<PAGE> 1
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST Two World Trade Center
LETTER TO THE SHAREHOLDERS May 31, 1999 New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the annual report on the operations of Morgan Stanley
Dean Witter Premium Municipal Income Trust (PIA) for the period ended May 31,
1999.
The financial markets have begun to recover from last year's global economic
difficulties. The turmoil which included the Asian crisis, the Russian debt
default and the near collapse of a major U.S. hedge fund has given way to more
normal financial conditions. The major catalyst for this return to stability was
the liquidity provided by the Federal Reserve Board's 75-basis-point reduction
in the federal-funds rate during the fourth quarter of 1998.
These international economic problems precipitated a "flight to quality" rally
in fixed-income securities and U.S. Treasury yields reached 30-year lows in
October 1998. As the world markets recovered, foreign investors repatriated
funds and Treasury yields began to rise. Interest rates also rose in response to
the surprisingly robust domestic economic growth reported over the second half
of 1998. The bond market became concerned that the central bank might become
more restrictive by taking back some of the liquidity provided during the
crisis. On June 30, 1999, the Federal Reserve Board raised the Federal Funds
rate 25 basis points to 5.00 percent.
MUNICIPAL MARKET CONDITIONS
During 1998 municipal yields were less volatile than Treasury yields. This
pattern of stability continued into 1999. Long-term insured municipal index
yields stood at 5.30 percent at the end of May only 30 basis points higher than
November 1998. In contrast, Treasury bond yields rose 80 basis points from 5.05
to 5.85 percent. During the past six months, the yield pickup for extending
tax-exempt maturities from one to 30 years averaged 225 basis points.
The modest rally of municipals during 1998 created a more favorable relationship
relative to Treasuries. Municipals underperformed Treasuries and the ratio of
municipal yields to Treasury yields climbed to 99 percent by December. The
higher the ratio, the more attractive municipals are
<PAGE> 2
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS May 31, 1999, continued
relative to Treasuries. Municipals have outperformed Treasuries this year and
the ratio declined to 91 percent by May. The high-to-low annual range of
municipal/Treasury yields for the past five years has averaged from 93 to 84
percent.
In addition to lagging 1998's Treasury rally, 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. Issuers actively refinanced at
lower interest rates and refundings were 29 percent of total volume. This year's
rise in interest rates has reduced the amount of refunding activity. Refunding
volume was down 45 percent in the first five months of 1999. Total underwriting
declined 24 percent.
30-YEAR BOND YIELDS 1994 - 1999
<TABLE>
<CAPTION>
Insured U.S. Insured Municipal Yields as a
Municipal Yields Treasury Yields Percentage of U.S. Treasury Yields
<S> <C> <C> <C>
1994 5.40 6.34 85.17
5.40 6.24 86.54
5.80 6.66 87.09
6.40 7.09 90.27
6.35 7.32 86.75
6.25 7.43 84.12
6.50 7.61 85.41
6.25 7.39 84.57
6.30 7.45 84.56
6.55 7.81 83.87
6.75 7.96 84.80
7.00 8.00 87.50
6.75 7.88 85.66
1995 6.40 7.70 83.12
6.15 7.44 82.66
6.15 7.43 82.77
6.20 7.34 84.47
5.80 6.66 87.09
6.10 6.62 92.15
6.10 6.86 88.92
6.00 6.66 90.09
5.95 6.48 91.82
5.75 6.33 90.84
5.50 6.14 89.58
5.35 5.94 90.07
1996 5.40 6.03 89.55
5.60 6.46 86.69
5.85 6.66 87.84
5.95 6.89 86.36
6.05 6.99 86.55
5.90 6.89 85.63
5.85 6.97 83.93
5.90 7.11 82.98
5.70 6.93 82.25
5.65 6.64 85.09
5.50 6.35 86.61
5.60 6.63 84.46
1997 5.70 6.79 83.95
5.65 6.80 83.09
5.90 7.10 83.10
5.75 6.94 82.85
5.65 6.91 81.77
5.60 6.78 82.60
5.30 6.30 84.13
5.50 6.61 83.21
5.40 6.40 84.38
5.35 6.15 86.99
5.30 6.05 87.60
5.15 5.92 86.99
1998 5.15 5.80 88.79
5.20 5.92 87.84
5.25 5.93 88.53
5.35 5.95 89.92
5.20 5.80 89.66
5.20 5.65 92.04
5.18 5.71 90.72
5.03 5.27 95.45
4.95 5.00 99.00
5.05 5.16 97.87
5.00 5.06 98.81
