<PAGE> 1
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST Two World Trade
Center
LETTER TO THE SHAREHOLDERS November 30, 1998 New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the semiannual report of Morgan Stanley Dean Witter
Municipal Premium Income Trust (PIA) for the six-month period ended November 30,
1998.
On December 21, 1998 the Fund changed its name from Municipal Premium Income
Trust to Morgan Stanley Dean Witter Municipal Premium Income Trust. Details on
the name change were mailed to shareholders in mid-December under separate
cover.
Since our last report six months ago, global financial turmoil, including the
Russian currency crisis, continued to affect the securities markets. The
resulting flight-to-quality bond rally pushed U.S. Treasury bond yields to
30-year lows. Municipal bond yields declined but lagged the downward trend of
Treasury yields.
The deflationary impact of the international financial crisis began to temper
U.S. economic growth prior to the summer's tumultuous market activity. Lower
commodity prices, cheaper imports and improved
BOND YIELDS 1994 - 1998
<TABLE>
<CAPTION>
30-Year Insured 30-Year U.S. Insured Municipal Yields as a
Municipal Yields Treasury Yields Percentage of U.S. Treasury Yields
<S> <C> <C> <C>
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
1994 6.5 7.61 85.41
6.25 7.39 84.57
6.3 7.45 84.56
6.55 7.81 83.87
6.75 7.96 84.8
7 8 87.5
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
1995 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
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
1996 5.9 6.89 85.63
5.85 6.97 83.93
5.9 7.11 82.98
5.7 6.93 82.25
5.65 6.64 85.09
5.5 6.35 86.61
5.6 6.63 84.46
5.7 6.79 83.95
5.65 6.8 83.08
5.9 7.1 83.1
5.75 6.94 82.85
5.65 6.91 81.77
1997 5.6 6.78 82.6
5.3 6.3 84
5.5 6.61 83
5.4 6.4 84.4
5.35 6.15 86.9
5.3 6.05 87.6
5.15 5.92 86.9
5.15 5.81 88.8
5.2 5.92 87.8
5.25 5.93 88.5
5.35 5.95 89.9
5.2 5.80 89.66
1998 5.2 5.65 92.04
5.18 5.71 90.72
5.03 5.27 95.45
4.95 5 99
5.05 5.16 97.87
</TABLE>
Source: Municipal Market Data
<PAGE> 2
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS November 30, 1998, continued
productivity offset the potential inflationary impact of strong domestic
employment. With inflation held in check, the Federal Reserve Board provided
liquidity to the markets by lowering short-term interest rates. Between the end
of September and the middle of November, the Federal Reserve Open Market
Committee had cut the federal-funds rate 75 basis points from 5.50 percent to
4.75 percent in three separate moves.
MUNICIPAL MARKET CONDITIONS
At the end of November the long-term insured municipal bond index yield stood at
5.00 percent. This index yield declined 30 basis points from 5.30 percent over
the last 12 months. In contrast, the 30-year U.S. Treasury bond yield fell 100
basis points during the same period.
As municipals lagged the rally in Treasuries, the ratio of municipal yields to
Treasury yields rose sharply to 99 percent. A rising ratio means that the
attractiveness of municipals relative to Treasuries has improved. The rise in
this ratio is similar to the jump witnessed in 1986 when a radical legislative
proposal threatened the favorable tax advantage of municipal bonds.
The overall decline in interest rates led to a substantial increase in new issue
municipal volume. Municipal issuance was on a pace to challenge 1993's record of
$292 billion. Total municipal volume through November of $255 billion was ahead
28 percent versus the same period last year. Half the underwriting volume was
enhanced with bond insurance. Refundings represented 29 percent of total new
issuance.
PERFORMANCE
The Fund's net asset value (NAV) increased from $10.41 to $10.55 per share for
the six month period. Based on this NAV change plus reinvestment of tax-free
dividends of $0.285 per share, the Fund's total return was 4.29 percent. PIA's
price on the New York Stock Exchange declined from $9.625 to $9.50 per share.
Based on this change in market price plus reinvestment of dividends, PIA's total
market return was 1.57 percent. On November 30, 1998 PIA traded at a 9.95
percent discount to NAV.
Monthly dividends for the fourth calendar quarter of 1998 were declared in
September. Beginning with the October 1998 dividend, the monthly dividend was
reduced from $0.05 per share to $0.0425 per share to more closely reflect the
Fund's anticipated income. The level of undistributed net investment income
remained unchanged at $0.09.
