<PAGE>
Morgan Stanley Dean Witter Municipal Income Two World Trade Center,
Opportunities Trust New York, New York 10048
Letter to the Shareholders November 30, 1999
DEAR SHAREHOLDER:
The U.S. economy, led by consumer demand, has continued to experience robust
growth this year. As a result, the fixed-income markets anticipated that the
Federal Reserve Board would blunt the risk of inflation by taking back the
liquidity it provided during last year's international economic crises. Between
June and November 1999, the Fed changed monetary policy and, in three separate
moves, raised the federal-funds rate a total of 75 basis points, to 5.50
percent. By the end of November, long-term interest rates had risen to levels
last seen more than two years ago.
MUNICIPAL MARKET CONDITIONS
Long-term insured municipal index yields began 1999 near a record low of 5.00
percent. By the end of November, this index yield had increased 100 basis
points, to 6.00 percent. Since the prices of bonds move inversely to changes in
interest rates, higher yields have led to significantly lower bond prices. The
increase in the index yield translated into a 13 percent price decline for a
generic insured municipal bond with a 30-year maturity.
The municipal market outperformed U.S. Treasury bonds early in the year but
later gave ground. The ratio of long-term municipal yields to 30-year Treasury
yields declined from 99 percent at the end of 1998 to 91 percent in May 1999
then reversed itself by rising to 95 percent by the end of November. A declining
ratio means municipals have outperformed Treasuries, while a rising ratio
indicates underperformance by municipals. Over the past five years the ratio has
ranged from a high of 99 percent to a low of 82 percent.
Higher interest rates slowed municipal underwriting in 1999. New-issue volume
declined 20 percent in the first 11 months. Refunding activity, the most
interest-rate-sensitive component of supply, dropped 50 percent.
<PAGE>
Morgan Stanley Dean Witter Municipal Income Opportunities Trust
Letter to the Shareholders November 30, 1999, continued
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
30-YEAR BOND YIELDS 1994-1999
AAA AAA
Date Ins Tsy % Relationship Date Ins Tsy % Relationship
12/31/93 5.40% 6.34% 85.17% 12/31/96 5.60 6.63 84.46%
01/31/94 5.40 6.24 86.54% 01/31/97 5.70 6.79 83.95%
02/28/94 5.80 6.66 87.09% 02/28/97 5.65 6.80 83.09%
03/31/94 6.40 7.09 90.27% 03/31/97 5.90 7.10 83.10%
04/29/94 6.35 7.32 86.75% 04/30/97 5.75 6.94 82.85%
05/31/94 6.25 7.43 84.12% 05/30/97 5.65 6.91 81.77%
06/30/94 6.50 7.61 85.41% 06/30/97 5.60 6.78 82.60%
07/29/94 6.25 7.39 84.57% 07/30/97 5.30 6.30 84.13%
08/31/94 6.30 7.45 84.56% 08/31/97 5.50 6.61 83.21%
09/30/94 6.55 7.81 83.87% 09/30/97 5.40 6.40 84.38%
10/31/94 6.75 7.96 84.80% 10/31/97 5.35 6.15 86.99%
11/30/94 7.00 8.00 87.50% 11/30/97 5.30 6.05 87.60%
12/30/94 6.75 7.88 85.66% 12/31/97 5.15 5.92 86.99%
01/31/95 6.40 7.70 83.12% 01/31/98 5.15 5.80 88.79%
02/28/95 6.15 7.44 82.66% 02/28/98 5.20 5.92 87.84%
03/31/95 6.15 7.43 82.77% 03/31/98 5.25 5.93 88.53%
04/28/95 6.20 7.34 84.47% 04/30/98 5.35 5.95 89.92%
05/31/95 5.80 6.66 87.09% 05/29/98 5.20 5.80 89.66%
06/30/95 6.10 6.62 92.15% 06/30/98 5.20 5.65 92.04%
07/31/95 6.10 6.86 88.92% 07/31/98 5.18 5.71 90.72%
08/31/95 6.00 6.66 90.09% 08/31/98 5.03 5.27 95.45%
09/29/95 5.95 6.48 91.82% 09/30/98 4.95 5.00 99.00%
10/31/95 5.75 6.33 90.84% 10/31/98 5.05 5.16 97.87%
11/30/95 5.50 6.14 89.58% 11/30/98 5.00 5.06 98.81%
12/29/95 5.35 5.94 90.07% 12/31/98 5.05 5.10 99.02%
01/31/96 5.40 6.03 89.55% 01/31/99 5.00 5.09 98.23%