5.05 5.10 99.02
1999 5.00 5.09 98.23
5.10 5.58 91.40
5.15 5.63 91.47
5.20 5.66 91.87
5.30 5.83 90.91
</TABLE>
PERFORMANCE
The Fund's total net asset value (NAV) return for the 12-month period ending May
31, 1999 was 4.60 percent. This return is based on the NAV change plus
reinvestment of tax-free dividends totaling $0.54 per share and a long-term
capital gain distribution of $0.26 per share. PIA's value on the New York Stock
Exchange decreased from $9.625 per share to $8.75 per share during the same
period. Based on this change plus reinvestment of dividends and distributions,
the Fund's total market
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS May 31, 1999, continued
[LARGEST TERM SECTORS LINE GRAPH]
<TABLE>
<CAPTION>
LARGEST SECTORS as of May 31, 1999 (% of Net Assets)
<S> <C>
Hospital 18%
IDR/PCR* 16%
Transportation 15%
Electric 14%
General Obligation 8%
Mortgage 8%
Water & Sewer 7%
* Industrial Development/Pollution Control Revenue
Portfolio structure is subject to change.
</TABLE>
[CREDIT RATINGS PIE CHART]
<TABLE>
<CAPTION>
CREDIT RATINGS as of May 31, 1999 (% of Total Long-Term Portfolio)
<S> <C>
Aaa or AAA 66%
Aa or AA 20%
A or A 2%
Baa or BBB 9%
NR 3%
As measured by Moody's Investors Service, Inc. or
Standard & Poor's Corp.
Portfolio structure is subject to change.
</TABLE>
[CALL STRUCTURE BAR CHART]
<TABLE>
<CAPTION>
CALL STRUCTURE as of May 31, 1999
(% of Total Long-Term Portfolio)
Percent Callable
WEIGHTED AVERAGE
CALL PROTECTION: 6 YEARS
Years Bonds Callable Percent Callable
<S> <C>
1999 4%
2000 8%
2001 7%
2002 8%
2003 0%
2004 10%
2005 12%
2006 13%
2007 4%
2008 27%
2009 3%
2010+ 4%
</TABLE>
Years Bonds Callable
Portfolio structure is subject to change.
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS May 31, 1999, continued
return was -1.21 percent. As of May 31, 1999, PIA's share price represented a
12.7 percent discount to its NAV.
Monthly dividends for the second quarter of 1999 remained at $0.0425 per share.
The Fund's level of undistributed net investment income was $0.107 per share on
May 31, 1999 versus $0.09 per share on November 30, 1998.
PORTFOLIO STRUCTURE
The Fund's investments were diversified among 13 long-term sectors and 75
credits. At the end of May, the portfolio's average maturity was 20 years.
Portfolio duration, a measure of sensitivity to interest rate changes, was 6.9
years. The accompanying charts provide current information on the portfolio's
call structure, largest sectors and distribution of credit ratings.
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. 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 12-month period, ARPS leverage contributed approximately $0.08 per
share to common share earnings. Weekly ARPS yields ranged between 2.95 and 5.00
percent. Five ARPS series totaling $100 million represented 30 percent of net
assets.
ARPS leverage also increases the price volatility of common shares by
effectively extending portfolio duration.
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 late last year
than it had been in the previous 10 years. Although municipals have outperformed
Treasuries thus far in 1999, we believe that municipals still offer investors
considerable value versus their historical relationship with Treasuries.
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS May 31, 1999, continued
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. 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. During the fiscal year ended May
31, 1999, the Fund purchased and retired 848,200 shares of common stock at a
weighted average market discount of 9.68 percent.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley Dean
Witter Funds. Mr. Merin is also the President and Chief Operating Officer of
Asset Management for Morgan Stanley Dean Witter & Co. and President, Chief
Executive Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the
Fund's Investment Advisor. He also serves as Chairman, Chief Executive Officer
and Director of Morgan Stanley Dean Witter Distributors Inc. and Morgan Stanley
Dean Witter Trust FSB.
