<PAGE> 1
MUNICIPAL PREMIUM INCOME TRUST Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS May 31, 1998
DEAR SHAREHOLDER:
We are pleased to present the annual report of Municipal Premium Income Trust
(PIA) for the fiscal year ended May 31, 1998.
The deflationary impact of the Asian financial crisis has begun to temper U.S.
economic growth. Although employment conditions in the United States
strengthened and unemployment declined to its lowest level since 1970, inflation
remained subdued. This was primarily the result of improved productivity, lower
oil costs and cheaper imports.
Foreign currency turmoil strengthened the value of the U.S. dollar and spurred
demand for U.S. Treasury securities. Municipal bonds followed the trend of
Treasuries with yields declining to a range not seen in over 20 years. The bond
market rally was also aided by prospects of the first federal budget surplus in
more than two decades.
MUNICIPAL MARKET CONDITIONS
Long-term insured municipal yields declined 45 basis points, from 5.65 percent
to 5.20 percent between May 1997 and May 1998. Over the
<TABLE>
<CAPTION>
BOND YIELDS 1994-1998
Insured Municipal
30-Year 30-Year Revenue Yields
Insured Municipal U.S. Treasury as Percentage of
Yields Yields U.S. Treasury Yields
<S> <C> <C> <C>
Dec '93 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%
Jun '94 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 84.80%
7 8 87.50%
Dec '94 6.75 7.88 85.66%
6.4 7.7 83.12%
6.15 7.44 82.66%
6.15 7.43 82.77%
6.2 7.34 84.47%
5.8 6.66 87.09%
Jun '95 6.1 6.62 92.15%
6.1 6.86 88.92%
6 6.66 90.08%
5.95 6.48 91.82%
5.75 6.33 90.84%
5.5 6.14 89.56%
Dec '95 5.35 5.94 90.07%
5.4 6.03 89.55%
5.8 6.46 86.69%
5.85 6.66 87.84%
5.95 6.89 86.36%
6.05 6.99 86.55%
Jun '96 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%
Dec '96 5.6 6.63 84.46%
5.7 6.79 83.95%
5.65 6.8 83.08%
5.9 7.1 83.10%
5.75 6.94 82.85%
5.65 6.91 81.77%
Jun '97 5.6 6.78 82.60%
5.3 6.3 84.00%
5.5 6.61 83.00%
5.4 6.4 84.40%
5.35 6.15 86.90%
5.3 6.05 87.60%
Dec '97 5.15 5.92 86.90%
Jan '98 5.15 5.8 88.80%
Feb '98 5.2 5.92 87.80%
Mar '98 5.25 5.93 88.50%
Apr '98 5.35 5.95 89.90%
</TABLE>
Source: Municipal Market Data
<PAGE> 2
MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS May 31, 1998, continued
same time period the yield on one-year notes fell only 15 basis points, from
3.90 percent to 3.75 percent. Thus, the yield pickup or spread for extending
maturities from 1 to 30 years narrowed to 145 basis points.
The overall decline in interest rates led to an increase in new-issue municipal
volume. In contrast, U. S. Treasury borrowing needs have declined with the
reduction in the budget deficit. Under these conditions the municipal rally
lagged the rally in Treasuries. The ratio of municipal yields to Treasury yields
improved during this period, from 82 percent of Treasuries in May 1997 to almost
90 percent a year later. A rising ratio means that municipals have
underperformed Treasuries and have become more attractive on a relative basis.
Total municipal volume increased 20 percent in 1997 and totaled $220 billion
last year. Half the underwritings were enhanced with bond insurance. Refundings
represented one-quarter of total new issues. For the year-to-date, underwriting
is up 60 percent with refunding issues comprising nearly one-third of total
issuance.
PERFORMANCE
During the fiscal year ended May 31, 1998, the Fund's net asset value (NAV)
improved from $10.08 to $10.41 per share. Based on this NAV change plus
reinvestment of tax-free dividends totaling $0.60 per share, the Fund's total
NAV return was 9.72 percent. PIA's price on the New York Stock Exchange (NYSE)
moved from $9.375 to $9.625 per share. Based on this change in market price plus
reinvestment of dividends, the Fund's total market return was 9.08 percent. On
May 31, 1998, PIA's market price was trading at a 7.5 percent discount (lower
than) to NAV.
Monthly dividends for the second quarter of 1998 were declared in March and
remained unchanged at $0.05 per share. The level of undistributed net investment
income increased from $0.086 per share to $0.09 per share.