02/29/96 5.60 6.46 86.69% 02/28/99 5.10 5.58 91.40%
03/29/96 5.85 6.66 87.84% 03/31/99 5.15 5.63 91.47%
04/30/96 5.95 6.89 86.36% 04/30/99 5.20 5.66 91.87%
05/31/96 6.05 6.99 86.55% 05/31/99 5.30 5.83 90.91%
06/28/96 5.90 6.89 85.63% 06/30/99 5.47 5.96 91.78%
07/31/96 5.85 6.97 83.93% 07/31/99 5.55 6.10 90.98%
08/30/96 5.90 7.11 82.98% 08/31/99 5.75 6.06 94.88%
09/30/96 5.70 6.93 82.25% 09/30/99 5.85 6.05 96.69%
10/31/96 5.65 6.64 85.09% 10/31/99 6.03 6.16 97.89%
11/29/96 5.50 6.35 86.61% 11/30/99 6.00 6.29 95.39%
Source: Municipal Market Data-A Division of Thomson Financial Municipal
Group and Bloomberg L.P.
PERFORMANCE
In this rising interest rate environment, the net asset value (NAV) of Morgan
Stanley Dean Witter Municipal Income Opportunities Trust (OIA) declined from
$8.69 to $8.23 per share during the six-month period ended November 30, 1999.
Based on this change plus reinvestment of tax-free dividends totaling $0.31 per
share, the Fund's total NAV return was -1.90 percent. OIA's value on the New
York Stock Exchange (NYSE) fell from $9.4375 to $8.1875 per share during the
same period. Based on this change plus reinvestment of dividends, OIA's total
market return was -10.24 percent.
Monthly dividends for the fourth quarter of 1999 were declared in September.
Beginning with the October payment, the dividend was increased from $0.050 to
$0.0525 per share. The new dividend rate reflects the Fund's estimated earnings
over the next 6-12 months and its $0.166 per share cushion of undistributed net
investment income on November 30, 1999.
2
<PAGE>
Morgan Stanley Dean Witter Municipal Income Opportunities Trust
Letter to the Shareholders November 30, 1999, continued
PORTFOLIO STRUCTURE
The Fund's investments were diversified among 14 long-term sectors and 66
credits. At the end of November, the portfolio's average maturity was 19 years.
Average duration, a measure of sensitivity to interest-rate changes, was 8.7
years. Nonrated securities comprise more than half of OIA's assets. All credits
are currently accruing interest. However, two other issuers, representing 4
percent of net assets, were accruing income but may have difficulty with future
debt service payments. The accompanying charts provide current information on
the portfolio's credit quality, sector distribution and geographic
diversification. Optional call provisions by year and their respective cost
(book) yields are also charted.
LOOKING AHEAD
The Federal Reserve Board raised interest rates twice in the summer and again in
November 1999. These moves confirmed its previously disclosed bias of becoming
less accommodative in the face of continued strong domestic economic growth. It
is anticipated that the central bank may raise short-term interest rates further
and influence the level of long-term rates. However, we believe municipal bonds
continue to offer tax conscious investors good long-term value relative to
Treasuries.
The Fund's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps support
the market value of the Fund's shares. In addition, we would like to remind you
that the Trustees have approved a procedure whereby the Fund may, when
appropriate, purchase shares in the open market or in privately negotiated
transactions at a price not above market value or net asset value, whichever is
lower at the time of purchase.
In conclusion, we would like to take this opportunity to notify shareholders
that in July 1999 Julie C. Morrone was named co-manager of the Fund. Ms. Morrone
joined Morgan Stanley Dean Witter Advisors in 1993, where she has worked as a
senior municipal analyst for the Fund's management team.