We appreciate your ongoing support of Morgan Stanley Dean Witter Municipal
Premium 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
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On December 17, 1998, 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 BY ALL SHAREHOLDERS:
<TABLE>
<S> <C>
Edwin J. Garn
For......................................................... 18,606,044
Withheld.................................................... 550,746
Michael E. Nugent
For......................................................... 18,627,838
Withheld.................................................... 528,952
Philip J. Purcell
For......................................................... 18,620,351
Withheld.................................................... 536,439
</TABLE>
ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS:
<TABLE>
<S> <C>
John R. Haire
For......................................................... 832
Withheld.................................................... 0
</TABLE>
The following Trustees were not standing for reelection at this meeting:
Michael Bozic, Charles A. Fiumefreddo, Wayne E. Hedien, Dr. Manuel H. Johnson,
and John L. Schroeder.
(2) RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS:
<TABLE>
<S> <C>
For......................................................... 18,451,239
Against..................................................... 264,897
Abstain..................................................... 440,624
</TABLE>
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (96.8%)
General Obligation (8.0%)
$ 2,000 California, Dtd 10/01/98 Refg (MBIA)........................ 4.50% 10/01/28 $ 1,771,160
5,000 Los Angeles Unified School District, California, 1997 Ser B
(FGIC)..................................................... 5.00 07/01/23 4,849,900
3,500 Massachusetts, 1995 Ser A (AMBAC)........................... 5.00 07/01/12 3,570,735
2,000 Berkley School District, Michigan, Refg Ser 1998 (FGIC)..... 4.75 01/01/19 1,869,160
2,000 Michigan Municipal Bond Authority, School Ser 1998.......... 5.25 12/01/13 2,046,860
3,000 Puerto Rico, Public Improvement Ser 1998 (MBIA)............. 4.875 07/01/23 2,874,750
3,500 Shelby County, Tennessee, Refg 1995 Ser A................... 5.625 04/01/11 3,672,690
6,000 Washington, Ser 1993 A...................................... 5.75 10/01/17 6,199,740
- -------- -----------
27,000 26,854,995
- -------- -----------
Educational Facilities Revenue (3.4%)
5,500 Oakland University, Michigan, Ser 1995 (MBIA)............... 5.75 05/15/26 5,750,525
New York State Dormitory Authority,
4,000 State University Refg Ser 1993 A........................... 5.50 05/15/08 4,234,800
1,350 State University Refg Ser 1990 B........................... 7.50 05/15/11 1,621,823
- -------- -----------
10,850 11,607,148
- -------- -----------
Electric Revenue (13.5%)
5,000 Sacramento Municipal Utility District, California, Refg 1994
Ser I (MBIA)............................................... 6.00 01/01/24 5,326,950
2,950 Kansas City, Kansas, Utility Refg & Impr Ser 1994 (FGIC).... 6.375 09/01/23 3,259,455
7,750 South Carolina Public Service Authority, 1995 Refg Ser A
(AMBAC).................................................... 6.25 01/01/22 8,482,298
4,000 Lower Colorado River Authority, Texas, Jr Lien Seventh Ser
(FSA)...................................................... 4.75 01/01/28 3,650,360
17,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C.......... 4.70 02/01/06 17,389,470
Intermountain Power Agency, Utah,
2,000 Refg Ser 1998 A (MBIA)..................................... 5.25 07/01/15 2,020,200
5,000 Refg 1997 Ser B (MBIA)..................................... 5.75 07/01/19 5,241,550
- -------- -----------
43,700 45,370,283
- -------- -----------
Hospital Revenue (17.9%)
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 4,733,450
5,000 Birmingham-Carraway Special Care Facilities Financing
Authority, Alabama, Carraway Methodist Health Ser 1995 A
(Connie Lee)............................................... 5.875 08/15/15 5,250,100
3,500 Colbert County - Northwest Health Care Authority, Alabama,
Hellen Keller Hospital Refg Ser 1990....................... 8.75 06/01/09 3,706,430
3,000 Montgomery Special Care Facilities Financing Authority,
Alabama, Baptist Health Ser 1998 B (MBIA).................. 5.00 11/15/29 2,830,080
8,000 Fulco Hospital Authority, Georgia, Catholic Health East Ser
1998 A (MBIA).............................................. 5.00 11/15/28 7,609,680
