-----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, UcNYSbv7RfeW2jl4wp22JYzg9ziaCyrGI2SouWMhaxwO+nZI6gHAkysKrdhENUZR A33XdaLMFgYR/i7gklOcSQ== 0000950123-99-004194.txt : 19990506 0000950123-99-004194.hdr.sgml : 19990506 ACCESSION NUMBER: 0000950123-99-004194 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990228 FILED AS OF DATE: 19990505 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: 99611270 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 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST 1 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST Two World Trade Center, New York, New York 10048 LETTER TO THE SHAREHOLDERS February 28, 1999 DEAR SHAREHOLDER: We are pleased to present the semiannual report on the operations of Morgan Stanley Dean Witter Municipal Income Trust (TFA) for the period ended February 28, 1999. Continued economic turmoil in Asia and Latin America, a currency crisis in Russia and the orchestrated bailout of a major U.S. hedge fund contributed to the volatility in the global financial markets during the second half of 1998. These events precipitated a "flight to quality" demand for U.S. Treasury securities. U.S. Treasury bond yields reached a 30-year low in October 1998. During the fourth quarter, the Federal Reserve Board sought to restore stability to the financial markets by cutting the federal-funds rate 75 basis points in three moves from 5.50 percent to 4.75 percent. U.S. economic growth and employment remained strong in early 1999. Although inflation remained subdued, concern developed that the Federal Reserve might become more restrictive if the pace of growth did not slacken. MUNICIPAL MARKET CONDITIONS Municipal yields did not decline as much as U.S. Treasury yields during 1998. At the end of December, long-term insured municipal index yields were 5.05 percent. This level was only 10 basis points lower than the beginning of the year. In contrast, U.S. Treasury bond yields fell 80 basis points, from 5.90 percent to 5.10 percent. When U.S. Treasury yields reversed direction in February 1999 and rose 50 basis points, municipal yields were less volatile and rose only 10 basis points to 5.15 percent. The modest rally of municipals during 1998 created a favorable relative value relationship versus Treasuries. Municipals underperformed Treasuries and the ratio of municipal yields to Treasury yields climbed to 99 percent by year-end. The higher the ratio, the more attractive municipals are relative to Treasuries. The ratio declined to 92 percent by the end of February, as municipals outperformed Treasuries. Over the past five years, the annual high-low range of the municipal/Treasury yield ratio has averaged 93-84 percent. 2 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS February 28, 1999, continued In addition to lagging the Treasury "flight to quality" rally in 1998, municipals also experienced a glut of new issue supply. Underwriting volume of $284 billion was up 28 percent from the prior year and approached 1993's record level. Issuers actively refinanced at lower interest rates and refundings were 29 percent of the total volume. New-money issues set a record and included the largest single municipal underwriting of $3.3 billion for the Long Island Power Authority. In the first two months of 1999, volume slowed and was down 25 percent compared to the same period last year. PERFORMANCE The Fund's net asset value (NAV) declined from $10.21 to $10.15 per share during the six month period. Based on this change, plus reinvestment of tax-free dividends totaling $0.2325 per share and capital gains distributions totaling $0.0626, the Fund's total return based on NAV was 2.54 percent. TFA's price on the New York Stock Exchange fell from $9.4375 to $8.8750 per share during the same period. Based on this market value and reinvestment of tax-free dividends and capital gains distributions, the Fund's total return based on market value was -2.91 percent. As of February 28, 1999, TFA's market value was trading at a 12.6 percent discount to its NAV. BOND YIELDS 1994 - 1999
30-Year Insured 30-Year U.S. Insured Municipal Yields as a Municipal Yields Treasury Yields Percentage 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
Source: Municipal Market Data 2 3 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS February 28, 1999, continued [LARGEST SECTORS BAR CHART] LARGEST SECTORS AS OF FEBRUARY 28, 1999 (% OF NET ASSETS) Transportation 15% Mortgage 15% General Obligation 12% Water & Sewer 11% Electric 10% Hospital 10% Education 7% IDR/PCR* 6% Refunded 6% All Others 8%