PORTFOLIO STRUCTURE
PIA remained fully invested in long-term municipal bonds during the period.
Investments were diversified among 13 specific long-term sectors and 73 credits.
As illustrated in the accompanying
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS November 30, 1998, continued
<TABLE>
<CAPTION>
LARGEST SECTORS as of November 30, 1998 (% of Net Assets)
<S> <C>
Hospital 18%
IDR/PCR* 15%
Electric 15%
Transportation 14%
Mortgage 10%
General Obligation 8%
Water & Sewer 7%
All Others 13%
* Industrial Development/Pollution Control Revenue
Portfolio structure is subject to change.
</TABLE>
<TABLE>
<CAPTION>
CREDIT RATINGS as of November 30, 1998 (% of Total Long-Term Portfolio)
<S> <C>
Aaa or AAA 65%
Aa or AA 21%
A or A 2%
Baa or BBB 10%
N/R 2%
As measured by Moody's Investors Service, Inc. or
Standard & Poor's Corp.
Portfolio structure is subject to change.
</TABLE>
<TABLE>
<CAPTION>
CALL STRUCTURE as of November 30, 1998
(% of Total Long-Term Portfolio)
WEIGHTED AVERAGE
CALL PROTECTION: 6 YEARS
Years Bonds Callable Percent Callable
<S> <C>
1999 5%
2000 8%
2001 8%
2002 9%
2003 0%
2004 10%
2005 12%
2006 12%
2007 4%
2008 28%
2009+ 4%
Portfolio structure is subject to change.
</TABLE>
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS November 30, 1998, continued
chart, the distribution of call dates in the portfolio produced 6 years of
weighted average call protection.
At the time of issuance, municipal bonds generally have 10 years of protection
from the municipality's option to call bonds for redemption. Interest rates have
declined since the Fund's inception and we anticipate that most municipal
issuers will use their optional call provisions to refinance portfolio holdings
at lower yields.
PIA's weighted average maturity was 21 years. Average duration (a measure of
sensitivity to interest rate changes) was 6.8 years. High grade credit quality
was maintained with 86 percent of 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 six month period, ARPS leverage contributed approximately $0.04 per
share to common share earnings. Weekly ARPS yields ranged between 3.10 and 3.85
percent. Five ARPS series totaling $100 million represented 28 percent of net
assets.
LOOKING AHEAD
Global economic conditions have kept inflationary pressures under control and
have contributed to lower interest rates. The fixed income markets appear
concerned about the risk of reflation as countries seek to stimulate economic
growth. However, the ability of the Fed to maintain stability by responding with
appropriate monetary policy is encouraging. With the municipal relationship to
Treasuries more favorable than it has been in 10 years, the outlook for
municipal bonds is positive.
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
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS November 30, 1998, continued
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 six month period, the Fund purchased and retired
426,600 shares of common stock at a weighted average discount of 9.86% percent.
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
- -----------------------------
CHARLES A. FIUMEFREDDO
Chairman of the Board
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (95.1%)
General Obligation (7.6%)
$ 2,000 California, Dtd 10/01/98 Refg (MBIA)........................ 4.50% 10/01/28 $ 1,869,180
5,000 Los Angeles Unified School District, California, 1997 Ser B
(FGIC)..................................................... 5.00 07/01/23 5,004,150
3,500 Massachusetts, 1995 Ser A (AMBAC)........................... 5.00 07/01/12 3,672,655
2,000 Michigan Municipal Bond Authority, School Ser 1998.......... 5.25 12/01/13 2,104,460
3,000 Puerto Rico, Public Improvement Ser A 1998 (MBIA)........... 4.875 07/01/23 2,976,510
4,500 Shelby County, Tennessee, Refg 1995 Ser A................... 5.625 04/01/11 4,840,965
6,000 Washington, Ser 1993 A...................................... 5.75 10/01/17 6,329,640
- -------- -----------
26,000 26,797,560
- -------- -----------
Educational Facilities Revenue (3.4%)
5,500 Oakland University, Michigan, Ser 1995 (MBIA)............... 5.75 05/15/26 5,929,275
New York State Dormitory Authority,
4,000 State University Refg Ser 1993 A........................... 5.50 05/15/08 4,327,720
1,350 State University Refg Ser 1990 B........................... 7.50 05/15/11 1,671,935
- -------- -----------
10,850 11,928,930
