-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ChsmejKrXWAMFcPFj4iVBHbjDEX5vj39K8c/uQ+PkzvN67nhi0CbdCMsArBA9xmG qCEcK12JpqkojV4Yerpj5Q== 0000950123-00-004118.txt : 20000501 0000950123-00-004118.hdr.sgml : 20000501 ACCESSION NUMBER: 0000950123-00-004118 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000229 FILED AS OF DATE: 20000428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST CENTRAL INDEX KEY: 0000817130 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133422754 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05214 FILM NUMBER: 611892 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CNTR STREET 2: C/O DEAN WITTER INTERCAPITAL INC CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123922550 FORMER COMPANY: FORMER CONFORMED NAME: MUNICIPAL INCOME TRUST/MA DATE OF NAME CHANGE: 19930721 FORMER COMPANY: FORMER CONFORMED NAME: ALLSTATE MUNICIPAL INCOME TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: WITTER DEAN TAX FREE INCOME TRUST DATE OF NAME CHANGE: 19870817 N-30D 1 MSDW MUNICIPAL INCOME TRUST 1 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST Two World Trade Center LETTER TO THE SHAREHOLDERS February 29, 2000 New York, New York 10048 DEAR SHAREHOLDER: The U.S. economy continued its unprecedented expansion into the new year with strong growth sustaining full employment. Rising commodity prices, led by oil, which moved above $30 per barrel, heightened concern about inflation. The Federal Reserve Board reacted by raising the federal funds rate by 25 basis points in February and March. This marked the fourth and fifth times in less than a year that the central bank has increased short-term rates. Economic growth and a less accommodative monetary policy caused long-term interest rates to rise throughout 1999 and into January 2000. In February, the U.S. Treasury announced its plan to use the federal budget surplus to retire debt, precipitating a rally in long Treasury securities. 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 year-end. This index reached a high of 6.18 percent in January 2000 before closing February at 6.04 percent. Because bond prices move inversely to changes in interest rates, higher yields caused bond prices to decline significantly. For the 1999 calendar year 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 ratio of municipal yields as a percentage of Treasury yields has been used historically 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 beginning of 1999, to 98 percent in February 2000 is primarily attributed to the magnitude of the rally in long-term Treasuries. A rising yield ratio indicates weaker relative performance by municipals. Higher interest rates reduced municipal market underwriting in 1999. New-issue volume declined 20 percent. Refunding activity, the most interest-rate-sensitive component of supply, was down more than 2 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS February 29, 2000, continued 50 percent. In the first two months of this year, volume was 30 percent lower than the same period last year. 30-YEAR BOND YIELDS 1994 - 2000
Insured U.S. Insured Municipal Yields as a Municipal Yields Treasury Yields Percent of U.S. Treasury Yields 1994 5.4% 6.34% 85.17% 5.4 6.24 86.54 5.8 6.66 87.09 6.4 7.09 90.27 6.35 7.32 86.75 6.25 7.43 84.12 6.5 7.61 85.41 6.25 7.39 84.57 6.3 7.45 84.56 6.55 7.81 83.87 6.75 7.96 84.8 7 8.00 87.5 6.75 7.88 85.66 1995 6.4 7.70 83.12 6.15 7.44 82.66 6.15 7.43 82.77 6.2 7.34 84.47 5.8 6.66 87.09 6.1 6.62 92.15 6.1 6.86 88.92 6 6.66 90.09 5.95 6.48 91.82 5.75 6.33 90.84 5.5 6.14 89.58 5.35 5.94 90.07 1996 5.4 6.03 89.55 5.6 6.46 86.69 5.85 6.66 87.84 5.95 6.89 86.36 6.05 6.99 86.55 5.9 6.89 85.63 5.85 6.97 83.93 5.9 7.11 82.98 5.7 6.93 82.25 5.65 6.64 85.09 5.5 6.35 86.61 5.6 6.63 84.46 1997 5.7 6.79 83.95 5.65 6.80 83.09 5.9 7.10 83.1 5.75 6.94 82.85 5.65 6.91 81.77 5.6 6.78 82.6 5.3 6.30 84.13 5.5 6.61 83.21 5.4 6.40 84.38 5.35 6.15 86.99 5.3 6.05 87.6 5.15 5.92 86.99 1998 5.15 5.80 88.79 5.2 5.92 87.84 5.25 5.93 88.53 5.35 5.95 89.92 5.2 5.80 89.66 5.2 5.65 92.04 5.18 5.71 90.72 5.03 5.27 95.45 4.95 5.00 99.00 5.05 5.16 97.87 5.00 5.06 98.81 5.05 5.10 99.02 1999 5.00 5.09 98.23 5.10 5.58 91.40 5.15 5.63 91.47 5.20 5.66 91.87 5.30 5.83 90.91 5.47 5.96 91.78 5.55 6.10 90.98 5.75 6.06 94.88 5.85 6.05 96.69 6.03 6.16 97.89 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