The Fund's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps to
support the market value of the Fund's shares. In addition, we would like to
remind you that the Trustees have approved a procedure whereby the Fund may,
when appropriate, purchase shares in the open market or in privately negotiated
transactions at a price not above market value or net asset value, whichever is
lower at the time of purchase. During the fiscal year ended May 31, 1998, the
Fund purchased and retired 288,700 shares of common stock at a weighted average
market discount of 5.35 percent. The Fund may also utilize procedures to reduce
or eliminate the amount of outstanding ARPS, including their purchase in the
open market or in privately negotiated transactions.
2
<PAGE> 3
MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS May 31, 1998, continued
<TABLE>
<CAPTION>
LARGEST SECTORS AS OF MAY 31, 1998 CREDIT RATINGS AS OF MAY 31, 1998
(% OF NET ASSETS) (% OF TOTAL LONG-TERM PORTFOLLO)
<S> <C> <C> <C>
HOSPITAL 18% AAA OR AAA 60%
IDR/PCR* 16% AA OR AA 22%
ELECTRIC 14% A OR A 7%
MORTGAGE 12% BAA OR BBB 9%
TRANSPORTATION 10% N/R 2%
GENERAL OBLIGATION 7%
WATER & SEWER 6%
EDUCATION 5%
ALL OTHERS 12%
* INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE AS MEASURED BY MOODY'S INVESTORS SERVICE, INC. OR
STANDARD & POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
</TABLE>
<TABLE>
<CAPTION>
CALL STRUCTURE AS OF MAY 31, 1998 WEIGHTED AVERAGE
(% OF TOTAL LONG-TERM PORTFOLIO) CALL PROTECTION: 6 YEARS
PERCENT CALLABLE
YEARS BONDS CALLABLE
<S> <C>
1998 7%
1999 5%
2000 9%
2001 8%
2002 9%
2003 0%
2004 10%
2005 13%
2006 12%
2007 5%
2008 19%
2009+ 3%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
</TABLE>
3
<PAGE> 4
MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS May 31, 1998, continued
PORTFOLIO STRUCTURE
On May 31, 1998, PIA's investments were diversified among 13 long-term sectors
and 75 credits. As illustrated in the accompanying chart, the distribution of
call dates in the portfolio produced 6 years of weighted average call
protection. The Fund's weighted average maturity was 19 years. Throughout the
period, high credit quality was maintained with over 80 percent of its long-term
holdings rated double or triple "A."
THE IMPACT OF LEVERAGING
As discussed in previous reports, the total income available for distribution to
common shareholders includes incremental income provided by the Fund's
outstanding Auction Rate Preferred Shares (ARPS). ARPS dividends reflect
prevailing short-term interest rates on maturities normally ranging from one
week to one year. Incremental income to common shareholders depends on two
factors. The first factor is the amount of ARPS outstanding, while the second is
the spread between the portfolio's cost yield and ARPS expenses (ARPS auction
rate and expenses). The greater the spread and the amount of ARPS outstanding,
the greater the amount of incremental income available for distribution to
common shareholders. The level of net investment income available for
distribution to common shareholders varies with the level of short-term interest
rates.
During the fiscal year, ARPS leverage contributed approximately $0.09 per share
to common share earnings. Weekly ARPS yields ranged between 3.30 and 5.00
percent. PIA's five ARPS series totaling $100 million represented 28 percent of
net assets.
LOOKING AHEAD
The economic fundamentals remain in place for another year of solid economic
growth in the United States. Events in Asia have strengthened the U.S. dollar
and contributed to lower interest rates. Furthermore, the Asian crisis seems
likely to continue to moderate inflationary pressures and provide a favorable
outlook for municipal bonds. However, if labor costs accelerate, it is still
possible that the Federal Reserve Board may tighten monetary policy.
We appreciate your ongoing support of Municipal Premium 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
<PAGE> 5
MUNICIPAL PREMIUM INCOME TRUST
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On December 18, 1997, an annual meeting of the Fund's shareholders was held for
the purpose of voting on two separate matters, the results of which were as
follows:
(1) ELECTION OF TRUSTEES:
<TABLE>
<S> <C>
Wayne E. Hedien
For......................................................... 19,849,938
Withheld.................................................... 451,848
Dr. Manuel H. Johnson
For......................................................... 19,863,297
Withheld.................................................... 438,489
John L. Schroeder
For......................................................... 19,862,727
Withheld.................................................... 439,059
</TABLE>
The following Trustees were not standing for reelection at this meeting:
Michael Bozic, Charles A. Fiumefreddo, Edwin J. Garn, John R. Haire, Michael
E. Nugent and Philip J. Purcell.
(2) RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP (THE SUCCESSOR
FIRM TO PRICE WATERHOUSE LLP) AS INDEPENDENT ACCOUNTANTS:
<TABLE>
<S> <C>
For......................................................... 19,644,866
Against..................................................... 89,060
Abstain..................................................... 567,860
</TABLE>
5
<PAGE> 6
MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (97.3%)
General Obligation (6.5%)
$ 5,000 Chicago Park District, Illinois, Ser A 1995................. 6.60 % 11/15/14 $ 5,624,350
3,500 Massachusetts, 1995 Ser A (AMBAC)........................... 5.00 07/01/12 3,599,855
3,000 Puerto Rico, Public Improvement Ser A 1998 (MBIA)........... 4.875 07/01/23 2,909,040
4,500 Shelby County, Tennessee, Refg 1995 Ser A................... 5.625 04/01/11 4,776,075
6,000 Washington, Ser 1993 A...................................... 5.75 10/01/17 6,274,560
- -------- ------------
22,000 23,183,880
- -------- ------------
Educational Facilities Revenue (5.0%)
2,310 St Joseph County Educational Facilities Authority, Indiana,
University of Notre Dame Dulac Ser 1997.................... 5.00 03/01/27 2,295,863
3,000 Massachusetts Industrial Finance Agency, Tufts University
Ser H (MBIA)............................................... 4.75 02/15/28 2,818,200
5,500 Oakland University, Michigan, Ser 1995 (MBIA)............... 5.75 05/15/26 5,786,770
New York State Dormitory Authority,
4,000 State University Refg Ser 1993 A........................... 5.50 05/15/08 4,271,839
1,350 State University Ser 1990 B................................ 7.50 05/15/11 1,651,604
1,000 Pennsylvania Higher Educational Facilities Authority, Temple
University First Ser (MBIA)................................ 6.50 04/01/21 1,075,300
- -------- ------------
17,160 17,899,576
- -------- ------------
Electric Revenue (13.9%)
5,000 Sacramento Municipal Utility District, California, Refg 1994
Ser I (MBIA)............................................... 6.00 01/01/24 5,408,550
4,000 Kansas City, Kansas, Utility Refg & Impr Ser 1994 (FGIC).... 6.375 09/01/23 4,472,160
7,750 South Carolina Public Service Authority, 1995 Refg Ser A
(AMBAC).................................................... 6.25 01/01/22 8,660,160
4,000 Lower Colorado River Authority, Texas, Jr Lien Seventh Ser
(FSA)...................................................... 4.75 01/01/28 3,752,400
20,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C.......... 4.70 02/01/06 20,307,400
Intermountain Power Agency, Utah,
5,000 Refg Ser 1997 B (MBIA)..................................... 5.75 07/01/19 5,298,500
1,270 Refg Ser 1988 B............................................ 7.50 07/01/21 1,299,121
- -------- ------------
47,020 49,198,291
- -------- ------------
Hospital Revenue (17.8%)
5,000 Alabama Special Care Facilities Financing Authority of
Birmingham, Daughters of Charity National Health/St
Vincent's & Providence Hospitals Ser 1995.................. 5.00 11/01/25 4,784,200
5,000 Birmingham-Carraway Special Care Facilities Financing
Authority, Alabama, Carraway Methodist Health Ser 1995 A
(Connie Lee)............................................... 5.875 08/15/15 5,330,750
3,500 Colbert County - Northwest Health Care Authority, Alabama,
Hellen Keller Hospital Refg Ser 1990....................... 8.75 06/01/09 3,811,185
1,000 California Health Facilities Financing Authority, Alexian
Brothers/San Jose Refg Ser 1990 (MBIA)..................... 7.125 01/01/16 1,061,420
10,000 Fulco Hospital Authority, Georgia, Catholic Health East Ser
1998 A (MBIA).............................................. 5.00 11/15/28 9,666,000
3,000 Hall County and Gainesville Hospital Authority, Georgia,
Northeast Georgia Healthcare Ser 1995 (MBIA)............... 6.00 10/01/20 3,239,340
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 1998, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,800 Southwestern Illinois Development Authority, Anderson
Hospital Ser 1992 A........................................ 7.00 % 08/15/22 $ 1,952,082
3,275 Kentucky Development Finance Authority, Ashland
Hospital/King's Daughters Refg Ser 1987.................... 9.75 08/01/05 3,369,320
9,500 Boston, Massachussetts, Boston City Hospital - FHA Mtg Refg
Ser B...................................................... 5.75 02/15/13 9,828,700
4,000 Montgomery County, Ohio, Franciscan Medical Center - Dayton
Campus Ser 1997............................................ 5.50 07/01/18 3,999,800
2,985 Lehigh County General Purpose Authority, Pennsylvania, St
Lukes Hospital Ser 1992 (AMBAC)............................ 6.25 07/01/22 3,231,233