3,000 Hall County and Gainesville Hospital Authority, Georgia,
Northeast Georgia Healthcare Ser 1995 (MBIA)............... 6.00 10/01/20 3,187,620
9,500 Boston, Massachusetts, Boston City Hospital - FHA Mtg Refg
Ser B...................................................... 5.75 02/15/13 9,829,459
4,000 North Carolina Medical Care Commission, Duke University
Health Ser 1998 A.......................................... 4.75 06/01/28 3,604,920
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 4,000 Montgomery County, Ohio, Franciscan Medical Center - Dayton
Ser 1997................................................... 5.50% 07/01/18 $ 3,898,320
2,985 Lehigh County General Purpose Authority, Pennsylvania, St
Lukes Hospital Ser 1992 (AMBAC)............................ 6.25 07/01/22 3,213,950
2,750 Jefferson County Health Facilities Development Corporation,
Texas, Baptist Health Ser 1989............................. 8.30 10/01/14 2,826,835
5,000 Washington Health Care Facilities Authority, Swedish Health
Ser 1998 (AMBAC)........................................... 5.125 11/15/22 4,844,050
5,000 Wisconsin Health & Educational Facilities Authority, Wausau
Hospital Refg Ser 1998 A (AMBAC)........................... 5.125 08/15/20 4,845,600
- -------- -----------
60,735 60,380,494
- -------- -----------
Industrial Development/Pollution Control Revenue (15.2%)
10,360 Pima County Industrial Development Authority, Arizona,
Tucson Electric Power Co Refg Ser 1988 A (FSA)............. 7.25 07/15/10 11,373,829
10,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991
(MBIA)..................................................... 7.00 06/01/31 10,738,500
8,000 New York City Industrial Development Agency, New York,
Brooklyn Navy Yard Cogeneration Partners LP Ser 1997
(AMT)...................................................... 5.65 10/01/28 8,099,600
9,500 Montgomery County Industrial Development Authority,
Pennsylvania, Philadelphia Electric Co Refg 1991 Ser B
(MBIA)..................................................... 6.70 12/01/21 10,220,860
10,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990
(AMT)...................................................... 7.50 12/01/29 10,634,900
- -------- -----------
47,860 51,067,689
- -------- -----------
Mortgage Revenue - Multi-Family (3.0%)
1,250 Lake Charles Non-Profit Housing Development Corporation,
Louisiana, Ser 1990 A (FSA)................................ 7.875 02/15/25 1,263,750
Massachusetts Housing Finance Agency,
1,925 Rental 1994 Ser A (AMT) (AMBAC)............................ 6.60 07/01/14 2,065,679
3,785 Rental 1994 Ser A (AMT) (AMBAC)............................ 6.65 07/01/19 4,061,154
2,485 Minnesota Housing Finance Agency, Rental 1995 Ser D
(MBIA)..................................................... 6.00 02/01/22 2,598,092
- -------- -----------
9,445 9,988,675
- -------- -----------
Mortgage Revenue - Single Family (5.1%)
Colorado Housing & Finance Authority,
220 Ser 1990 B-2............................................... 8.00 02/01/18 227,405
2,500 Ser 1997 A-2 (AMT)......................................... 7.25 05/01/27 2,779,851
215 Idaho Housing Agency, 1988 Ser D-2 (AMT).................... 8.25 01/01/20 232,800
760 Kansas City Leavenworth & Lenexa, Kansas, GNMA-Backed Ser
1998 C (AMT)............................................... 8.00 11/01/20 782,367
Olathe, Kansas,
120 GNMA Collateralized Ser 1990 B............................. 7.50 09/01/10 125,564
295 GNMA Collateralized Ser 1989 A (AMT) (MBIA)................ 8.00 11/01/20 304,118
1,235 New Orleans Home Mortgage Authority, Louisiana, GNMA
Collateralized 1989 Ser B-1 (AMT).......................... 8.25 12/01/21 1,261,330
Maine Housing Authority,
135 Purchase Ser 1988 D4 (AMT)................................. 7.55 11/15/19 136,050
1,000 Purchase Ser 1988 D5 (AMT)................................. 7.55 11/15/19 1,046,090
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 470 Mississippi Housing Finance Corporation, GNMA-Backed Ser
1989 (AMT) (FGIC).......................................... 8.25% 10/15/18 $ 483,639
2,545 Missouri Housing Development Commission, Homeownership 1996
Ser D (AMT)................................................ 7.10 09/01/27 2,711,393
125 Muskogee County Home Finance Authority, Oklahoma, 1990 Ser A
(FGIC)..................................................... 7.60 12/01/10 129,298
1,345 Rhode Island Housing & Mortgage Finance Corporation,
Homeownership 1988 Ser 1-D (AMT)........................... 7.875 10/01/22 1,380,091