* INDUSTRIAL DEVELOPMENT/POLUTION CONTROL REVENUE PORTFOLIO IS SUBJECT TO CHANGE [CREDIT RATINGS PIE CHART] CREDIT RATINGS AS OF FEBRUARY 28, 1999 (% OF TOTAL LONG-TERM PORTFOLIO)
Aaa/AAA Aa/AA A/A Baa/BBB N/R - ------- ----- --- ------- --- 55% 27% 8% 6% 4%
AS MEASURED BY MOODY'S INVESTORS SERVICE, INC. OR STANDARD & POOR'S CORP. PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. [CALL STRUCTURE BAR GRAPH]
CALL STRUCTURE as of February 28, 1999 (% of Total Long-Term Portfolio) WEIGHTED AVERAGE CALL PROTECTION: 8 YEARS BONDS CALLABLE 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010+ Percent Callable 3% 3% 1% 3% 6% 9% 16% 13% 21% 12% 0% 13%
Portfolio structure is subject to change. 3 4 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS February 28, 1999, continued Monthly dividends for the first quarter of 1998 were declared in December. The Fund's level of earned but undistributed net investment income was essentially unchanged at $0.066 per share on February 28, 1999, versus $0.069 per share six months earlier. PORTFOLIO STRUCTURE The Fund's investments were diversified among 14 long-term sectors and 63 credits. At the end of February the portfolio's average maturity was 20 years. Average duration, a measure of sensitivity to interest-rate changes, was 8.2 years. The accompanying charts provide information on the Fund's call structure, largest sectors and distribution by credit quality as of February 28, 1999. LOOKING AHEAD The combination of a "flight to quality" and the flood of new municipal issues made the municipal-to-Treasury yield relationship more favorable last year than it has been in the previous 10 years. Although municipals have outperformed Treasuries in early 1999, we believe that municipals still offer investors considerable value versus their historical relationship with 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, when appropriate, may 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 six-month period ended February 28,1999 the Fund purchased and retired 274,600 shares of common stock at a weighted average market discount of 10.66 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 CHARLES A. FIUMEFREDDO Chairman of the Board 4 5 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST RESULTS OF ANNUAL MEETING February 28, 1999 * * * On December 17, 1998, 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: Michael Bozic For......................................................... 22,854,044 Withheld.................................................... 685,512 Charles A. Fiumefreddo For......................................................... 22,851,173 Withheld.................................................... 688,383
The following Trustees were not standing for reelection at this meeting: Edwin J. Garn, John R. Haire, 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: For......................................................... 22,840,852 Against..................................................... 206,707 Abstain..................................................... 491,997
(3) SHAREHOLDER PROPOSAL TO AMEND THE FUND'S DECLARATION OF TRUST TO REQUIRE EACH TRUSTEE, WITHIN 30 DAYS OF ELECTION, TO BECOME A SHAREHOLDER OF THE FUND: For......................................................... 4,378,600 Against..................................................... 10,333,845 Abstain..................................................... 1,552,616
5 6 MORGAN STANLEY DEAN WITTER MUNCIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- TAX-EXEMPT MUNICIPAL BONDS (98.3%) General Obligation (11.7%) $ 5,000 Moulton-Niguel Water District, California, Refg 1993 (MBIA)..................................................... 5.00 % 09/01/19 $ 4,987,250 5,000 Washington Suburban Sanitary District, Maryland, Gen Constr Refg 1994.................................................. 5.00 06/01/10 5,203,400 5,000 Massachusetts, 1994 Ser A................................... 5.00 01/01/11 5,157,500 2,000 Michigan Municipal Bond Authority, School Ser 1998.......... 5.25 12/01/13 2,105,940 4,000 New York City, New York, 1995 Ser D (MBIA).................. 