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 Trust (TFA) was affected by the higher-interest-rate environment outlined above. The Fund's net asset value (NAV) declined from $9.61 to $9.31 per share for the six-month period ended February 29, 2000. Based on this change, plus reinvestment of tax-free dividends totaling $0.25 per share and a long-term capital gain distribution of $0.011412 per share paid on December 17, 1999, the Fund's total NAV return was 0.07 percent. TFA's Price on the New York Stock Exchange (NYSE) moved from $7.8125 to $7.9375 per share during the same period. Based on this change, plus the reinvestment of distributions, TFA's total market return was 4.95 percent. As of February 29, 2000 TFA's share price was at a 14.7 percent discount to its NAV. Monthly dividends for the first quarter of 2000, declared in January were unchanged at $0.0425 per share. The Fund's level of undistributed net investment income declined from $0.111 per share to $0.107 per over the past six months. 2 3 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS February 29, 2000, continued PORTFOLIO STRUCTURE The Fund's net assets of $263 million were diversified among 16 long-term sectors and 63 credits. Holdings in the refunded bond category comprised 6 percent of net assets. These bonds have been refinanced and will be redeemed on the dates shown in the portfolio. At the end of February the portfolio's average maturity was 19 years and its average duration, a measure of sensitivity to interest rate changes was 9.6 years. 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 has expressed concern over prices and rising consumer wealth. It is anticipated that the central bank will continue to increase short-term interest rates in an effort to slow the economy. 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. During the 6-month period ended February 29, 2000, the Fund purchased and retired 771,800 shares of common stock at a weighted average market discount of 14.57 percent. We appreciate your ongoing support of Morgan Stanley Dean Witter Municipal Income 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 4 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS February 29, 2000, continued [BAR CHART]
LARGEST SECTORS as of February 29, 2000 (% of Net Assets) General Obligation 17% Transportation 14% Mortgage 14% Water & Sewer 10% Education 7% Electric 7% Hospital 7% Refunded 6% IDR/PCR* 5%
* Industrial Development/Pollution Control Revenue Portfolio structure is subject to change. [PIE CHART]
CREDIT RATINGS as of February 29, 2000 (% of Total Long-Term Portfolio) AAA/AAA 52% AA/AA 27% A/A 8% BAA/BBB 9% NR 4%
As measured by Moody's Investors Service, Inc. or Standard & Poor's Corp. Portfolio structure is subject to change. [SUMMARY OF INVESTMENTS]
GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percent of Net Assets February 29, 2000 Alabama 6.8% Alaska 3.7 Arizona 1.8 California 11.8 Colorado 3.3 Connecticut 1.3 District of Columbia 0.7 Florida 2.2 Georgia 2.3 Hawaii 5.5 Illinois 4.1 Maryland 1.9 Massachusetts 5.3 Michigan 3.4 Missouri 2.2 Nevada 1.1 New Jersey 3.0 New York 11.7 North Carolina 3.4 North Dakota 0.7 Ohio 2.0 Oklahoma 1.9 Pennsylvania 3.6 Rhode Island 0.4 South Carolina 0.7 Tennessee 2.7 Texas 5.5 Utah 0.7 Virginia 3.8 Washington 0.8 Joint Exemptions* (1.1) ----- Total 97.2% =====
- -------------------------- * Joint exemptions have been included in each geographic location. Portfolio structure is subject to change. 4 5 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS February 29, 2000, continued CALL AND COST (BOOK) YIELD STRUCTURE FEBRUARY 29, 2000
YEARS BOND CALLABLE PERCENT CALLABLE* - ------------------- ----------------- 2000 4% 2001 1% 2002 3% 2003 5% 2004 8% 2005 16% 2006 7% 2007 18% 2008 9% 2009 11% 2010+ 18% Weighted Average Call Protection: 8 Years
COST (BOOK) YIELD ** -------------------- 2000 8.14% 2001 7.74% 2002 6.34% 2003 5.86% 2004 5.38% 2005 6.01% 2006 5.97% 2007 5.91% 2008 5.58% 2009 5.79% 2010+ 5.90% Weighted Average Book Yield: 5.92%
*% 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 7.74% on 1% of the long-term portfolio that are callable in 2001. Portfolio structure is subject to change. 5 6 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME 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 three separate matters, the results of which were as follows: (1) ELECTION OF TRUSTEES: Wayne E. Hedien For......................................................... 22,443,055 Withheld.................................................... 694,911 Dr. Manuel H. Johnson For......................................................... 22,448,031 Withheld.................................................... 689,935 John L. Schroeder For......................................................... 22,329,471 Withheld.................................................... 808,495