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
3
<PAGE>
Morgan Stanley Dean Witter Municipal Income Opportunities Trust
Letter to the Shareholders November 30, 1999, continued
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
LARGEST SECTORS as of November 30, 1999
(% of Net Assets)
IDR/PCR* 18%
Mortgage 17%
Nursing & Health 17%
Retirement & Life Care 10%
Hospital 9%
Recreational Facilities 7%
Transportation 6%
Tax Allocation 4%
* Industrial Development/Pollution Control Revenue
Portfolio structure is subject to change.
CREDIT RATING as of November 30, 1999
(% of Total Long-Term Portfolio)
Baa or BBB 12%
NR 60%
Aaa or AAA 13%
Aa or AA 10%
A or A 5%
As measured by Moody's Investors Service, Inc. or Standard & Poor's Corp.
Portfolio Structure is subject to change.
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
November 30, 1999
Alabama ....................... 0.9%
Alaska ........................ 2.1
Arkansas ...................... 1.0
California .................... 5.2
Colorado ...................... 3.5
Connecticut ................... 1.1
District of Columbia .......... 0.3
Florida ....................... 8.4
Illinois ...................... 5.7
Iowa .......................... 0.9
Kentucky ...................... 2.4
Louisiana ..................... 0.9 %
Massachusetts ................. 6.8
Michigan ...................... 6.3
Minnesota ..................... 4.5
Missouri ...................... 4.2
New Hampshire ................. 6.3
New Jersey .................... 3.6
New York ...................... 6.9
Ohio .......................... 3.3
Oklahoma ...................... 2.9
Pennsylvania .................. 3.9
South Carolina ................ 3.2 %
Tennessee ..................... 1.4
Texas ......................... 2.8
Utah .......................... 2.5
Vermont ....................... 1.2
Virginia ...................... 6.2
West Virginia ................. 1.2
Joint Exemption* .............. (0.3)
----
Total ......................... 99.3 %
====
* Joint exemptions have been included in each geographic location.
Portfolio structure is subject to change.
4
<PAGE>
Morgan Stanley Dean Witter Municipal Income Opportunities Trust
Letter to the Shareholders November 30, 1999, continued
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
CALL AND COST (BOOK) YIELD STRUCTURE
NOVEMBER 30, 1999
PERCENT CALLABLE* COST(BOOK) YIELD**
2000 12% 2000 9.9%
2001 1% 2001 9.4%
2002 2% 2002 6.6%
2003 8% 2003 7.0%
2004 7% 2004 9.3%
2005 9% 2005 6.8%
2006 9% 2006 6.7%
2007 6% 2007 5.8%
2008 14% 2008 6.1%
2009 13% 2009 6.3%
2010+ 19% 2010+ 8.6%
YEARS BONDS CALLABLE
WEIGHTED AVERAGE WEIGHTED AVERAGE
CALL PROTECTION: 8 YEARS BOOK YIELD: 7.5%
* % Based on Long-Term Portfolio.
** Cost or "book" yield is the annual income earned on a portfolio investment
based on its original purchase price before Fund operating expenses. For
example, the Fund earned a book yield of 7% on 8% of the long-term portfolio
that is callable in 2003.
Portfolio structure is subject to change.