6.20 02/01/07 4,518,040 5,000 New York State, Refg Ser 1995 B............................. 5.625 08/15/09 5,444,050 7,000 Shelby County, Tennessee, Refg 1995 Ser A................... 5.625 04/01/11 7,499,800 - -------- ----------- 33,000 34,915,980 - -------- ----------- Educational Facilities Revenue (6.6%) 5,000 California Public Works Board, University of California 1993 Refg Ser A................................................. 5.50 06/01/21 5,184,300 2,000 Massachusetts Health & Educational Facilities Authority, Massachusetts Institute of Technology 1998 Ser I........... 5.20 01/01/28 2,088,840 2,000 New Jersey Economic Development Authority, Educational Testing Service Ser 1998 A (MBIA).......................... 4.75 05/15/18 1,943,380 New York State Dormitory Authority, 2,500 State University Ser 1995 A................................ 6.50 05/15/05 2,821,875 2,500 State University Ser 1995 A................................ 6.50 05/15/06 2,853,025 5,000 State University Ser 1997.................................. 5.125 05/15/27 4,929,850 - -------- ----------- 19,000 19,821,270 - -------- ----------- Electric Revenue (10.1%) 15,000 Southern California Public Power Authority, Mead-Adelanto 1994 Ser A (AMBAC)......................................... 5.15 07/01/15 15,815,250 Intermountain Power Agency, Utah, 2,000 Refg Ser 1998 A (MBIA)..................................... 5.25 07/01/15 2,061,060 10,000 Refg 1996 Ser D (Secondary FSA)............................ 5.00 07/01/21 9,788,600 2,500 Washington Public Power Supply System, Project #1 Refg Ser 1998 A..................................................... 5.125 07/01/17 2,505,175 - -------- ----------- 29,500 30,170,085 - -------- ----------- Hospital Revenue (9.5%) 3,000 Birmingham-Carraway Special Care Facilities Financing Authority, Alabama, Carraway Methodist Health Ser 1995 A (Connie Lee)............................................... 5.875 08/15/15 3,196,440 3,000 Chatham County Hospital Authority, Georgia, Memorial Medical Center Inc Ser 1996 A (AMBAC).............................. 5.25 01/01/16 3,062,250 4,000 Michigan Hospital Finance Authority, Detroit Medical Center Ser 1997 A (AMBAC)......................................... 5.25 08/15/27 3,964,880 7,500 North Carolina Medical Care Commission, Presbyterian Health Services Corp Refg Ser 1993................................ 5.50 10/01/20 7,678,500 2,500 Delaware County Authority, Pennsylvania, Catholic Health East Ser 1998 A (AMBAC).................................... 4.875 11/15/26 2,365,425
SEE NOTES TO FINANCIAL STATEMENTS 6 7 MORGAN STANLEY DEAN WITTER MUNCIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- $ 5,000 Pennsylvania Higher Educational Facilities Authority, University of Pennsylvania Ser A 1996...................... 5.75 % 01/01/22 $ 5,174,750 3,000 Washington Health Care Facilities Authority, Virginia Mason Medical Center Refg Ser 1997 A (MBIA)...................... 5.125 08/15/17 3,005,970 - -------- ----------- 28,000 28,448,215 - -------- ----------- Industrial Development/Pollution Control Revenue (5.9%) 2,705 Lapeer Economic Development Corporation, Michigan, Dott Manufacturing Co Ser 1989 A (AMT).......................... 10.65 11/15/17 1,623,000 3,050 New York City Industrial Development Agency, Japan Airlines Co 1991 (AMT) (FSA)........................................ 6.00 11/01/15 3,284,362 2,000 New York State Energy Research & Development Authority, New York State Electric & Gas Corp 1987 Ser A (AMT) (MBIA)..... 6.15 07/01/26 2,180,280 5,000 Tulsa Municipal Airport Trust, Oklahoma, American Airlines Inc Ser 1988 (AMT)......................................... 7.375 12/01/20 5,350,800 5,000 Dallas-Fort Worth International Airport Facility Improvement Corporation, Texas, American Airlines Inc Ser 1995......... 6.00 11/01/14 5,255,850 - -------- ----------- 17,755 17,694,292 - -------- ----------- Mortgage Revenue -- Multi-Family (2.1%) 5,000 New Jersey Housing & Mortgage Finance Agency, 1995 Ser A (AMBAC).................................................... 6.00 11/01/14 5,331,950 940 Rhode Island Housing & Mortgage Finance Corporation, Rental 1989 Ser B (AMT)........................................... 7.95 10/01/20 978,399 - -------- ----------- 5,940 6,310,349 - -------- ----------- Mortgage Revenue -- Single Family (13.1%) 10,000 Alaska Housing Finance Corporation, 1997 Ser A (MBIA)....... 6.00 06/01/27 10,563,901 2,250 Colorado Housing Finance Authority, 1997 Ser B-2 (AMT)...... 7.00 05/01/26 2,502,945 10,000 Hawaii Housing Finance & Development Corporation, FNMA-Collateralized 1997 Ser A (AMT)....................... 