South Carolina Housing Finance & Development Authority,
1,955 Homeownership 1998 Ser C-1 (AMT)........................... 8.125 07/01/21 1,996,602
1,220 Homeownership 1991 Ser A (AMT)............................. 7.40 07/01/23 1,274,083
Utah Housing Finance Agency,
125 Ser 1991 B-1............................................... 7.50 07/01/16 130,246
145 Ser 1989 B (AMT)........................................... 8.25 07/01/21 147,926
2,000 Virginia Housing Development Authority, 1992 Ser A.......... 7.10 01/01/25 2,057,660
- -------- -----------
16,410 17,206,513
- -------- -----------
Nursing & Health Related Facilities Revenue (0.6%)
New York State Medical Care Facilities Finance Agency,
825 Mental Health Ser 1987..................................... 8.875 08/15/07 833,820
565 Mental Health Ser 1990 A (Secondary MBIA).................. 7.75 02/15/20 591,956
405 Mental Health Ser 1991 A................................... 7.50 02/15/21 434,763
- -------- -----------
1,795 1,860,539
- -------- -----------
Public Facilities Revenue (1.7%)
2,000 Metropolitan Pier & Exposition Authority, Illinois,
McCormick Place Refg Ser 1998 A (FGIC)..................... 5.50 06/15/18 2,091,700
Saint Paul Independent School District #625, Minnesota,
1,700 Ser 1995 C COPs............................................ 5.45 02/01/11 1,775,650
1,800 Ser 1995 C COPs............................................ 5.50 02/01/12 1,872,684
- -------- -----------
5,500 5,740,034
- -------- -----------
Transportation Facilities Revenue (14.3%)
3,000 Alameda Corridor Transportation Authority, California, Sr
Lien Ser 1999 A (MBIA)..................................... 5.25 10/01/21 3,016,050
3,500 Atlanta, Georgia, Airport Ser 1994 B (AMT) (AMBAC).......... 6.00 01/01/21 3,713,955
Chicago, Illinois,
5,000 Chicago-O'Hare International Airport Ser 1996 A (AMBAC).... 5.625 01/01/12 5,230,050
7,000 Midway Airport 1994 Ser A (AMT) (MBIA)..................... 6.25 01/01/24 7,565,250
5,000 Regional Transportation Authority, Illinois, Ser 1994 A
(AMBAC).................................................... 6.25 06/01/24 5,461,400
5,000 New Jersey Transportation Trust Authority, 1998 Ser A
(FSA)...................................................... 4.50 06/15/19 4,620,050
3,000 New York State Thruway Authority, Local Highway & Bridge Ser
1998 A (MBIA).............................................. 5.00 04/01/18 2,931,780
8,000 Austin, Texas, Airport Prior Lien Ser 1995 A (AMT) (MBIA)... 6.125 11/15/25 8,603,360
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 5,000 Pocahontas Parkway Association, Virginia, Route 895
Connector Ser 1998 A....................................... 5.50% 08/15/28 $ 4,878,900
2,000 Richmond Metropolitan Authority, Virginia, Expressway & Refg
Ser 1998 (FGIC)............................................ 5.25 07/15/17 2,049,400
- -------- -----------
46,500 48,070,195
- -------- -----------
Water & Sewer Revenue (7.1%)
2,500 Coachella, California, Ser 1992 COPs (FSA).................. 6.10 03/01/22 2,670,950
3,000 Santa Rosa, California, Wastewater Refg 1996 Ser A (FGIC)... 4.75 09/01/16 2,896,920
3,000 Atlanta, Georgia, Water & Wastewater Ser 1999 (FGIC)........ 5.50 11/01/06 3,154,410
5,000 Massachusetts Water Resources Authority, 1998 Ser A (FSA)... 4.75 08/01/27 4,572,350
3,000 Detroit, Michigan, Water Supply 1997 Ser A (MBIA)........... 5.00 07/01/21 2,894,850
5,000 Cleveland, Ohio, Waterworks Impr & Refg 1998 Ser I (FSA).... 5.00 01/01/23 4,831,750
3,020 Texas Water Resource Finance Authority, Ser 1989 (AMBAC).... 7.50 08/15/13 3,045,579
- -------- -----------
24,520 24,066,809
- -------- -----------
Other Revenue (3.6%)
10,000 New York Local Government Assistance Corporation, Refg Ser
1997 B (MBIA).............................................. 5.00 04/01/21 9,676,600
2,500 Cuyahoga County, Ohio, The Medical Center Co Ser 1998
(AMBAC).................................................... 5.125 02/15/28 2,421,300
- -------- -----------
12,500 12,097,900
- -------- -----------
Refunded (3.4%)
1,800 Southwestern Illinois Development Authority, Anderson
Hospital Ser 1992 A........................................ 7.00 08/15/02+ 1,989,432
1,340 Missouri Health & Educational Facilities Authority, Missouri
Baptist Medical Center Refg Ser 1989 (ETM)................. 7.625 07/01/18 1,399,737
3,600 Rio Rancho, New Mexico, Water & Wastewater Ser 1995 A
(FSA)...................................................... 6.00 05/15/06+ 3,964,860
1,000 Shelby County, Tennessee, Refg 1995 Ser A................... 5.625 04/01/05+ 1,078,770