5
<PAGE>
Morgan Stanley Dean Witter Municipal Income Opportunities Trust
Portfolio of Investments November 30, 1999 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------- ---------- --------------
<S> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (97.5%)
General Obligation (1.2%)
$ 2,000 New York City, New York, 1994 Ser D ................................................ 5.75% 08/15/10 $ 2,039,700
--------- ------------
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 1,683,328
1,000 Massachusetts Health & Educational Facilities Authority, The Learning
Center for Deaf Children Ser C ................................................... 6.125 07/01/29 890,120
1,000 New Jersey Educational Facilities Authority, Fairleigh Dickinson University
1998 Ser G ....................................................................... 5.70 07/01/28 902,600
1,000 New York State Dormitory Authority, State University 1993 Ser A .................... 5.25 05/15/15 949,220
--------- ------------
4,600 4,425,268
--------- ------------
Electric Revenue (3.2%)
1,500 Alaska Industrial Development & Export Authority, Snettisham Hydroelectric
1st Ser (AMT) (AMBAC) ............................................................ 5.00 01/01/27 1,258,275
5,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary FSA)** ................ 5.00 07/01/21 4,333,750
--------- ------------
6,500 5,592,025
--------- -----------
Hospital Revenue (8.6%)
2,000 Baxter County, Arkansas, Baxter County Regional Hospital Impr & Refg
Ser 1999 B ....................................................................... 5.625 09/01/28 1,703,600
2,000 Kentucky Economic Development Finance Authority, Appalachian Regional
Healthcare Inc Refg & Impr Ser 1997 .............................................. 5.875 10/01/22 1,617,440
Massachusetts Health & Educational Facilities Authority,
2,000 Dana Farber Cancer Institute Ser G-1 ............................................. 6.25 12/01/14 2,030,140
3,000 Dana Farber Cancer Institute Ser G-1 ............................................. 6.25 12/01/22 2,967,540
1,250 New Hampshire Higher Educational & Health Facilities Authority, Littleton
Hospital Assn Ser 1998 A ......................................................... 6.00 05/01/28 1,074,825
2,000 New Jersey Health Care Facilities Financing Authority, Raritan Bay Medical
Center Ser 1994 .................................................................. 7.25 07/01/27 1,927,260
1,250 Cuyahoga County, Ohio, Cleveland Clinic Foundation Ser 1999 B ...................... 5.25 01/01/15 1,177,838
3,000 Metropolitan Government of Nashville & Davidson County, Health &
Educational Facilites Board, Tennessee, Baptist Hospital Ser 1998 A (MBIA) ....... 4.875 11/01/28 2,479,170
--------- ------------
16,500 14,977,813
--------- ------------
Industrial Development/Pollution Control Revenue (17.8%)
460 Metropolitan Washington Airports Authority, District of Columbia & Virginia,
CaterAir International Corp Ser 1991 (AMT)++ ..................................... 10.125 09/01/11 462,571
2,350 Chicago, Illinois, Chicago O'Hare Int'l Airport/United Airlines Inc Ser 1999 A ..... 5.35 09/01/16 2,047,109
1,500 Iowa Finance Authority, ISPCO Inc Ser 1997 (AMT) ................................... 6.00 06/01/27 1,494,990
3,000 Massachusetts Industrial Finance Agency, Eastern Edison Co Refg Ser 1993 ........... 5.875 08/01/08 2,911,620
3,650 Detroit Economic Development Corporation, Michigan, North Industrial
Park LP Ser 1989 ................................................................. 11.375 02/15/14 3,719,642
1,290 Michigan Strategic Fund, Kasle Steel Corp Ser 1989 (AMT) ........................... 9.375 10/01/06 1,309,948
2,000 Dayton, Ohio, Emery Air Freight Corp Ser 1998 A .................................... 5.625 02/01/18 1,790,280
850 Zanesville-Muskingum County Port Authority, Ohio, Anchor Glass
Container Corp Ser 1989 B (AMT) .................................................. 10.25 12/01/08 860,345
</TABLE>
See Notes to Financial Statements
6
<PAGE>
Morgan Stanley Dean Witter Municipal Income Opportunities Trust
Portfolio of Investments November 30, 1999 (unaudited), continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------- ---------- ---------------
<S> <C> <C> <C>
$ 2,000 Beaver County Industrial Development Authority, Pennsylvania, Toledo
Edison Co Collateralized Ser 1995 B ......................................... 7.75% 05/01/20 $ 2,153,260
Lexington County, South Carolina,
1,415 Ellett Brothers Inc Refg Ser 1988 ........................................... 7.50 09/01/02 1,406,439
4,250 Ellett Brothers Inc Refg Ser 1988 ........................................... 7.50 09/01/08 4,177,069