2,750 Jefferson County Health Facilities Development Corporation,
Texas, Baptist Health Care Ser 1989........................ 8.30 10/01/14 2,896,355
5,000 Washington Health Care Facilities Authority, Swedish Health
Services Ser 1998 (AMBAC).................................. 5.125 11/15/22 4,874,000
5,000 Wisconsin Health & Educational Facilities Authority, Wausau
Hospital Refg Ser 1998 A (AMBAC)........................... 5.125 08/15/20 4,892,550
- -------- ------------
61,810 62,936,935
- -------- ------------
Industrial Development/Pollution Control Revenue (16.4%)
11,230 Pima County Industrial Development Authority, Arizona,
Tucson Electric Power Co Refg Ser 1988 A (FSA Surety)...... 7.25 07/15/10 12,528,862
10,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991
(MBIA)..................................................... 7.00 06/01/31 10,894,100
9,300 New York City Industrial Development Agency, New York,
Brooklyn Navy Yard Cogeneration Partners LP Project Ser
1997 (AMT)................................................. 5.65 10/01/28 9,366,588
1,000 Ohio Water Development Authority, Toledo Edison Co Ser 1990
A (Secondary FSA).......................................... 7.75 05/15/19 1,082,200
9,500 Montgomery County Industrial Development Authority,
Pennsylvania, Philadelphia Electric Co Refg 1991 Ser B
(MBIA)..................................................... 6.70 12/01/21 10,343,030
13,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990
(AMT)...................................................... 7.50 12/01/29 14,027,780
- -------- ------------
54,030 58,242,560
- -------- ------------
Mortgage Revenue - Multi-Family (2.9%)
1,250 Lake Charles Non-Profit Housing Development Corporation,
Louisiana, Ser 1990 A (FSA)................................ 7.875 02/15/25 1,259,688
Massachusetts Housing Finance Agency,
1,925 Rental 1994 Ser A (AMT) (AMBAC)............................ 6.60 07/01/14 2,073,321
3,785 Rental 1994 Ser A (AMT) (AMBAC)............................ 6.65 07/01/19 4,086,324
2,650 Minnesota Housing Finance Agency, Rental 1995 Ser D
(MBIA)..................................................... 6.00 02/01/22 2,775,531
- -------- ------------
9,610 10,194,864
- -------- ------------
Mortgage Revenue - Single Family (9.1%)
Colorado Housing & Finance Authority,
330 Ser 1990 B-2............................................... 8.00 02/01/18 344,434
2,500 Ser 1997 A-2 (AMT)......................................... 7.25 05/01/27 2,822,550
445 Idaho Housing Agency, 1988 Ser D-2 (AMT).................... 8.25 01/01/20 480,573
245 Illinois Housing Development Authority, 1988 Ser C (AMT).... 8.10 02/01/22 250,483
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 1998, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 960 Kansas City Leavenworth & Lenexa, Kansas, GNMA-Backed Ser
1988 C (AMT)............................................... 8.00 % 11/01/20 $ 989,155
Olathe, Kansas,
145 GNMA Collateralized Ser 1990 B............................. 7.50 09/01/10 153,340
410 GNMA Collateralized Ser 1989 A (AMT) (MBIA)................ 8.00 11/01/20 426,781
1,410 New Orleans Home Mortgage Authority, Louisiana, GNMA
Collateralized 1989 Ser B-1 (AMT).......................... 8.25 12/01/21 1,455,853
Maine Housing Authority,
3,540 Purchase Ser 1988 D4 (AMT)................................. 7.55 11/15/19 3,743,196
1,000 Purchase Ser 1988 D5 (AMT)................................. 7.55 11/15/19 1,057,400
4,960 Massachusetts Housing Finance Agency, 1989 Ser 7 (AMT)...... 8.10 06/01/20 5,065,499
615 Mississippi Housing Finance Corporation, GNMA-Backed Ser
1989 (AMT) (FGIC).......................................... 8.25 10/15/18 646,648
2,645 Missouri Housing Development Commission, Homeownership 1996
Ser D (AMT)................................................ 7.10 09/01/27 2,889,874
240 Muskogee County Home Finance Authority, Oklahoma, 1990 Ser A
(FGIC)..................................................... 7.60 12/01/10 251,242
2,560 Rhode Island Housing & Mortgage Finance Corporation,
Homeownership 1988 Ser 1-D (AMT)........................... 7.875 10/01/22 2,672,563
South Carolina Housing Finance & Development Authority,
1,955 Homeownership 1998 Ser C-1 (AMT)........................... 8.125 07/01/21 2,023,679
1,220 Homeownership 1991 Ser A (AMT)............................. 7.40 07/01/23 1,285,978
2,785 El Paso Housing Finance Corporation, Texas, GNMA
Collateralized Ser 1989 (AMT).............................. 8.20 03/01/21 2,896,456
Utah Housing Finance Agency,
250 Ser 1991 B-1............................................... 7.50 07/01/16 263,448
290 Ser 1989 B (AMT)........................................... 8.25 07/01/21 298,126