5.75 07/01/30 10,305,900 2,395 Chicago, Illinois, GNMA-Backed Ser 1997-A (AMT)............. 7.25 09/01/28 2,718,253 Maine Housing Authority, 4,265 Purchase 1988 Ser D-2 (AMT)................................ 8.10 11/15/19 4,366,379 1,000 Purchase 1988 Ser D-2 (AMT)................................ 8.10 11/15/22 1,023,660 1,825 Missouri Housing Development Commission, GNMA-Backed 1997 Ser A-2 (AMT).............................................. 7.30 03/01/28 2,071,211 2,370 North Dakota Housing Finance Agency, 1990 Ser B (AMT)....... 7.75 07/01/24 2,496,937 805 Ohio Housing Finance Agency, GNMA-Backed 1990 Ser C (AMT)... 7.85 09/01/21 848,687 2,230 Virginia Housing Development Authority, 1992 Ser A.......... 7.10 01/01/17 2,324,485 - -------- ----------- 37,140 39,222,358 - -------- ----------- Public Facilities Revenue (1.4%) 3,495 Illinois, Civic Center Dedicated Tax Ser 1991 (AMBAC)....... 6.25 12/15/20 4,045,218 - -------- ----------- Resource Recovery Revenue (1.9%) 5,000 Greater Detroit Resource Recovery Authority, Michigan, 1996 Ser A (AMBAC).............................................. 6.25 12/13/08 5,794,150 - -------- -----------
SEE NOTES TO FINANCIAL STATEMENTS 7 8 MORGAN STANLEY DEAN WITTER MUNCIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- Retirement & Life Care Facilities Revenue (0.6%) $ 1,900 Charleston County, South Carolina, Sandpiper Village Inc Refg Ser 1998.............................................. 8.00 % 11/01/13 $ 1,752,997 - -------- ----------- Transportation Facilities Revenue (15.3%) 15,000 E-470 Public Highway Authority, Colorado, Ser 1997 B (MBIA)..................................................... 0.00 09/01/14 7,014,300 2,000 Dade County, Florida, Seaport Refg Ser 1996 (MBIA).......... 5.125 10/01/26 2,012,720 790 Southwestern Development Authority, Illinois, Tri-City Regional Port District Ser 1989 A (AMT) (a)................ 7.90 07/01/14 816,655 5,000 Massachusetts Turnpike Authority, Metropolitan Highway 1997 Ser A (MBIA)............................................... 5.00 01/01/37 4,818,900 5,000 Wayne Charter County, Michigan, Detroit Airport Ser 1998 A (AMT) (MBIA)............................................... 5.00 12/01/28 4,827,000 3,000 Delaware River Port Authority, New Jersey & Pennsylvania, Ser 1995 (FGIC)++.......................................... 5.50 01/01/26 3,145,320 3,000 Ohio Turnpike Commission, Ser 1998 B (FGIC)................. 4.50 02/15/24 2,775,270 5,000 Austin, Texas, Airport Prior Lien Ser 1995 A (AMT) (MBIA)... 6.125 11/15/25 5,448,949 5,000 Dallas-Fort Worth International Airport, Texas, Refg Ser 1995 (FGIC)................................................ 5.625 11/01/15 5,351,450 3,000 Pocahontas Parkway Association, Virginia, Route 895 Connector 1998 Ser A....................................... 5.50 08/15/28 2,969,700 6,000 Virginia Transportation Board, US Route 28 Ser 1992......... 6.50 04/01/18 6,540,600 - -------- ----------- 52,790 45,720,864 - -------- ----------- Water & Sewer Revenue (11.2%) 10,000 Jefferson County, Alabama, Sewer Ser 1997 (FGIC)............ 5.75 02/01/22 10,696,900 5,000 Phoenix Civic Improvement Corporation, Arizona, Jr Lien Water Ser 1994............................................. 5.45 07/01/19 5,158,300 3,000 East Bay Municipal Utility District, California, Water Ser 1998 (MBIA)................................................ 4.75 06/01/34 2,861,760 3,000 Massachusetts Water Resources Authority, 1993 Ser C......... 5.25 12/01/20 3,018,750 8,000 Pittsburgh Water & Sewer Authority, Pennsylvania, 1998 Ser B (FGIC)..................................................... 0.00 09/01/26 1,916,240 10,000 Upper Occoquan Sewerage Authority, Virginia, Ser 1995 A (MBIA)..................................................... 5.00 07/01/25 9,869,500 - -------- ----------- 39,000 33,521,450 - -------- ----------- Other Revenue (3.2%) 4,000 Mashantucket (Western) Pequot Tribe, Connecticut, Special 1997 Ser B (a)............................................. 5.75 09/01/27 4,098,240 2,000 Northern Palm Beach County Improvement District, Florida, Water Control & Impr #9A Ser 1996 A........................ 6.80 08/01/06 2,149,920 3,000 New York Local Government Assistance Corporation, Ser 1995 A.......................................................... 6.00 04/01/24 3,259,740 - -------- ----------- 9,000 9,507,900 - -------- ----------- Refunded (5.7%) 5,000 Birmingham Water Works & Sewer Board, Alabama, Ser 1994..... 