Pittsylvania County Industrial Development Authority, Virginia,
4,500 Multi-Trade of Pittsylvania County Ser 1994 A (AMT) ......................... 7.45 01/01/09 4,720,859
1,500 Multi-Trade of Pittsylvania County Ser 1994 A (AMT) ......................... 7.50 01/01/14 1,579,545
2,000 Upshur County, West Virginia, TJ International Inc Ser 1995 (AMT) ............. 7.00 07/15/25 2,093,380
--------- ------------
30,765 30,727,057
--------- ------------
Mortgage Revenue - Multi-Family (6.1%)
Washington County Housing & Redevelopment Authority, Minnesota,
3,885 Courtly Park Ser 1989 A ..................................................... 9.75 06/15/19 3,091,139
1,165 Courtly Park Ser 1989 A (AMT) ............................................... 10.25 06/15/19 927,247
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 3,322,881
21,210 White Bear Woods Apts Phase II Refg 1989 Ser B .............................. 0.00 06/15/19 212,107
3,000 Brookhaven Industrial Development Agency, New York, Woodcrest Estates
Ser 1998 A (AMT) ............................................................ 6.375 12/01/37 2,665,950
--------- ------------
65,733 10,546,903
--------- ------------
Mortgage Revenue - Single Family (11.3%)
2,500 Alaska Housing Finance Corporation, 1997 Ser A (MBIA)** ....................... 6.00 06/01/27 2,427,975
3,000 Colorado Housing Finance Authority, Ser 1998 D-2 (AMT) ........................ 6.35 11/01/29 3,013,470
85 Broward County Housing Finance Authority, Florida, Home Ser 1989 A ............ 10.00 10/01/03 85,108
46,985 New Hampshire Housing Finance Authority, Residential 1983 Ser B ............... 0.00 01/01/15 9,862,621
2,000 Ohio Housing Finance Agency, Residential 1996 Ser B-2 (AMT) ................... 6.10 09/01/28 1,957,340
2,260 Virginia Housing Development Authority, 1992 Ser A ............................ 7.10 01/01/22 2,310,240
--------- ------------
56,830 19,656,754
--------- ------------
Nursing & Health Related Facilities Revenue (16.7%)
Escambia County, Florida,
7,660 Pensacola Care Development Centers Ser 1989 ................................. 10.25 07/01/11 7,629,974
1,755 Pensacola Care Development Centers Ser 1989 A ............................... 10.25 07/01/11 1,748,120
1,000 Orange County Health Facilities Authority, Florida, Westminister
Community Care Services Inc Ser 1999 ........................................ 6.75 04/01/34 918,700
2,455 Jefferson County, Kentucky, AHF/Kentucky-Iowa Inc Ser 1990 .................... 10.25 01/01/20 2,532,504
1,500 Westside Habilitation Center, Louisiana, Intermediate Care Facility for the
Mentally Retarded Refg Ser 1993 ............................................. 8.375 10/01/13 1,603,455
1,040 Mount Vernon Industrial Development Agency, New York, Meadowview
at the Wartburg Civic Facility Ser 1999 ..................................... 6.00 06/01/09 994,698
McCurtain County, Oklahoma,
4,950 Heartway Corp Ser 1997 A .................................................... 7.00 03/01/19 4,950,000
835 Heartway Corp Ser 1997 B .................................................... 10.00 03/01/19 8,350
3,725 Allegheny County Hospital Development Authority, Pennsylvania,
Allegheny Valley School Ser 1990 ............................................ 8.50 02/01/15 3,793,279
</TABLE>
See Notes to Financial Statements
7
<PAGE>
Morgan Stanley Dean Witter Municipal Income Opportunities Trust
Portfolio of Investments November 30, 1999 (unaudited), continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------- ----------- ---------------
<S> <C> <C> <C> <C>
Kirbyville Health Facilities Develpmenet Authority, Texas,
$ 642 Heartway III Corp Ser 1998 B ............................................... 6.00% 03/20/04 $ 616,320
3,942 Heartway III Corp Ser 1998 A ............................................... 10.00 03/20/18 4,217,243
--------- ------------
29,504 29,012,643
--------- ------------
Recreational Facilities Revenue (6.5%)
2,000 West Jefferson Amusement & Public Park Authority, Alabama,
Visionland Ser 1999 ........................................................ 6.375 02/01/29 1,593,260
2,000 Sacramento Financing Authority, California, Convention Center Hotel
1999 Ser A ................................................................. 6.25 01/01/30 1,855,640
2,000 San Diego County, California, San Diego Natural History Museum COPs .......... 5.70 02/01/28 1,798,040
Mashantucket (Western) Pequot Tribe, Connecticut,
1,010 Special 1996 Ser A (a) ..................................................... 6.40 09/01/11 1,046,815
1,000 Special 1997 Ser B (a) ..................................................... 5.75 09/01/27 907,970
2,500 American National Fish & Wildlife Museum District, Missouri,