2,000 Virginia Housing Development Authority, 1992 Ser A.......... 7.10 01/01/25 2,098,280
- -------- ------------
30,505 32,115,558
- -------- ------------
Nursing & Health Related Facilities Revenue (0.5%)
New York State Medical Care Facilities Finance Agency,
825 Mental Health Ser 1987..................................... 8.875 08/15/07 844,610
565 Mental Health Ser 1990 A (Secondary MBIA).................. 7.75 02/15/20 607,081
405 Mental Health Ser 1991 A................................... 7.50 02/15/21 443,916
- -------- ------------
1,795 1,895,607
- -------- ------------
Public Facilities Revenue (1.4%)
1,500 Manatee County School Board, Florida, COPs (MBIA)........... 4.875 07/01/18 1,461,495
Saint Paul Independent School District #625, Minnesota,
1,700 Ser 1995 COPs.............................................. 5.45 02/01/11 1,768,816
1,800 Ser 1995 COPs.............................................. 5.50 02/01/12 1,868,994
- -------- ------------
5,000 5,099,305
- -------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 1998, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Resource Recovery Revenue (3.3%)
$ 11,500 Cambria County Industrial Development Authority,
- -------- Pennsylvania, Cambria Cogen Co Ser 1989 F-2 (AMT).......... 7.75 % 09/01/19 $ 11,585,560
------------
Transportation Facilities Revenue (10.2%)
3,500 Atlanta, Georgia, Airport Ser 1994 B (AMT) (AMBAC).......... 6.00 01/01/21 3,709,545
Chicago, Illinois,
5,000 Chicago-O'Hare International Airport Ser 1996 A (AMBAC).... 5.625 01/01/12 5,298,050
7,000 Midway Airport 1994 Ser A (AMT) (MBIA)..................... 6.25 01/01/24 7,531,510
5,000 Regional Transportation Authority, Illinois, Ser 1994 A
(AMBAC).................................................... 6.25 06/01/24 5,499,200
3,000 Massachusetts Turnpike Authority, Metropolitan Highway 1997
Ser A (MBIA)............................................... 5.00 01/01/37 2,890,740
8,000 Austin, Texas, Airport Prior Lien Ser 1995 A (AMT) (MBIA)... 6.125 11/15/25 8,621,680
2,625 Richmond Metropolitan Authority, Virginia, Expressway & Refg
Ser 1998 (FGIC)............................................ 5.25 07/15/17 2,714,906
- -------- ------------
34,125 36,265,631
- -------- ------------
Water & Sewer Revenue (6.1%)
2,500 Coachella, California, Ser 1992 COPs (FSA).................. 6.10 03/01/22 2,682,500
4,000 Santa Rosa, California, Wastewater Refg 1996 Ser A (FGIC)... 4.75 09/01/16 3,853,080
5,000 Massachusetts Water Resources Authority, 1998 Ser A (FSA)... 4.75 08/01/27 4,663,750
3,000 Detroit, Michigan, Water Supply 1997 Ser A (MBIA)........... 5.00 07/01/21 2,931,570
3,600 Rio Rancho, New Mexico, Water & Wastewater Ser 1995 A
(FSA)...................................................... 6.00 05/15/22 3,833,964
3,490 Texas Water Resource Finance Authority, Ser 1989 (AMBAC).... 7.50 08/15/13 3,631,345
- -------- ------------
21,590 21,596,209
- -------- ------------
Other Revenue (2.8%)
10,000 New York Local Government Assistance Corporation, Refg Ser
- -------- 1997 (MBIA)................................................ 5.00 04/01/21 9,786,100
------------
Refunded (1.4%)
3,000 Central Coast Water Authority, California, Ser 1992
(AMBAC).................................................... 6.60 10/01/02+ 3,355,650
1,340 Missouri Health & Educational Facilities Authority, Missouri
Baptist Medical Center Refg Ser 1989 (ETM)................. 7.625 07/01/18 1,460,024
- -------- ------------
4,340 4,815,674
- -------- ------------
330,485 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $325,347,631)................. 344,815,750
- -------- ------------
SHORT-TERM TAX EXEMPT MUNICIPAL OBLIGATIONS (1.0%)
2,500 Harris County Health Facilities Development Corporation,
Texas, Methodist Hospital Ser 1994 (Demand 06/01/98)....... 4.00* 12/01/25 2,500,000
1,000 North Central Texas Health Facilities Development
Corporation, Presbyterian Medical Center Ser 1985 C (MBIA)
(Demand 06/01/98).......................................... 4.00* 12/01/15 1,000,000
- -------- ------------
3,500 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost
$3,500,000).................................................................... 3,500,000
- -------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 1998, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
$333,985 TOTAL INVESTMENTS (Identified Cost $328,847,631) (a)................... 98.3% $348,315,750
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 1.7 6,076,605
----- ------------
NET ASSETS.............................................................. 100.0% $354,392,355
===== ============
</TABLE>
- ---------------------
<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to maturity.