- -------- -----------
Electric Revenue (14.6%)
5,000 Sacramento Municipal Utility District, California, Refg 1994
Ser I (MBIA)............................................... 6.00 01/01/24 5,491,450
4,000 Kansas City, Kansas, Utility Refg & Impr Ser 1994 (FGIC).... 6.375 09/01/23 4,514,160
7,750 South Carolina Public Service Authority, 1995 Refg Ser A
(AMBAC).................................................... 6.25 01/01/22 8,728,283
4,000 Lower Colorado River Authority, Texas, Jr Lien Seventh Ser
(FSA)...................................................... 4.75 01/01/28 3,823,800
20,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C.......... 4.70 02/01/06 20,562,000
Intermountain Power Agency, Utah,
3,000 Refg Ser 1998 A (MBIA)..................................... 5.25 07/01/15 3,098,310
5,000 Refg 1997 Ser B (MBIA)..................................... 5.75 07/01/19 5,407,650
- -------- -----------
48,750 51,625,653
- -------- -----------
Hospital Revenue (17.5%)
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 4,919,850
5,000 Birmingham - Carraway Special Care Facilities Financing
Authority, Alabama, Carraway Methodist Health Ser 1995 A
(Connie Lee)............................................... 5.875 08/15/15 5,376,899
3,500 Colbert County - Northwest Health Care Authority, Alabama,
Hellen Keller Hospital Refg Ser 1990....................... 8.75 06/01/09 3,767,365
1,000 California Health Facilities Financing Authority, Alexian
Brothers/San Jose Refg Ser 1990 (MBIA)..................... 7.125 01/01/16 1,054,310
8,000 Fulco Hospital Authority, Georgia, Catholic Health East Ser
1998 A (MBIA).............................................. 5.00 11/15/28 7,865,600
3,000 Hall County and Gainesville Hospital Authority, Georgia,
Northeast Georgia Healthcare Ser 1995 (MBIA)............... 6.00 10/01/20 3,304,470
1,800 Southwestern Illinois Development Authority, Anderson
Hospital Ser 1992 A........................................ 7.00 08/15/22 1,946,448
9,500 Boston, Massachusetts, Boston City Hospital - FHA Mtg Refg
Ser B...................................................... 5.75 02/15/13 9,903,750
4,000 North Carolina Medical Care Commission, Duke University
Health Ser 1998 A.......................................... 4.75 06/01/28 3,758,640
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998 (unaudited) 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
Campus Ser 1997............................................ 5.50% 07/01/18 $ 4,036,160
2,985 Lehigh County General Purpose Authority, Pennsylvania, St
Lukes Hospital Ser 1992 (AMBAC)............................ 6.25 07/01/22 3,253,740
2,750 Jefferson County Health Facilities Development Corporation,
Texas, Baptist Health Ser 1989............................. 8.30 10/01/14 2,865,005
5,000 Washington Health Care Facilities Authority, Swedish Health
Ser 1998 (AMBAC)........................................... 5.125 11/15/22 4,948,850
5,000 Wisconsin Health & Educational Facilities Authority, Wausau
Hospital Refg Ser 1998 A (AMBAC)........................... 5.125 08/15/20 4,957,550
- -------- -----------
60,535 61,958,637
- -------- -----------
Industrial Development/Pollution Control Revenue (15.3%)
11,230 Pima County Industrial Development Authority, Arizona,
Tucson Electric Power Co Refg Ser 1988 A (FSA)............. 7.25 07/15/10 12,524,369
10,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991
(MBIA)..................................................... 7.00 06/01/31 10,883,600
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 9,484,326
9,500 Montgomery County Industrial Development Authority,
Pennsylvania, Philadelphia Electric Co Refg 1991 Ser B
(MBIA)..................................................... 6.70 12/01/21 10,332,295
10,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990
(AMT)...................................................... 7.50 12/01/29 10,727,400
- -------- -----------
50,030 53,951,990
- -------- -----------
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 1,276,250
Massachusetts Housing Finance Agency,
1,925 Rental 1994 Ser A (AMT) (AMBAC)............................ 6.60 07/01/14 2,083,967
3,785 Rental 1994 Ser A (AMT) (AMBAC)............................ 6.65 07/01/19 4,106,649
2,540 Minnesota Housing Finance Agency, Rental 1995 Ser D
(MBIA)..................................................... 6.00 02/01/22 2,687,498