Ser 1999 (WI) .............................................................. 7.00 09/01/19 2,429,925
1,700 Bi-State Development Agency of the Missouri-Illinois Metropolitan District,
Arch Parking Refg Ser 1997 ................................................. 5.875 12/01/12 1,667,785
--------- ------------
12,210 11,299,435
--------- ------------
Retirement & Life Care Facilities Revenue (10.3%)
1,500 Massachusetts Development Finance Agency, Loomis Communities
Ser 1999 A ................................................................. 5.75 07/01/23 1,294,155
5,552 Ann Arbor Economic Development Corporation, Michigan, Glacier Hills Inc
Ser 1989 ................................................................... 8.375 01/15/19 5,840,148
New Jersey Economic Development Authority,
1,000 Fellowship Village Refg Ser 1998 A ......................................... 5.50 01/01/25 862,140
1,000 Franciscan Oaks Ser 1997 ................................................... 5.70 10/01/17 872,750
2,000 United Methodist Homes of New Jersey Ser 1998 .............................. 5.125 07/01/25 1,585,100
2,000 Glen Cove Housing Authority, New York, Mayfair at Glen Cove Ser 1996
(AMT) ...................................................................... 8.25 10/01/26 2,145,900
3,250 Suffolk County Industrial Development Agency, New York, Jefferson's Ferry
Ser 1999 (WI) .............................................................. 7.25 11/01/28 3,238,008
2,100 Vermont Economic Development Authority, Wake Robin Corp Ser 1999 A ........... 6.75 03/01/29 2,031,183
--------- ------------
18,402 17,869,384
--------- ------------
Tax Allocation Revenue (3.8%)
Crestwood, Illinois,
3,000 Refg Ser 1994 .............................................................. 7.00 12/01/04 3,124,470
3,350 Refg Ser 1994 .............................................................. 7.25 12/01/08 3,474,888
--------- ------------
6,350 6,599,358
--------- ------------
Transportation Facilities Revenue (6.0%)
4,000 Foothill/Eastern Transportation Corridor Agency, California, Ser 1999 ......... 0.00 01/15/27 2,050,240
7,500 E-470 Public Highway Authority, Colorado, Ser 1997 B (MBIA) ................... 0.00 09/01/15 2,978,100
2,000 Mid-Bay Bridge Authority, Florida, Sr Lien Crossover Refg Ser 1993 A
(AMBAC) ..................................................................... 5.85 10/01/13 2,048,200
2,000 Massachusetts Turnpike Authority, Metropolitan Highway 1997 Ser A
(MBIA) ...................................................................... 5.00 01/01/37 1,672,260
2,000 Pocahontas Parkway Association, Virginia, Route 895 Connector
Ser 1998 A .................................................................. 5.50 08/15/28 1,711,320
--------- ------------
17,500 10,460,120
--------- ------------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
Morgan Stanley Dean Witter Municipal Income Opportunities Trust
Portfolio of Investments November 30, 1999 (unaudited), continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------- --------------- ------------
<S> <C> <C> <C> <C>
Water & Sewer Revenue (1.7%)
$ 2,000 Northern Palm Beach County Improvement District, Florida, Water Control
& Improvement #9A Ser 1996 A .......................................... 7.30% 08/01/27 $ 2,107,220
6,000 Pittsburgh Water & Sewer Authority, Pennsylvania, First Lien 1998 Ser B
(FGIC) ................................................................ 0.00 09/01/30 890,700
--------- ------------
8,000 2,997,920
--------- ------------
Refunded (1.7%)
2,000 Foothill/Eastern Transportation Corridor Agency, California, Toll Road
Sr Lien Ser 1995 A .................................................... 0.00 01/01/13+ 1,706,420
1,095 Bridgeview, Illinois, Tax Increment Ser 1995 ............................ 9.00 01/01/11+ 1,275,993
--------- ------------
3,095 2,982,413
--------- ------------
277,989 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $182,690,355) .................................. 169,186,793
--------- ------------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATION (1.8%)
3,100 Missouri Health & Educational Facilities Authority, Washington University
--------- Ser C (Demand 12/01/99) (Identified Cost $3,100,000) .................. 3.75* 09/01/30 3,100,000
------------
$ 281,089 TOTAL INVESTMENTS (Identified Cost $185,790,355) (b).............................. 99.3% 172,286,793
=========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ................................... 0.7 1,187,451
----- ---------
NET ASSETS ....................................................................... 100.0% $173,474,244
===== ============
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
WI Security purchased on a "when-issued" basis.