+ Prerefunded to call date shown.
* Current coupon of variable rate demand obligation.
(a) The aggregate cost for federal income tax purposes
approximates identified cost. The aggregate gross unrealized
appreciation is $19,664,881 and the aggregate gross
unrealized depreciation is $196,762, resulting in net
unrealized appreciation of $19,468,119.
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.
</TABLE>
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
May 31, 1998
<TABLE>
<S> <C>
Alabama.................. 3.9%
Arizona.................. 3.5
California............... 3.1
Colorado................. 0.9
District of Columbia..... 1.5
Florida.................. 0.4
Georgia.................. 4.7
Idaho.................... 0.1
Illinois................. 7.4
Indiana.................. 0.6
Kansas................... 5.2
Kentucky................. 1.0
Louisiana................ 0.4
Maine.................... 1.4
Massachusetts............ 9.9
Michigan................. 2.5
Minnesota................ 1.8
Mississippi.............. 0.2
Missouri................. 1.2
New Mexico............... 1.1
New York................. 7.6
Ohio..................... 1.4
Oklahoma................. 0.1
Pennsylvania............. 7.4
Puerto Rico.............. 0.8
Rhode Island............. 0.8
South Carolina........... 3.4
Tennessee................ 1.3
Texas.................... 16.8
Utah..................... 2.0
Virginia................. 1.4
Washington............... 3.1
Wisconsin................ 1.4
------
Total.................... 98.3%
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MUNICIPAL PREMIUM INCOME TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1998
ASSETS:
Investments in securities, at value
(identified cost $328,847,631).......... $348,315,750
Cash..................................... 186,621
Receivable for:
Interest.............................. 6,227,081
Investments redeemed.................. 120,000
Prepaid expenses and other assets........ 176,973
------------
TOTAL ASSETS.......................... 355,026,425
------------
LIABILITIES:
Payable for:
Dividends to preferred shareholders... 191,758
Investment advisory fee............... 143,137
Shares of beneficial interest
repurchased.......................... 96,550
Administration fee.................... 89,460
Accrued expenses and other payables...... 113,165
------------
TOTAL LIABILITIES..................... 634,070
------------
NET ASSETS............................ $354,392,355
============
COMPOSITION OF NET ASSETS:
Preferred shares of beneficial interest
(1,000,000 shares authorized of non-
participating $.01 par value, 1,000
shares outstanding)..................... $100,000,000
------------
Common shares of beneficial interest
(unlimited shares authorized of $.01 par
value, 24,433,224 shares outstanding)... 227,033,713
Net unrealized appreciation.............. 19,468,119
Accumulated undistributed net investment
income.................................. 2,202,979
Accumulated undistributed net realized
gain.................................... 5,687,544
------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS.......................... 254,392,355
------------
TOTAL NET ASSETS...................... $354,392,355
============
NET ASSET VALUE PER COMMON SHARE
($254,392,355 divided by 24,433,224
common shares outstanding).............. $10.41
============
</TABLE>
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the year ended May 31, 1998
NET INVESTMENT INCOME:
INTEREST INCOME........................... $21,502,429
-----------
EXPENSES
Investment advisory fee................... 1,417,273
Administration fee........................ 885,795
Auction commission fees................... 281,597
Professional fees......................... 100,398
Transfer agent fees and expenses.......... 96,946
Shareholder reports and notices........... 69,821
Auction agent fees........................ 50,113
Registration fees......................... 32,339
Trustees' fees and expenses............... 18,769
Custodian fees............................ 16,547
Other..................................... 27,994
-----------
TOTAL EXPENSES......................... 2,997,592
Less: expense offset...................... (16,414)
-----------
NET EXPENSES........................... 2,981,178
-----------
NET INVESTMENT INCOME.................. 18,521,251
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain......................... 5,780,796
Net change in unrealized appreciation..... 2,044,112
-----------
NET GAIN............................... 7,824,908
-----------
NET INCREASE.............................. $26,346,159
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
MUNICIPAL PREMIUM INCOME TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR
ENDED ENDED
MAY 31, 1998 MAY 31, 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................................. $ 18,521,251 $ 19,568,521
Net realized gain (loss)............................... 5,780,796 (93,251)