- -------- -----------
9,500 10,154,364
- -------- -----------
Mortgage Revenue - Single Family (6.6%)
Colorado Housing & Finance Authority,
275 Ser 1990 B-2............................................... 8.00 02/01/18 286,435
2,500 Ser 1997 A-2 (AMT)......................................... 7.25 05/01/27 2,848,424
280 Idaho Housing Agency, 1988 Ser D-2 (AMT).................... 8.25 01/01/20 308,182
845 Kansas City Leavenworth & Lenexa, Kansas, GNMA-Backed Ser
1998 C (AMT)............................................... 8.00 11/01/20 870,806
Olathe, Kansas,
140 GNMA Collateralized Ser 1990 B............................. 7.50 09/01/10 147,692
350 GNMA Collateralized Ser 1989 A (AMT) (MBIA)................ 8.00 11/01/20 362,509
1,410 New Orleans Home Mortgage Authority, Louisiana, GNMA
Collateralized 1989 Ser B-1 (AMT).......................... 8.25 12/01/21 1,444,573
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Maine Housing Authority,
$ 1,670 Purchase Ser 1988 D4 (AMT)................................. 7.55% 11/15/19 $ 1,721,854
1,000 Purchase Ser 1988 D5 (AMT)................................. 7.55 11/15/19 1,055,960
540 Mississippi Housing Finance Corporation, GNMA-Backed Ser
1989 (AMT) (FGIC).......................................... 8.25 10/15/18 562,621
2,615 Missouri Housing Development Commission, Homeownership 1996
Ser D (AMT)................................................ 7.10 09/01/27 2,882,227
185 Muskogee County Home Finance Authority, Oklahoma, 1990 Ser A
(FGIC)..................................................... 7.60 12/01/10 192,992
1,765 Rhode Island Housing & Mortgage Finance Corporation,
Homeownership 1988 Ser 1-D (AMT)........................... 7.875 10/01/22 1,829,687
South Carolina Housing Finance & Development Authority,
1,955 Homeownership 1998 Ser C-1 (AMT)........................... 8.125 07/01/21 2,009,114
1,220 Homeownership 1991 Ser A (AMT)............................. 7.40 07/01/23 1,285,404
2,685 El Paso Housing Finance Corporation, Texas, GNMA
Collateralized Ser 1989 (AMT).............................. 8.20 03/01/21 2,775,377
Utah Housing Finance Agency,
220 Ser 1991 B-1............................................... 7.50 07/01/16 231,317
250 Ser 1989 B (AMT)........................................... 8.25 07/01/21 256,500
2,000 Virginia Housing Development Authority, 1992 Ser A.......... 7.10 01/01/25 2,076,120
- -------- -----------
21,905 23,147,794
- -------- -----------
Nursing & Health Related Facilities Revenue (0.5%)
New York State Medical Care Facilities Finance Agency,
825 Mental Health Ser 1987..................................... 8.875 08/15/07 836,855
565 Mental Health Ser 1990 A (Secondary MBIA).................. 7.75 02/15/20 601,556
405 Mental Health Ser 1991 A................................... 7.50 02/15/21 440,709
- -------- -----------
1,795 1,879,120
- -------- -----------
Public Facilities Revenue (1.7%)
2,000 Metropolitan Pier & Exposition Authority, Illinois,
McCormick Place Refg Ser 1998 A (FGIC)..................... 5.50 06/15/18 2,162,920
Saint Paul Independent School District #625, Minnesota,
1,700 Ser 1995 C COPs............................................ 5.45 02/01/11 1,795,421
1,800 Ser 1995 C COPs............................................ 5.50 02/01/12 1,909,836
- -------- -----------
5,500 5,868,177
- -------- -----------
Transportation Facilities Revenue (13.9%)
3,500 Atlanta, Georgia, Airport Ser 1994 B (AMT) (AMBAC).......... 6.00 01/01/21 3,748,955
Chicago, Illinois,
5,000 Chicago-O'Hare International Airport Ser 1996 A (AMBAC).... 5.625 01/01/12 5,398,100
7,000 Midway Airport 1994 Ser A (AMT) (MBIA)..................... 6.25 01/01/24 7,706,440
2,000 Midway Airport 1998 Ser A (AMT) (MBIA)..................... 5.125 01/01/35 1,943,860
5,000 Regional Transportation Authority, Illinois, Ser 1994 A
(AMBAC).................................................... 6.25 06/01/24 5,552,400
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 5,000 Wayne County, Michigan, Detroit Metropolitan Wayne County
Airport Ser 1998 A (AMT) (MBIA)............................ 5.00% 12/01/28 $ 4,848,900
3,500 New York State Thruway Authority, Local Highway & Bridge Ser
1998 A (MBIA).............................................. 5.00 04/01/18 3,508,785
8,000 Austin, Texas, Airport Prior Lien Ser 1995 A (AMT) (MBIA)... 6.125 11/15/25 8,795,600
5,000 Pocahontas Parkway Association, Virginia, Route 895