5.50 01/01/04+ 5,439,851 5,000 Southern California Public Power Authority, Palo Verde Ser A (AMBAC) (ETM).............................................. 5.00 07/01/15 5,067,500 1,230 Illinois Health Facilities Authority, Glen Oaks Medical Center Inc Refg 1990 Ser D (ETM)........................... 9.50 11/15/15 1,383,602 2,920 Cleveland, Ohio, Waterworks Impr & Refg Ser H 1996 (MBIA)... 5.75 01/01/06+ 3,265,932 1,650 Fayette County, West Virginia, MPC Inc Refg Ser 1990........ 9.75 02/01/00+ 1,767,711 - -------- ----------- 15,800 16,924,596 - -------- ----------- 297,320 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $276,074,916)................. 293,849,724 - -------- -----------
SEE NOTES TO FINANCIAL STATEMENTS 8 9 MORGAN STANLEY DEAN WITTER MUNCIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATION (0.4%) $ 1,325 Harris County Health Facilities Development Corporation, - -------- Texas, St Luke's Episcopal Hospital Ser 1997 A (Demand 03/01/99) (Identified Cost $1,325,000)..................... 3.35*% 02/15/27 $ 1,325,000 ----------- $298,645 TOTAL INVESTMENTS (Identified Cost $277,399,916) (b)................... 98.7% 295,174,724 ======== CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 1.3 3,747,802 ----- ----------- NET ASSETS.............................................................. 100.0% $298,922,526 ===== ============
- --------------------- AMT Alternative Minimum Tax. ETM Escrowed to maturity. + Prerefunded to call date shown. ++ Joint exemption in New Jersey and Pennsylvania. * 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 $19,122,385 and the aggregate gross unrealized depreciation is $1,347,577, resulting in net unrealized appreciation of $17,774,808. Bond Insurance: - --------------- AMBAC AMBAC Indemnity Corporation. Connie Lee Connie Lee Insurance Company. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS 9 10 MORGAN STANLEY DEAN WITTER MUNCIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS February 28, 1999 (unaudited) continued GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percent of Net Assets February 28, 1999 Alabama.................. 6.5% Alaska................... 3.5 Arizona.................. 1.7 California............... 11.4 Colorado................. 3.2 Connecticut.............. 1.4 Florida.................. 1.4 Georgia.................. 1.0 Hawaii................... 3.5 Illinois................. 3.0 Maine.................... 1.8 Maryland................. 1.7 Massachusetts............ 5.0 Michigan................. 6.1 Missouri................. 0.7 New Jersey............... 3.5 New York................. 9.8 North Carolina........... 2.6 North Dakota............. 0.8 Ohio..................... 2.3 Oklahoma................. 1.8 Pennsylvania............. 4.2 Rhode Island............. 0.3 South Carolina........... 0.6 Tennessee................ 2.5 Texas.................... 5.8 Utah..................... 4.0 Virginia................. 8.3 Washington............... 0.8 West Virginia............ 0.6 Joint Exemption*......... (1.1) ------ Total.................... 98.7% ======
- --------------------- * Joint exemption has been included in each geographic location. SEE NOTES TO FINANCIAL STATEMENTS 10 11 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES February 28, 1999 (unaudited) ASSETS: Investments in securities, at value (identified cost $277,399,916)............................. $295,174,724 Cash........................................................ 107,011 Receivable for: Interest................................................ 3,753,996 Investments sold........................................ 190,000 Prepaid expenses and other assets........................... 11,997 ----------- TOTAL ASSETS............................................ 299,237,728 ----------- LIABILITIES: Payable for: Investment advisory fee................................. 82,453 Shares of beneficial interest repurchased............... 62,647 Administration fee...................................... 47,411 Accrued expenses and other payables......................... 122,691 ----------- TOTAL LIABILITIES....................................... 315,202 ----------- NET ASSETS.............................................. $298,922,526 =========== COMPOSITION OF NET ASSETS: Paid-in-capital............................................. $278,123,947 Net unrealized appreciation................................. 17,774,808 Accumulated undistributed net investment income............. 2,170,389 Accumulated undistributed net realized gain................. 853,382 ----------- NET ASSETS.............................................. $298,922,526 =========== NET ASSET VALUE PER SHARE, 29,464,950 shares outstanding (unlimited shares authorized of $.01 par value)............ $10.15 ===========