The following Trustees were not standing for reelection at this meeting: Michael Bozic, Charles A. Fiumefreddo, Edwin J. Garn, Michael E. Nugent and Philip J. Purcell. (2) RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS: For......................................................... 22,479,025 Against..................................................... 214,636 Abstain..................................................... 444,305
(3) SHAREHOLDER PROPOSAL TO AMEND THE FUND'S DECLARATION OF TRUST TO REQUIRE EACH TRUSTEE, WITHIN THIRTY DAYS OF ELECTION, TO BECOME A SHAREHOLDER OF THE FUND: For......................................................... 4,154,709 Against..................................................... 10,037,003 Abstain..................................................... 1,287,020
6 7 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 29, 2000 (unaudited)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- TAX- EXEMPT MUNICIPAL BONDS (97.2%) General Obligation (16.5%) $ 4,400 Moulton-Niguel Water District, California, 1993 Refg (MBIA)..................................................... 5.00% 09/01/19 $ 3,935,316 2,000 District of Columbia, Ser 1999 A (FSA)...................... 5.375 06/01/24 1,789,580 5,000 Hawaii, 1999 Ser CT (FSA)................................... 5.875 09/01/16 5,039,500 5,000 Washington Suburban Sanitary District, Maryland, Gen Constr Refg 1994.................................................. 5.00 06/01/10 4,897,550 Massachusetts, 5,000 1994 Ser A................................................. 5.00 01/01/11 4,817,300 4,000 2000 Ser A................................................. 6.00 02/01/16 4,093,080 4,000 New York City, New York, 1995 Ser D (MBIA).................. 6.20 02/01/07 4,230,800 5,000 New York State, Refg Ser 1995 B............................. 5.625 08/15/09 5,080,500 5,000 North Carolina, Public School Ser 1999...................... 4.60 04/01/17 4,278,000 5,125 Shelby County, Tennessee, Refg 1995 Ser A................... 5.625 04/01/11 5,189,164 - -------- ----------- 44,525 43,350,790 - -------- ----------- Educational Facilities Revenue (7.1%) 5,000 California Public Works Board, University of California 1993 Refg Ser A................................................. 5.50 06/01/21 4,718,600 New York State Dormitory Authority, 5,000 City University Ser 2000 A (AMBAC) (WI).................... 6.125 07/01/13 5,232,650 2,500 State University Ser 1995 A................................ 6.50 05/15/05 2,641,200 2,500 State University Ser 1995 A................................ 6.50 05/15/06 2,649,975 4,000 State University Ser 1997.................................. 5.125 05/15/27 3,373,320 - -------- ----------- 19,000 18,615,745 - -------- ----------- Electric Revenue (6.9%) 15,000 Southern California Public Power Authority, Mead-Adelanto 1994 Ser A (AMBAC)......................................... 5.15 07/01/15 14,162,550 2,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary FSA)*...................................................... 5.00 07/01/21 1,720,040 2,500 Washington Public Power Supply System, Project #1 Refg Ser 1998 A..................................................... 5.125 07/01/17 2,224,000 - -------- ----------- 19,500 18,106,590 - -------- ----------- Hospital Revenue (7.4%) 3,000 Birmingham-Carraway Special Care Facilities Financing Authority, Alabama, Carraway Methodist Health Ser 1995 A (Connie Lee)............................................... 5.875 08/15/15 2,998,410 2,500 Tampa, Florida, Catholic Health Ser 1998 A-2 (AMBAC)........ 4.875 11/15/28 2,046,875 3,000 Chatham County Hospital Authority, Georgia, Memorial Medical Center Inc Ser 1996 A (AMBAC).............................. 5.25 01/01/16 2,818,470