Net change in unrealized appreciation.................. 2,044,112 5,092,960
------------ ------------
NET INCREASE....................................... 26,346,159 24,568,230
------------ ------------
Dividends to preferred shareholders from net investment
income................................................ (3,705,932) (3,571,216)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS
FROM:
Net investment income.................................. (14,732,173) (15,071,283)
Net realized gain...................................... -- (5,000,795)
------------ ------------
TOTAL.............................................. (14,732,173) (20,072,078)
------------ ------------
Decrease from transactions in common shares of
beneficial interest................................... (2,810,018) (7,218,048)
------------ ------------
NET INCREASE (DECREASE)............................ 5,098,036 (6,293,112)
NET ASSETS:
Beginning of period.................................... 349,294,319 355,587,431
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$2,202,979 and $2,119,833, respectively)........... $354,392,355 $349,294,319
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Municipal Premium 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 a high level
of current income exempt from federal income tax. The Fund was organized as a
Massachusetts business trust on November 16, 1988 and commenced operations on
February 1, 1989.
Effective June 22, 1998, the following entities have changed their name:
<TABLE>
<CAPTION>
OLD NAME NEW NAME
- --------------------------------- ------------------------------------------------
<S> <C>
Dean Witter InterCapital Inc. Morgan Stanley Dean Witter Advisors Inc.
Dean Witter Services Company Inc. Morgan Stanley Dean Witter Services Company Inc.
</TABLE>
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.
13
<PAGE> 14
MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998, continued
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 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
annual rate of 0.40% 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 0.25% 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,
14
<PAGE> 15
MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998, continued
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 year ended May 31, 1998 aggregated $70,772,755
and $74,302,588, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor and
Administrator, is the Fund's transfer agent. At May 31, 1998, the Fund had
transfer agent fees and expenses payable of approximately $5,300.
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 year ended May 31, 1998 included in
Trustees' fees and expenses in the Statement of Operations amounted to $3,772.
At May 31, 1998, the Fund had an accrued pension liability of $48,605 which is
included in accrued expenses in the Statement of Assets and Liabilities.
5. PREFERRED SHARES OF BENEFICIAL INTEREST
The Fund is authorized to issue up to 1,000,000 non-participating preferred
shares of beneficial interest having a par value of $.01 per share, in one or
more series, with rights as determined by the Trustees, without the approval of
the common shareholders. The Fund has issued Series A through E Auction Rate
Preferred Shares ("Preferred Shares") which have a liquidation value of $100,000
per share plus the redemption premium, if any, plus accumulated but unpaid
dividends, whether or not declared, thereon to the date of distribution. The
Fund may redeem such shares, in whole or in part, at the original purchase price
of $100,000 per share plus accumulated but unpaid dividends, whether or not
declared, thereon to the date of redemption.
15
<PAGE> 16
MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998, continued
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
AMOUNT NEXT RANGE OF
SERIES SHARES* IN THOUSANDS* RATE* RESET DATE DIVIDEND RATES**
- ------ ------- ------------- ----- ---------- ----------------
<S> <C> <C> <C> <C> <C>
A 200 $20,000 3.65% 06/02/98 3.30% - 5.00%
B 200 20,000 3.75 06/02/98 3.30 - 5.00
C 200 20,000 3.75 09/01/98 3.62 - 3.87
D 200 20,000 3.69 05/01/99 3.55 - 3.69
E 200 20,000 3.85 07/07/98 3.85
</TABLE>
- ---------------------
* As of May 31, 1998.
** For the year ended May 31, 1998.
Subsequent to May 31, 1998 and up through July 10, 1998, the Fund paid dividends
to each of the Series A through E at rates ranging from 3.28% to 3.85% in the
aggregate amount of $367,216.
The Fund is subject to certain restrictions relating to the preferred shares.
Failure to comply with these restrictions could preclude the Fund from declaring
any distributions to common shareholders or purchasing common shares and/or
could trigger the mandatory redemption of preferred shares at liquidation value.
The preferred shares, which are entitled to one vote per share, generally vote
with the common shares but vote separately as a class to elect two Trustees and
on any matters affecting the rights of the preferred shares.