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 28, 1999 (unaudited) NET INVESTMENT INCOME: INTEREST INCOME............................................. $ 7,993,693 ----------- EXPENSES Investment advisory fee..................................... 499,228 Administration fee.......................................... 287,106 Professional fees........................................... 66,306 Transfer agent fees and expenses............................ 63,601 Shareholder reports and notices............................. 24,966 Registration fees........................................... 16,098 Trustees' fees and expenses................................. 9,278 Custodian fees.............................................. 4,916 Other....................................................... 12,161 ----------- TOTAL EXPENSES.......................................... 983,660 Less: expense offset........................................ (4,901) ----------- NET EXPENSES............................................ 978,759 ----------- NET INVESTMENT INCOME................................... 7,014,934 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain........................................... 914,792 Net change in unrealized appreciation....................... (1,271,862) ----------- NET LOSS................................................ (357,070) ----------- NET INCREASE................................................ $ 6,657,864 ===========
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 28, 1999 AUGUST 31, 1998 - ------------------------------------------------------------------------------------------ (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................ $ 7,014,934 $ 14,846,017 Net realized gain.................................... 914,792 2,028,297 Net change in unrealized appreciation................ (1,271,862) 8,504,893 ------------ ------------ NET INCREASE..................................... 6,657,864 25,379,207 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income................................ (6,889,590) (16,273,738) Net realized gain.................................... (1,853,867) (2,821,505) ------------ ------------ TOTAL DIVIDENDS AND DISTRIBUTIONS................ (8,743,457) (19,095,243) ------------ ------------ Net decrease from transactions in shares of beneficial interest................................. (2,495,342) (4,488,741) ------------ ------------ NET INCREASE (DECREASE).......................... (4,580,935) 1,795,223 NET ASSETS: Beginning of period.................................. 303,503,461 301,708,238 ------------ ------------ END OF PERIOD (Including undistributed net investment income of $2,170,389 and $2,045,045, respectively)......... $298,922,526 $303,503,461 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 13 14 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS February 28, 1999 (unaudited) 1. ORGANIZATION AND ACCOUNTING POLICIES Morgan Stanley Dean Witter Municipal Income Trust (the "Fund"), formerly Municipal Income Trust, is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The Fund's investment objective is to provide 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 28, 1999 (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"), an affiliate of Morgan Stanley Dean Witter Services Company Inc. (the "Administrator"), 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 the Administrator, 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 28, 1999 (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 28, 1999 aggregated $6,846,680 and $10,073,686, respectively. Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor and Administrator, is the Fund's transfer agent. 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 28, 1999, included in Trustee's fees and expenses in the Statement of Operations amounted to $2,967. At February 28, 1999, the Fund had an accrued pension liability of $51,229 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, 1997.................................... 30,214,250 $302,143 $284,805,887 Treasury shares purchased and retired (weighted average discount 5.97%)*........................................... (474,700) (4,747) (4,483,994) ---------- -------- ------------ Balance, August 31, 1998.................................... 29,739,550 297,396 280,321,893 Treasury shares purchased and retired (weighted average discount 10.66%)*.......................................... (274,600) (2,746) (2,492,596) ---------- -------- ------------ Balance, February 28, 1999.................................. 29,464,950 $294,650 $277,829,297 ========== ======== ============