3,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C (ETM).... 4.70 02/01/06 3,034,050
- -------- -----------
10,740 11,466,849
- -------- -----------
317,555 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $312,490,182)................. 325,778,123
- -------- -----------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (1.5%)
1,900 East Baton Rouge Parish, Louisiana, Exxon Corp Ser 1989
(Demand 06/01/99).......................................... 3.30* 11/01/19 1,900,000
3,000 Missouri Health & Educational Facilities Authority,
Washington University Ser C (Demand 06/01/99).............. 3.35* 09/01/30 3,000,000
- -------- -----------
4,900 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost
$4,900,000).................................................................... 4,900,000
- -------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$322,455 TOTAL INVESTMENTS (Identified Cost $317,390,182) (a)................... 98.3% $330,678,123
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 1.7 5,817,643
----- -----------
NET ASSETS.............................................................. 100.0% $336,495,766
===== ===========
</TABLE>
- ---------------------
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 $14,956,771 and the aggregate gross
unrealized depreciation is $1,668,830, resulting in net
unrealized appreciation of $13,287,941.
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
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 1999, continued
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
May 31, 1999
<TABLE>
<S> <C>
Alabama.................. 4.9%
Arizona.................. 3.4
California............... 6.1
Colorado................. 0.9
Georgia.................. 5.3
Idaho.................... 0.1
Illinois................. 6.5
Kansas................... 4.5
Louisiana................ 1.3
Maine.................... 0.4
Massachusetts............ 7.2
Michigan................. 3.7
Minnesota................ 1.9
Mississippi.............. 0.1
Missouri................. 2.1
New Mexico............... 1.2
New Jersey............... 1.4
New York................. 8.5
North Carolina........... 1.1
Ohio..................... 3.3
Pennsylvania............. 4.0
Puerto Rico.............. 0.9
Rhode Island............. 0.4
South Carolina........... 3.5
Tennessee................ 1.4
Texas.................... 14.6
Utah..................... 2.2
Virginia................. 2.7
Washington............... 3.3
Wisconsin................ 1.4
------
Total.................... 98.3%
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1999
ASSETS:
Investments in securities, at value
(identified cost $317,390,182)............................. $330,678,123
Cash........................................................ 121,718
Receivable for:
Interest................................................ 5,888,241
Investments sold........................................ 155,000
Prepaid expenses and other assets........................... 182,465
------------
TOTAL ASSETS............................................ 337,025,547
------------
LIABILITIES:
Payable for:
Dividends to preferred shareholders..................... 167,606
Investment advisory fee................................. 115,114
Administration fee...................................... 71,946
Shares of beneficial interest repurchased............... 35,120
Accrued expenses and other payables......................... 139,995
------------
TOTAL LIABILITIES....................................... 529,781
------------
NET ASSETS.............................................. $336,495,766
============
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, 23,585,024
shares outstanding)........................................ 219,071,095
Net unrealized appreciation................................. 13,287,941
Accumulated undistributed net investment income............. 2,512,905
Accumulated undistributed net realized gain................. 1,623,825
------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS............ 236,495,766
------------
TOTAL NET ASSETS........................................ $336,495,766
============
NET ASSET VALUE PER COMMON SHARE
($236,495,766 divided by 23,585,024 common share
outstanding)............................................... $10.03
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the year ended May 31, 1999
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $19,737,293
-----------
EXPENSES
Investment advisory fee..................................... 1,398,476
