNTANTS
On July 1, 2000 PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with its audits for the two most recent fiscal years and through
July 1, 2000, there have been no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make
reference thereto in their report on the financial statements for such years.
The Fund, with the approval of its Board of Trustees and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent accountants as of July 1,
2000.
20
<PAGE> 21
MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME OPPORTUNITIES TRUST
REVISED INVESTMENT POLICY (unaudited)
On January 26, 2000, the Trustees of Morgan Stanley Dean Witter Municipal Income
Opportunities Trust (the "Fund") approved an investment policy whereby the Fund
would be permitted to invest up to 10% of its assets in inverse floating rate
municipal obligations. The inverse floating rate municipal obligations in which
the Fund will invest are typically created through a division of a fixed rate
municipal obligation into two separate instruments, a short-term obligation and
a long-term obligation. The interest rate on the short-term obligation is set at
periodic auctions. The interest rate on the long-term obligation is the rate the
issuer would have paid on the fixed income obligation: (i) plus the difference
between such fixed rate and the rate on the short-term obligation, if the
short-term rate is lower than the fixed rate; or (ii) minus such difference if
the interest rate on the short-term obligation is higher than the fixed rate.
The interest rates on these obligations generally move in the reverse direction
of market interest rates. If market interest rates fall, the interest rate on
the obligation will increase and if market interest rates increase, the interest
rate on the obligation will fall. Inverse floating rate municipal obligations
offer the potential for higher income than is available from fixed rate
obligations of comparable maturity and credit rating. They also carry greater
risks. In particular, the prices of inverse floating rate municipal obligations
are more volatile, i.e., they increase and decrease in response to changes in
interest rates to a greater extent than comparable fixed rate obligations.
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
James F. Higgins
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
Julie C. Morrone
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
MORGAN STANLEY
DEAN WITTER
MUNICIPAL
INCOME
OPPORTUNITIES
TRUST
Annual Report
May 31, 2000