- --------------------- * The Trustees have voted to retire the shares purchased. 16 17 MORGAN STANLEY DEAN WITTER MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS February 28, 1999 (unaudited) continued 6. DIVIDENDS The Fund declared the following dividends from net investment income:
DECLARATION AMOUNT RECORD PAYABLE DATE PER SHARE DATE DATE - ----------------- --------- ------------- -------------- December 29,1998 $0.0375 March 5, 1999 March 19, 1999 March 30, 1999 $0.0375 April 9, 1999 April 23, 1999 March 30, 1999 $0.0375 May 7, 1999 May 21, 1999 March 30, 1999 $0.0375 June 4, 1999 June 18, 1999
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 28, 1999* 1998 1997 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------------------- (unaudited) SELECTED PER SHARE DATA: Net asset value, beginning of period.................. $10.21 $ 9.99 $ 9.72 $ 9.92 $10.16 $10.83 ------ ------- ------ ------ ------ ------ Income from investment operations: Net investment income................................ 0.24 0.50 0.57 0.60 0.66 0.69 Net realized and unrealized gain (loss).............. (0.02) 0.34 0.26 (0.12) 0.04 (0.62) ------ ------- ------ ------ ------ ------ Total income from investment operations............... 0.22 0.84 0.83 0.48 0.70 0.07 ------ ------- ------ ------ ------ ------ Less dividends and distributions from: Net investment income................................ (0.23) (0.54) (0.58) (0.60) (0.60) (0.65) Net realized gain.................................... (0.06) (0.09) --** (0.09) (0.34) (0.09) ------ ------- ------ ------ ------ ------ Total dividends and distributions..................... (0.29) (0.63) (0.58) (0.69) (0.94) (0.74) ------ ------- ------ ------ ------ ------ Anti-dilutive effect of acquiring treasury shares..... 0.01 0.01 0.02 0.01 -- -- ------ ------- ------ ------ ------ ------ Net asset value, end of period........................ $10.15 $ 10.21 $ 9.99 $ 9.72 $ 9.92 $10.16 ====== ======= ====== ====== ====== ====== Market value, end of period........................... $8.875 $ 9.44 $ 9.50 $ 9.25 $ 9.00 $ 9.25 ====== ======= ====== ====== ====== ====== TOTAL RETURN+......................................... (2.91)%(1) 6.16% 9.23% 10.75% 7.78% (11.73)% RATIOS TO AVERAGE NET ASSETS: Expenses.............................................. 0.66%(2)(3) 0.66%(3) 0.63%(3) 0.64%(3) 0.65% 0.63% Net investment income................................. 4.68%(2) 4.92% 5.68% 6.03% 6.70% 6.59% SUPPLEMENTAL DATA: Net assets, end of period, in thousands............... $298,923 $303,503 $301,708 $301,835 $313,768 $331,745 Portfolio turnover rate............................... 2%(1) 13% 22% 33% 14% 27%
- --------------------- * 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 investment return is based upon the current market value on the last day of each period reported. Dividends and distributions are assumed to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Total investment 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 (This Page Intentionally Left Blank) 20 TRUSTEES Michael Bozic Charles A. Fiumefreddo Edwin J. Garn John R. Haire Wayne E. Hedien Dr. Manuel H. Johnson Michael E. Nugent Philip J. Purcell John L. Schroeder OFFICERS Charles A. Fiumefreddo Chairman and Chief Executive Officer Barry Fink Vice President, Secretary and General Counsel James F. Willison Vice President Thomas F. Caloia Treasurer TRANSFER AGENT Morgan Stanley Dean Witter Trust FSB Harborside Financial Center -- Plaza Two Jersey City, New Jersey 07311 INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York 10036 INVESTMENT ADVISOR Morgan Stanley Dean Witter Advisors Inc. Two World Trade Center New York, New York 10048 The financial statements included herein 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 TRUST SEMIANNUAL REPORT FEBRUARY 28, 1999 -----END PRIVACY-ENHANCED MESSAGE-----