SEE NOTES TO FINANCIAL STATEMENTS 7 8 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 29, 2000 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- $ 3,815 Henderson, Nevada, Catholic Health West 1998 Ser A.......... 5.375% 07/01/26 $ 2,884,903 5,000 North Carolina Medical Care Commission, Presbyterian Health Services Corp Refg Ser 1993................................ 5.50 10/01/20 4,590,350 5,000 Pennsylvania Higher Educational Facilities Authority, University of Pennsylvania Ser A 1996...................... 5.75 01/01/22 4,212,150 - -------- ----------- 22,315 19,551,158 - -------- ----------- Industrial Development/Pollution Control Revenue (4.5%) 2,655 Lapeer Economic Development Corporation, Michigan, Dott Manufacturing Co Ser 1989 A (AMT).......................... 10.65 11/15/17 1,938,150 5,000 Tulsa Municipal Airport Trust, Oklahoma, American Airlines Inc Ser 1988 (AMT)......................................... 7.375 12/01/20 5,071,650 5,000 Dallas-Fort Worth International Airport Facility Improvement Corporation, Texas, American Airlines Inc Ser 1995......... 6.00 11/01/14 4,702,350 - -------- ----------- 12,655 11,712,150 - -------- ----------- Mortgage Revenue - Multi-Family (2.3%) 5,000 New Jersey Housing & Mortgage Finance Agency, 1995 Ser A (AMBAC).................................................... 6.00 11/01/14 5,016,800 940 Rhode Island Housing & Mortgage Finance Corporation, Rental 1989 Ser B (AMT)........................................... 7.95 10/01/20 960,830 - -------- ----------- 5,940 5,977,630 - -------- ----------- Mortgage Revenue - Single Family (11.4%) 10,000 Alaska Housing Finance Corporation, 1997 D Ser A (MBIA)..... 6.00 06/01/27 9,686,300 2,090 Colorado Housing Finance Authority, 1997 Ser B-2 (AMT)...... 7.00 05/01/26 2,191,762 10,000 Hawaii Housing Finance & Development Corporation, FNMA-Collateralized 1997 Ser A (AMT)....................... 5.75 07/01/30 9,281,800 1,960 Chicago, Illinois, GNMA-Backed Ser 1997-A (AMT)............. 7.25 09/01/28 2,094,574 1,720 Missouri Housing Development Commission, GNMA-Backed 1997 Ser A-2 (AMT).............................................. 7.30 03/01/28 1,843,548 1,770 North Dakota Housing Finance Agency, 1990 Ser B (AMT)....... 7.75 07/01/24 1,821,542 695 Ohio Housing Finance Agency, GNMA-Backed 1990 Ser C (AMT)... 7.85 09/01/21 714,078 2,230 Virginia Housing Development Authority, 1992 Ser A.......... 7.10 01/01/17 2,274,533 - -------- ----------- 30,465 29,908,137 - -------- ----------- Nursing & Health Related Facilities Revenue (0.6%) 2,000 New York State Dormitory Authority, Mental Health Ser 1999 C (MBIA)..................................................... 4.75 08/15/22 1,644,600 - -------- ----------- Public Facilities Revenue (1.4%) 3,495 Illinois, Civic Center Dedicated Tax Ser 1991 (AMBAC)....... 6.25 12/15/20 3,629,558 - -------- ----------- Recreational Facilities Revenue (2.8%) 4,000 Mashantucket (Western) Pequot Tribe, Connecticut, Special 1997 Ser B................................................. 5.75 09/01/27 3,542,240 4,000 American National Fish & Wildlife Museum District, Missouri, Ser 1999................................................... 7.00 09/01/19 3,848,120 - -------- ----------- 8,000 7,390,360 - -------- -----------
SEE NOTES TO FINANCIAL STATEMENTS 8 9 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 29, 2000 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- Resource Recovery Revenue (2.0%) $ 5,000 Greater Detroit Resource Recovery Authority, Michigan, 1996 6.25% 12/13/08 $ 5,340,650 - -------- Ser A (AMBAC).............................................. ----------- Retirement & Life Care Facilities Revenue (2.0)% 4,250 Riverside County Public Financing Authority, California, Air Force Village West Inc COPs................................ 5.80 05/15/29 3,432,003 1,850 Charleston County, South Carolina, Sandpiper Village Inc Refg Ser 1988.............................................. 8.00 11/01/13 1,854,551 - -------- ----------- 6,100 5,286,554 - -------- ----------- Transportation Facilities Revenue (13.5%) 15,000 E-470 Public Highway Authority, Colorado, Ser 1997 B (MBIA)..................................................... 0.00 09/01/14 6,372,000 3,000 Regional Transportation Authority, Illinois, Refg Ser 1999 (FSA)...................................................... 5.75 06/01/21 2,934,930 770 Southwestern Development Authority, Illinois, Tri-City Regional Port District Ser 1989 A (AMT) (a)................ 7.90 07/01/14 786,039 2,000 Massachusetts Turnpike Authority, Metropolitan Highway 1997 Ser A (MBIA)............................................... 5.00 01/01/37 1,651,100 2,150 Wayne County, Michigan, Charter Airport Ser 1998 B (MBIA)... 4.875 12/01/23 1,781,813 2,000 Ohio Turnpike Commission, Ser 1998 B (FGIC)................. 4.50 02/15/24 1,576,440 3,000 Delaware River Port Authority, New Jersey & Pennsylvania, Ser 1995 (FGIC)++.......................................... 