+ Prerefunded to call date shown.
++ Joint exemption in locations shown.
* Current coupon of variable rate demand obligation.
** This security is segregated in connection with the purchase of "when-
issued" securities.
(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 $2,543,826 and the
aggregate gross unrealized depreciation is $16,047,388, resulting in net
unrealized depreciation of $13,503,562.
Bond Insurance:
- ---------------
AMBAC AMBAC Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements
9
<PAGE>
Morgan Stanley Dean Witter Municipal Income Opportunities Trust
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1999 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $185,790,355)............................ $172,286,793
Cash ....................................................... 199,709
Receivable for:
Interest ................................................. 3,923,495
Investments sold ......................................... 3,815,109
Prepaid expenses and other assets .......................... 11,499
------------
TOTAL ASSETS ............................................ 180,236,605
------------
LIABILITIES:
Payable for:
Investments purchased .................................... 6,483,698
Investment advisory fee .................................. 76,340
Administration fee ....................................... 45,804
Accrued expenses and other payables ........................ 156,519
------------
TOTAL LIABILITIES ....................................... 6,762,361
------------
NET ASSETS .............................................. $173,474,244
============
COMPOSITION OF NET ASSETS:
Paid-in-capital ............................................ $199,718,242
Net unrealized depreciation ................................ (13,503,562)
Accumulated undistributed net investment income ............ 3,509,320
Accumulated net realized loss .............................. (16,249,756)
------------
NET ASSETS .............................................. $173,474,244
============
NET ASSET VALUE PER SHARE,
21,084,072 shares outstanding
(unlimited shares authorized of $.01 par value) ......... $8.23
=====
See Notes to Financial Statements
10
<PAGE>
Morgan Stanley Dean Witter Municipal Income Opportunities Trust
Financial Statements, continued
STATEMENT OF OPERATIONS
For the six months ended November 30, 1999 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME ............................... $6,923,026
------------
EXPENSES
Investment advisory fee ....................... 445,251
Administration fee ............................ 267,151
Transfer agent fees and expenses .............. 38,110
Professional fees ............................. 20,725
Shareholder reports and notices ............... 17,889
Registration fees ............................. 16,250
Trustees' fees and expenses ................... 8,663
Custodian fees ................................ 4,289
Other ......................................... 8,451
------------
TOTAL EXPENSES ............................. 826,779
Less: expense offset .......................... (4,281)
------------
NET EXPENSES ............................... 822,498
------------
NET INVESTMENT INCOME ...................... 6,100,528
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ............................. 214,080
Net change in unrealized depreciation ......... (9,561,007)
------------
NET LOSS ................................... (9,346,927)
------------
NET DECREASE .................................. $ (3,246,399)
============
See Notes to Financial Statements
11
<PAGE>
Morgan Stanley Dean Witter Municipal Income Opportunities Trust
Financial Statements, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
NOVEMBER 30, 1999 MAY 31, 1999
------------------- ---------------
<S> <C> <C>
(unaudited)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ........................................ $ 6,100,528 $ 12,815,065
Net realized gain ............................................ 214,080 2,248,027
Net change in unrealized depreciation ........................ (9,561,007) (4,915,467)
------------ ------------
NET INCREASE (DECREASE) ................................... (3,246,399) 10,147,625
------------ ------------
Dividends to shareholders from net investment income ......... (6,431,999) (12,442,790)
------------ ------------
Net decrease from transactions in shares of beneficial
interest ................................................... (47,731) -
------------ ------------
NET DECREASE .............................................. (9,726,129) (2,295,165)
NET ASSETS:
Beginning of period .......................................... 183,200,373 185,495,538
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$3,509,320 and $3,840,791, respectively) .................. $173,474,244 $183,200,373
============ ============
</TABLE>
See Notes to Financial Statements
12
<PAGE>
Morgan Stanley Dean Witter Municipal Income Opportunities Trust
Notes to Financial Statements November 30, 1999 (unaudited)
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.