Administration fee.......................................... 874,047
Auction commission fees..................................... 318,725
Professional fees........................................... 117,598
Transfer agent fees and expenses............................ 93,733
Auction agent fees.......................................... 37,766
Registration fees........................................... 32,339
Shareholder reports and notices............................. 22,547
Trustees' fees and expenses................................. 20,586
Custodian fees.............................................. 16,993
Other....................................................... 36,610
-----------
TOTAL EXPENSES.......................................... 2,969,420
Less: expense offset........................................ (16,881)
-----------
NET EXPENSES............................................ 2,952,539
-----------
NET INVESTMENT INCOME................................... 16,784,754
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 2,192,129
Net change in unrealized appreciation....................... (6,180,178)
-----------
NET LOSS................................................ (3,988,049)
-----------
NET INCREASE................................................ $12,796,705
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER 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, 1999 MAY 31, 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................................. $16,784,754 $ 18,521,251
Net realized gain...................................... 2,192,129 5,780,796
Net change in unrealized appreciation.................. (6,180,178) 2,044,112
------------ ------------
NET INCREASE....................................... 12,796,705 26,346,159
------------ ------------
Dividends to preferred shareholders from net investment
income................................................ (3,464,520) (3,705,932)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS
FROM:
Net investment income.................................. (13,010,308) (14,732,173)
Net realized gain...................................... (6,255,848) --
------------ ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS.................. (19,266,156) (14,732,173)
------------ ------------
Decrease from transactions in common shares of
beneficial interest................................... (7,962,618) (2,810,018)
------------ ------------
NET INCREASE (DECREASE)............................ (17,896,589) 5,098,036
NET ASSETS:
Beginning of period.................................... 354,392,355 349,294,319
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$2,512,905 and $2,202,979, respectively)........... $336,495,766 $354,392,355
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Municipal Premium Income Trust (the "Fund"), formerly
Municipal Premium 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 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.
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.
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
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued
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, 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.
17
<PAGE> 18
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued
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, 1999 aggregated $58,129,384
and $73,236,210, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor and
Administrator, is the Fund's transfer agent. At May 31, 1999, the Fund had
transfer agent fees and expenses payable of approximately $3,400.
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, 1999 included in
Trustees' fees and expenses in the Statement of Operations amounted to $6,385.
At May 31, 1999, the Fund had an accrued pension liability of $51,585 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.
18
<PAGE> 19
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999, continued
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
AMOUNT IN NEXT RANGE OF
SERIES SHARES* THOUSANDS* RATE* RESET DATE DIVIDEND RATES**
- ------ ------- ---------- ----- ---------- ----------------
<S> <C> <C> <C> <C> <C>
A 200 $20,000 3.25% 06/02/99 2.95%- 5.00%
B 200 20,000 3.15 06/02/99 2.90 - 4.90
C 200 20,000 3.49 08/31/99 3.49 - 3.75
D 200 20,000 3.35 01/11/00 3.50 - 3.69
E 200 20,000 3.55 07/06/99 3.55 - 3.85
- --------------------------------------------------------------------
* As of May 31, 1999.