5.50 01/01/26 2,807,730 5,000 Austin, Texas, Airport Prior Lien Ser 1995 A (AMT) (MBIA)... 6.125 11/15/25 4,932,550 5,000 Dallas-Fort Worth International Airport, Texas, Refg Ser 1995 (FGIC)................................................ 5.625 11/01/15 4,915,300 2,000 Pocahontas Parkway Association, Virginia, Route 895 Connector 1998 Ser A....................................... 5.50 08/15/28 1,580,780 6,000 Virginia Transportation Board, US Route 28 Ser 1992......... 6.50 04/01/18 6,159,300 - -------- ----------- 45,920 35,497,982 - -------- ----------- Water & Sewer Revenue (9.5%) 10,000 Jefferson County, Alabama, Sewer Ser 1997 (FGIC)............ 5.75 02/01/22 9,720,500 5,000 Phoenix Civic Improvement Corporation, Arizona, Jr Lien Water Ser 1994............................................. 5.45 07/01/19 4,711,300 2,000 Lee County, Florida, Water & Sewer 1999 Ser A (AMBAC)....... 4.75 10/01/23 1,660,180 2,000 Northern Palm Beach County Improvement District, Florida, Water Control & Impr #9A Ser 1996 A........................ 6.80 08/01/06 2,087,780 4,000 Fulton County, Georgia, Water & Sewerage Ser 1998 (FGIC).... 4.75 01/01/28 3,232,880 Massachusetts Water Resources Authority, 2,000 2000 Ser A (FGIC) (WI)..................................... 6.125 08/01/11 2,131,980 1,510 1993 Ser C................................................. 5.25 12/01/20 1,351,722 - -------- ----------- 26,510 24,896,342 - -------- ----------- Other Revenue (3.2%) 3,000 New York City Transitional Finance Authority, 2000 Ser A.... 5.75 08/15/24 2,900,610 3,000 New York Local Government Assistance Corporation, Ser 1995 A.......................................................... 6.00 04/01/24 2,973,390 3,000 Philadelphia, Pennsylvania, Gas Works Second Ser 1998 (FSA)...................................................... 5.00 07/01/23 2,552,190 - -------- ----------- 9,000 8,426,190 - -------- -----------
SEE NOTES TO FINANCIAL STATEMENTS 9 10 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 29, 2000 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- Refunded (6.1%) $ 5,000 Birmingham Water Works & Sewer Board, Alabama, Ser 1994..... 5.50% 01/01/04+ $ 5,172,250 5,000 Southern California Public Power Authority, Palo Verde Ser A (AMBAC) (ETM).............................................. 5.00 07/01/15 4,644,900 1,165 Illinois Health Facilities Authority, Glen Oaks Medical Center Inc Refg 1990 Ser D (ETM)........................... 9.50 11/15/15 1,231,661 2,920 Cleveland, Ohio, Waterworks Impr & Refg Ser H 1996 (MBIA)... 5.75 01/01/06+ 3,061,124 1,875 Shelby County, Tennessee, Refg 1995 Ser A................... 5.625 04/01/05+ 1,937,306 - -------- ----------- 15,960 16,047,241 - -------- ----------- $276,385 TOTAL INVESTMENTS (Identified Cost $262,889,319) (b).................. 97.2% 255,381,677 ======== OTHER ASSETS IN EXCESS OF LIABILITIES................................... 2.8 7,459,667 ------ ----------- NET ASSETS............................................................. 100.0% $262,841,344 ===== ============
- --------------------- AMT Alternative Minimum Tax. COPs Certificates of Participation. ETM Escrowed to maturity. WI Security purchased on a "when-issued" basis. * This security is segregated in connection with the purchase of "when-issued" securities. + Prerefunded to call date shown. ++ Joint exemption in locations shown. (a) Resale is restricted to qualified institutional inventors. (b) The aggregate cost for federal income tax purposes approximates identified cost. The aggregate gross unrealized appreciation is $2,685,337 and the aggregate gross unrealized depreciation is $10,192,980, resulting in net unrealized depreciation of $7,507,642. Bond Insurance: - -------------- AMBAC AMBAC Assurance Corporation. Connie Lee Connie Lee Insurance Company - A wholly owned subsidiary of AMBAC Assurance Corporation. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation. SEE NOTES TO FINANCIAL STATEMENTS 10 11 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES February 29, 2000 (unaudited) ASSETS: Investments in securities, at value (identified cost $262,889,319)............................. $255,381,677 Cash........................................................ 2,370,660 Receivable for: Investments sold........................................ 9,089,329 Interest................................................ 3,652,112 Prepaid expenses and other assets........................... 43,654 ----------- TOTAL ASSETS............................................ 