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
13
<PAGE>
Morgan Stanley Dean Witter Municipal Income Opportunities Trust
Notes to Financial Statements November 30, 1999 (unaudited) continued
which may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
2. INVESTMENT ADVISORY AGREEMENT
Pursuant to an Investment Advisory Agreement with Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Advisor"), 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.
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, 1999 aggregated
$15,816,383 and $16,564,375, respectively.
14
<PAGE>
Morgan Stanley Dean Witter Municipal Income Opportunities Trust
Notes to Financial Statements November 30, 1999 (unaudited) continued
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor and
Administrator, is the Fund's transfer agent. At November 30, 1999 the Fund had
transfer agent fees and expenses payable of approximately $9,000.
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, 1999
included in Trustees' fees and expenses in the Statement of Operations amounted
to $2,987. At November 30, 1999, the Fund had an accrued pension liability of
$52,081 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, 1998 and May 31, 1999 .................................. 21,089,872 $210,898 $199,555,075
Treasury shares purchased and retired (weighted average discount 0.00%)* (5,800) (58) (47,673)
---------- -------- ------------
Balance, November 30, 1999 .............................................. 21,084,072 $210,840 $199,507,402
========== ======== ============
</TABLE>
- ---------------
* The Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS
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:
AMOUNT IN THOUSANDS
- ------------------------------------------------
2003 2004 2006
-------- --------- -------
$ 10,521 $5,243 $700
========= ====== ====
15
<PAGE>
Morgan Stanley Dean Witter Municipal Income Opportunities Trust
Notes to Financial Statements November 30, 1999 (unaudited) continued
7. DIVIDENDS
The Fund declared the following dividends from net investment income:
DECLARATION AMOUNT RECORD PAYABLE
DATE PER SHARE DATE DATE
- ------------------------ ----------- ------------------ ------------------
September 28, 1999 $0.0525 December 3, 1999 December 17, 1999
December 28, 1999 $0.0525 January 7, 2000 January 21, 2000
December 28, 1999 $0.0525 February 4, 2000 February 18, 2000
December 28, 1999 $0.0525 March 3, 2000 March 17, 2000
16
<PAGE>
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, 1999 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <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 $8.47
------- ------- ------- ------- ------- -------
Income (loss) from investment operations:
Net investment income .............................. 0.29 0.61 0.60 0.63 0.69 0.68
Net realized and unrealized gain (loss) ............ (0.44) (0.13) 0.31 0.16 (0.26) 0.01
------- ------- ------- ------- ------- -------
Total income (loss) from investment operations ...... (0.15) 0.48 0.91 0.79 0.43 0.69
------- ------- ------- ------- ------- -------
Less dividends from net investment income ........... (0.31) (0.59) (0.58) (0.63) (0.65) (0.63)
------- ------- ------- ------- ------- -------
Net asset value, end of period ...................... $ 8.23 $ 8.69 $ 8.80 $ 8.47 $ 8.31 $ 8.53
======= ======= ======= ======= ======= =======
Market value, end of period ......................... $8.188 $9.438 $8.688 $ 8.75 $8.875 $ 8.25
======= ======= ======= ======= ======= =======
TOTAL RETURN+ ....................................... (10.24)%(1) 15.65% 5.87% 5.82% 15.95% 9.81%
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................ 0.93 %(2)(3) 0.96%(3) 1.04% 1.08% 0.97% 1.04%
Net investment income ............................... 6.85 %(2) 6.89% 6.98% 7.44% 8.24% 8.10%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ............. $173,474 $183,200 $185,496 $178,600 $175,294 $179,843
Portfolio turnover rate ............................. 9 % 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) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.01%.
See Notes to Financial Statements
17
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
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
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
The financial statements included herein have been taken from the records
of the Fund without examination by the independent accountants and
accordingly they do not express an opinion thereon.
MORGAN STANLEY
DEAN WITTER
MUNICIPAL
INCOME
OPPORTUNITIES
TRUST
SEMIANNUAL REPORT
November 30, 1999