** For the year ended May 31, 1999.
</TABLE>
Subsequent to May 31, 1999 and up through July 9, 1999, the Fund paid dividends
to each of the Series A through E at rates ranging from 3.00% to 3.60% in the
aggregate amount of $332,440.
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, 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
Treasury shares purchased and retired (weighted average
discount 9.68%)*........................................... (848,200) (8,482) (7,954,136)
---------- -------- ------------
Balance, May 31, 1999....................................... 23,585,024 $235,850 $218,835,245
========== ======== ============
</TABLE>
- ---------------------
* The Trustees have voted to retire the shares purchased.
19
<PAGE> 20
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 1999, 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 30,
1999......... $0.0425 June 4, 1999 June 18, 1999
June 29,
1999......... $0.0425 July 9, 1999 July 23, 1999
June 29,
1999......... $0.0425 August 6, 1999 August 20, 1999
June 29,
1999......... $0.0425 September 3, 1999 September 17, 1999
</TABLE>
20
<PAGE> 21
MORGAN STANLEY DEAN WITTER 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*
--------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 10.41 $ 10.08 $ 10.02 $ 10.36 $ 10.24
---------- -------- -------- ---------- --------
Income from investment operations:
Net investment income...................................... 0.70 0.75 0.78 0.79 0.84
Net realized and unrealized gain (loss).................... (0.18) 0.33 0.19 (0.22) 0.26
---------- -------- -------- ---------- --------
Total income from investment operations..................... 0.52 1.08 0.97 0.57 1.10
---------- -------- -------- ---------- --------
Less dividends and distributions from:
Net investment income...................................... (0.54) (0.60) (0.60) (0.65) (0.72)
Common share equivalent of dividends paid to preferred
shareholders............................................. (0.14) (0.15) (0.14) (0.15) (0.16)
Net realized gain.......................................... (0.26) -- (0.20) (0.12) (0.10)
---------- -------- -------- ---------- --------
Total dividends and distributions........................... (0.94) (0.75) (0.94) (0.92) (0.98)
---------- -------- -------- ---------- --------
Anti-dilutive effect of acquiring treasury shares........... 0.04 -- 0.03 0.01 --
---------- -------- -------- ---------- --------
Net asset value, end of period.............................. $ 10.03 $ 10.41 $ 10.08 $ 10.02 $ 10.36
========== ======== ======== ========== ========
Market value, end of period................................. $ 8.75 $ 9.625 $ 9.375 $ 9.00 $ 9.688
========== ======== ======== ========== ========
TOTAL RETURN+............................................... (1.21)% 9.08% 13.52% 0.67% 8.15%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Expenses.................................................... 1.19%(1) 1.18%(1) 1.14%(1) 1.16%(1) 1.21%
Net investment income before preferred stock dividends...... 6.73% 7.31% 7.70% 7.68% 8.37%
Preferred stock dividends................................... 1.39% 1.46% 1.41% 1.44% 1.55%
Net investment income available to common shareholders...... 5.34% 5.85% 6.29% 6.24% 6.82%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $336,496 $354,392 $349,294 $355,587 $368,225
Asset coverage on preferred shares at end of period......... 336% 354% 349% 355% 368%
Portfolio turnover rate..................................... 17% 21% 5% 14% 16%
</TABLE>
- ---------------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total return is based upon the current market value on the last day of each
period reported. Dividends 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
21
<PAGE> 22
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER 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 Morgan Stanley Dean Witter
Municipal Premium Income Trust (the "Fund"), formerly Municipal Premium Income
Trust, at May 31, 1999, 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,
1999 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 9, 1999
1999 FEDERAL TAX NOTICE (unaudited)
During the year ended May 31, 1999, the Fund paid the following
per share amounts from tax-exempt income: $0.54 to common
shareholders, $3,320 to Series A preferred shareholders, $3,308 to
Series B preferred shareholders, $3,556 to Series C preferred
shareholders, $3,563 to Series D preferred shareholders and $3,576
to Series E preferred shareholders. For the year ended May 31,
1999, the Fund paid to common shareholders $0.26 per share from
long-term capital gains.
22
<PAGE> 23
(This Page Intentionally Left Blank)
<PAGE> 24
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 Premium Income Trust
Annual Report
May 31, 1999