270,537,432 ----------- LIABILITIES: Payable for: Investments purchased................................... 7,336,668 Shares of beneficial interest repurchased............... 112,939 Investment advisory fee................................. 79,299 Administration fee...................................... 45,382 Accrued expenses and other payables......................... 121,800 ----------- TOTAL LIABILITIES....................................... 7,696,088 ----------- NET ASSETS.............................................. $262,841,344 =========== COMPOSITION OF NET ASSETS: Paid-in-capital............................................. $267,917,258 Net unrealized depreciation................................. (7,507,642) Accumulated undistributed net investment income............. 3,030,726 Accumulated net realized loss............................... (598,998) ----------- NET ASSETS.............................................. $262,841,344 =========== NET ASSET VALUE PER SHARE 28,218,450 shares outstanding (unlimited shares authorized of $.01 par value)......................................... $9.31 ====================
SEE NOTES TO FINANCIAL STATEMENTS 11 12 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST FINANCIAL STATEMENTS, continued STATEMENT OF OPERATIONS For the six months ended February 29, 2000 (unaudited) NET INVESTMENT INCOME: INTEREST INCOME............................................. $ 7,844,126 ----------- EXPENSES Investment advisory fee..................................... 460,133 Administration fee.......................................... 263,579 Transfer agent fees and expenses............................ 58,883 Professional fees........................................... 42,095 Shareholder reports and notices............................. 25,623 Registration fees........................................... 8,241 Custodian fees.............................................. 7,582 Trustees' fees and expenses................................. 5,055 Other....................................................... 5,815 ----------- TOTAL EXPENSES.......................................... 877,006 Less: expense offset........................................ (7,568) ----------- NET EXPENSES............................................ 869,438 ----------- NET INVESTMENT INCOME................................... 6,974,688 ----------- NET REALIZED AND UNREALIZED LOSS: Net realized loss........................................... (598,989) Net change in unrealized appreciation....................... (8,345,212) ----------- NET LOSS................................................ (8,944,201) ----------- NET DECREASE................................................ $(1,969,513) ===========
SEE NOTES TO FINANCIAL STATEMENTS 12 13 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED FEBRUARY 29, 2000 AUGUST 31, 1999 - ------------------------------------------------------------------------------------------ (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income............................... $ 6,974,688 $14,651,654 Net realized gain (loss)............................ (598,989) 388,315 Net change in unrealized appreciation............... (8,345,212) (18,209,101) ----------- ----------- NET DECREASE.................................... (1,969,513) (3,169,132) ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income............................... (7,162,288) (13,478,373) Net realized gain................................... (326,914) (1,853,866) ----------- ----------- TOTAL DIVIDENDS AND DISTRIBUTIONS............... (7,489,202) (15,332,239) ----------- ----------- Net decrease from transactions in shares of beneficial interest................................ (6,175,435) (6,526,596) ----------- ----------- NET DECREASE.................................... (15,634,150) (25,027,967) NET ASSETS: Beginning of period................................. 278,475,494 303,503,461 ----------- ----------- END OF PERIOD (Including undistributed net investment income of $3,030,726 and $3,218,326, respectively)..... $262,841,344 $278,475,494 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 13 14 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS February 29, 2000 (unaudited) 1. ORGANIZATION AND ACCOUNTING POLICIES Morgan Stanley Dean Witter Municipal Income 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 current income which is exempt from federal income tax. The Fund was organized as a Massachusetts business trust on June 16, 1987 and commenced operations on September 29, 1987. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of significant accounting policies: A. VALUATION OF INVESTMENTS -- Portfolio securities are valued by an outside independent pricing service approved by the Trustees. The pricing service has informed the Fund that in valuing the portfolio securities, it uses both a computerized matrix of tax-exempt securities and evaluations by its staff, in each case based on information concerning market transactions and quotations from dealers which reflect the bid side of the market each day. The portfolio securities are thus valued by reference to a combination of transactions and quotations for the same or other securities believed to be comparable in quality, coupon, maturity, type of issue, call provisions, trading characteristics and other features deemed to be relevant. Short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost. B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Discounts are accreted and premiums are amortized over the life of the respective securities. Interest income is accrued daily except where collection is not expected. C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable and nontaxable income to its shareholders. Accordingly, no federal income tax provision is required. 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 14 15 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS February 29, 2000 (unaudited) continued income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized capital gains. To the extent they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in-capital. 2. INVESTMENT ADVISORY AGREEMENT Pursuant to an Investment Advisory Agreement with Morgan Stanley Dean Witter Advisors Inc. (the "Investment Advisor"), the Fund pays the Investment Advisor an advisory fee, calculated weekly and payable monthly, by applying the following annual rates to the Fund's weekly net assets: 0.35% to the portion of the Fund's weekly net assets not exceeding $250 million and 0.25% to the portion of the Fund's weekly net assets exceeding $250 million. Under the terms of the Agreement, in addition to managing the Fund's investments, the Investment Adviser pays the salaries of all personnel, including officers of the Fund, who are employees of the Investment Adviser. 3. ADMINISTRATION AGREEMENT Pursuant to an Administration Agreement with Morgan Stanley Dean Witter Services Company Inc. ("the Administrator") an affiliate of the Investment Advisor, the Fund pays an administration fee, calculated weekly and payable monthly, by applying the following annual rates to the Fund's weekly net assets: 0.20% to the portion of the Fund's weekly net assets not exceeding $250 million; 0.15% to the portion of the Fund's weekly net assets exceeding $250 million but not exceeding $500 million; 0.12% to the portion of the Fund's weekly net assets exceeding $500 million but not exceeding $750 million; and 0.10% to the portion of the Fund's weekly net assets exceeding $750 million. 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 15 16 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS February 29, 2000 (unaudited) continued 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 February 29, 2000 aggregated $26,794,040 and $24,244,168, respectively. Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor and Administrator, is the Fund's transfer agent. At February 29, 2000, the Fund had transfer agent fees and expenses payable of approximately $8,500. 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 February 29, 2000, included in Trustee's fees and expenses in the Statement of Operations amounted to $2,870. At February 29, 2000, the Fund had an accrued pension liability of $52,328, 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:
CAPITAL PAID IN PAR VALUE EXCESS OF SHARES OF SHARES PAR VALUE ---------- --------- ------------ Balance, August 31, 1998.................................... 29,739,550 $297,396 $280,321,893 Treasury shares purchased and retired(weighted average discount 12.75%)*.......................................... (749,300) (7,493) (6,519,103) ---------- -------- ------------ Balance, August 31, 1999.................................... 28,990,250 289,903 273,802,790 Treasury shares purchased and retired(weighted average discount 14.57%)*.......................................... (771,800) (7,718) (6,167,717) ---------- -------- ------------ Balance, February 29, 2000.................................. 28,218,450 $282,185 $267,635,073 ========== ======== ============