6. COMMON 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, 1996....................................... 25,501,424 $255,014 $236,806,765
Treasury shares purchased and retired (weighted average
discount 8.30%)*........................................... (779,500) (7,795) (7,210,253)
---------- -------- ------------
Balance, May 31, 1997....................................... 24,721,924 247,219 229,596,512
Treasury shares purchased and retired (weighted average
discount 5.35%)*........................................... (288,700) (2,887) (2,807,131)
---------- -------- ------------
Balance, May 31, 1998....................................... 24,433,224 $244,332 $226,789,381
========== ======== ============
</TABLE>
- ---------------------
* The Trustees have voted to retire the shares purchased.
16
<PAGE> 17
MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1998, continued
7. DIVIDENDS TO COMMON SHAREHOLDERS
The Fund declared the following dividends from net investment income:
<TABLE>
<CAPTION>
DECLARATION AMOUNT RECORD PAYABLE
DATE PER SHARE DATE DATE
- --------------------- --------- ----------------- ------------------
<S> <C> <C> <C>
March 24, 1998 $0.05 June 5, 1998 June 19, 1998
June 30, 1998 $0.05 July 10, 1998 July 24, 1998
June 30, 1998 $0.05 August 7, 1998 August 21, 1998
June 30, 1998 $0.05 September 4, 1998 September 18, 1998
</TABLE>
8. FEDERAL INCOME TAX STATUS
During the year ended May 31, 1998, the Fund utilized its net capital loss
carryover of approximately $93,000.
17
<PAGE> 18
MUNICIPAL PREMIUM INCOME TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a common share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31*
------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 10.08 $ 10.02 $ 10.36 $ 10.24 $ 10.67
-------- -------- -------- ---------- --------
Net investment income....................................... 0.75 0.78 0.79 0.84 0.90
Net realized and unrealized gain (loss)..................... 0.33 0.19 (0.22) 0.26 (0.45)
-------- -------- -------- ---------- --------
Total from investment operations............................ 1.08 0.97 0.57 1.10 0.45
-------- -------- -------- ---------- --------
Less dividends and distributions from:
Net investment income...................................... (0.60) (0.60) (0.65) (0.72) (0.76)
Common share equivalent of dividends paid to preferred
shareholders............................................. (0.15) (0.14) (0.15) (0.16) (0.12)
Net realized gain.......................................... -- (0.20) (0.12) (0.10) --
-------- -------- -------- ---------- --------
Total dividends and distributions........................... (0.75) (0.94) (0.92) (0.98) (0.88)
-------- -------- -------- ---------- --------
Anti-dilutive effect of acquiring treasury shares........... -- 0.03 0.01 -- --
-------- -------- -------- ---------- --------
Net asset value, end of period.............................. $ 10.41 $ 10.08 $ 10.02 $ 10.36 $ 10.24
======== ======== ======== ========== ========
Market value, end of period................................. $ 9.625 $ 9.375 $ 9.00 $ 9.688 $ 9.75
======== ======== ======== ========== ========
TOTAL INVESTMENT RETURN+.................................... 9.08% 13.52% 0.67% 8.15% (2.72)%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Expenses.................................................... 1.18%(1) 1.14%(1) 1.16%(1) 1.21% 1.23%
Net investment income before preferred stock dividends...... 7.31% 7.70% 7.68% 8.37% 8.31%
Preferred stock dividends................................... 1.46% 1.41% 1.44% 1.55% 1.11%
Net investment income available to common shareholders...... 5.85% 6.29% 6.24% 6.82% 7.20%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $354,392 $349,294 $355,587 $368,225 $393,532
Asset coverage on preferred shares at end of period......... 354% 349% 355% 368% 314%
Portfolio turnover rate..................................... 21% 5% 14% 16% 23%
</TABLE>
- ---------------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total investment return is based upon the current market value on the last
day of each period reported. Dividends and distributions are assumed to be
reinvested at the prices obtained under the Fund's dividend reinvestment
plan. Total investment return does not reflect brokerage commissions.
(1) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE> 19
MUNICIPAL PREMIUM INCOME TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MUNICIPAL PREMIUM INCOME TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Municipal Premium Income Trust (the
"Fund") at May 31, 1998, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at May 31,
1998 by correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
July 10, 1998
1998 FEDERAL TAX NOTICE (unaudited)
For the year ended May 31, 1998, all of the Fund's dividends
from net investment income were exempt interest dividends,
excludable from gross income for Federal income tax purposes.
19
<PAGE> 20
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
MUNICIPAL
PREMIUM
INCOME
TRUST
ANNUAL REPORT
MAY 31, 1998