- --------------------- * The Trustees have voted to retire the shares purchased. 16 17 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS February 29, 2000 (unaudited) continued 6. DIVIDENDS The Fund declared the following dividends from net investment income:
DECLARATION AMOUNT RECORD PAYABLE DATE PER SHARE DATE DATE - ----------------- --------- ------------- -------------- December 28, 1999 $0.0425 March 3, 2000 March 17, 2000 March 28, 2000 $0.0425 April 7, 2000 April 20, 2000 March 28, 2000 $0.0425 May 5, 2000 May 19, 2000 March 28, 2000 $0.0425 June 9, 2000 June 23, 2000
17 18 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
FOR THE SIX FOR THE YEAR ENDED AUGUST 31,* MONTHS ENDED ---------------------------------------------------- FEBRUARY 29, 2000 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------------------------- (unaudited) SELECTED PER SHARE DATA: Net asset value, beginning of period.................. $ 9.61 $10.21 $ 9.99 $ 9.72 $ 9.92 $10.16 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income................................ 0.25 0.50 0.50 0.57 0.60 0.66 Net realized and unrealized gain (loss).............. (0.33) (0.61) 0.34 0.26 (0.12) 0.04 ------ ------ ------ ------ ------ ------ Total income (loss) from investment operations........ (0.08) (0.11) 0.84 0.83 0.48 0.70 ------ ------ ------ ------ ------ ------ Less dividends and distributions from: Net investment income................................ (0.25) (0.46) (0.54) (0.58) (0.60) (0.60) Net realized gain.................................... (0.01) (0.06) (0.09) --** (0.09) (0.34) ------ ------ ------ ------ ------ ------ Total dividends and distributions..................... (0.26) (0.52) (0.63) (0.58) (0.69) (0.94) ------ ------ ------ ------ ------ ------ Anti-dilutive effect of acquiring treasury shares..... 0.04 0.03 0.01 0.02 0.01 -- ------ ------ ------ ------ ------ ------ Net asset value, end of period........................ $ 9.31 $ 9.61 $10.21 $ 9.99 $ 9.72 $ 9.92 ====== ====== ====== ====== ====== ====== Market value, end of period........................... $7.938 $7.813 $ 9.44 $ 9.50 $ 9.25 $ 9.00 ====== ====== ====== ====== ====== ====== TOTAL RETURN+......................................... 4.95%(1) (12.25)% 6.16% 9.23% 10.75% 7.78% RATIOS TO AVERAGE NET ASSETS: Expenses.............................................. 0.65%(2) 0.66%(3) 0.66%(3) 0.63% 0.64% 0.65% Net investment income................................. 5.20%(2) 4.94% 4.92% 5.68% 6.03% 6.70% SUPPLEMENTAL DATA: Net assets, end of period, in thousands............... $262,841 $278,475 $303,503 $301,708 $301,835 $313,768 Portfolio turnover rate............................... 9%(1) 16% 13% 22% 33% 14%
- --------------------- * The per share amounts were computed using an average number of shares outstanding during the period. ** Does not reflect a distribution of $0.0024. + Total return is based upon the current market value on the last day of each period reported. Dividends and distributions are assumed to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Total return does not reflect brokerage commissions. (1) Not annualized. (2) Annualized (3) Does not reflect the effect of expense offset of 0.01% SEE NOTES TO FINANCIAL STATEMENTS 18 19 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST REVISED INVESTMENT POLICY On January 26, 2000, the Trustees of Morgan Stanley Dean Witter Municipal Income 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. 19 20 TRUSTEES - ---------------------------------- Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien Dr. Manuel H. Johnson Michael E. Nugent Philip J. Purcell John L. Schroeder OFFICERS - ---------------------------------- Charles A. Fiumefreddo Chairman and Chief Executive Officer Mitchell M. Merin President Barry Fink Vice President, Secretary and General Counsel James F. Willison Vice President Thomas F. Caloia Treasurer TRANSFER AGENT - ---------------------------------- Morgan Stanley Dean Witter Trust FSB Harborside Financial Center -- Plaza Two Jersey City, New Jersey 07311 INDEPENDENT ACCOUNTANTS - ---------------------------------- PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York 10036 INVESTMENT MANAGER - ---------------------------------- Morgan Stanley Dean Witter Advisors Inc. Two World Trade Center New York, New York 10048 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST Semiannual Report February 29, 2000 -----END PRIVACY-ENHANCED MESSAGE-----