Connector Ser 1998 A....................................... 5.50 08/15/28 4,999,550
2,625 Richmond Metropolitan Authority, Virginia, Expressway & Refg
Ser 1998 (FGIC)............................................ 5.25 07/15/17 2,775,885
- -------- -----------
46,625 49,278,475
- -------- -----------
Water & Sewer Revenue (7.2%)
2,500 Coachella, California, Ser 1992 COPs (FSA).................. 6.10 03/01/22 2,702,425
3,000 Santa Rosa, California, Wastewater Refg 1996 Ser A (FGIC)... 4.75 09/01/16 3,006,750
5,000 Massachusetts Water Resources Authority, 1998 Ser A (FSA)... 4.75 08/01/27 4,803,000
3,000 Detroit, Michigan, Water Supply 1997 Ser A (MBIA)........... 5.00 07/01/21 2,975,790
3,600 Rio Rancho, New Mexico, Water & Wastewater Ser 1995 A
(FSA)...................................................... 6.00 05/15/22 3,943,620
5,000 Cleveland, Ohio, Waterworks Impr & Refg 1998 Ser I (FSA).... 5.00 01/01/23 4,972,050
3,140 Texas Water Resource Finance Authority, Ser 1989 (AMBAC).... 7.50 08/15/13 3,231,814
- -------- -----------
25,240 25,635,449
- -------- -----------
Other Revenue (3.5%)
10,000 New York Local Government Assistance Corporation, Refg Ser
1997 (MBIA)................................................ 5.00 04/01/21 9,946,100
2,500 Cuyahoga County, Ohio, The Medical Center Co Ser 1998
(AMBAC).................................................... 5.125 02/15/28 2,494,175
- -------- -----------
12,500 12,440,275
- -------- -----------
Refunded (0.4%)
1,340 Missouri Health & Educational Facilities Authority, Missouri
- -------- Baptist Medical Center Refg Ser 1989 (ETM)................. 7.625 07/01/18 1,422,959
-----------
320,570 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $315,284,778)................. 336,089,383
- -------- -----------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (3.2%)
7,000 Illinois Health Facilities Authority, Northwestern Memorial
Hospital Ser 1995 (Demand 12/01/98)........................ 3.35* 08/15/25 7,000,000
4,300 Missouri Health & Educational Facilities Authority,
- -------- Washington University Ser C (Demand 12/01/98).............. 3.25* 09/01/30 4,300,000
-----------
11,300 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost
$11,300,000)................................................................... 11,300,000
- -------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS November 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------------------------------------
<C> <S> <C> <C>
$331,870 TOTAL INVESTMENTS (Identified Cost $326,584,778) (a)........ 98.3% $347,389,383
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.............. 1.7 5,916,710
---- -----------
NET ASSETS.................................................. 100.0% $353,306,093
===== ===========
</TABLE>
- ---------------------
<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to maturity.
* 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 $20,888,189 and the aggregate gross
unrealized depreciation is $83,584, resulting in net
unrealized appreciation of $20,804,605.
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
November 30, 1998
<TABLE>
<S> <C>
Alabama.................. 4.0%
Arizona.................. 3.5
California............... 5.4
Colorado................. 1.0
Georgia.................. 4.2
Illinois................. 9.0
Kansas................... 4.7
Louisiana................ 0.8
Maine.................... 0.8
Massachusetts............ 7.0
Michigan................. 4.5
Minnesota................ 1.8
Mississippi.............. 0.2
Missouri................. 2.4
New Mexico............... 1.1
New York................. 8.7
North Carolina........... 1.1
Ohio..................... 3.3
Oklahoma................. 0.1
Pennsylvania............. 3.8
Puerto Rico.............. 0.8
Rhode Island............. 0.5
South Carolina........... 3.4
Tennessee................ 1.4
Texas.................... 14.9
Utah..................... 2.5
Virginia................. 2.8
Washington............... 3.2
Wisconsin................ 1.4
------
Total.................... 98.3%
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1998 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $326,584,778)............................. $347,389,383
Cash........................................................ 156,309
Receivable for:
Interest................................................ 5,918,662
Investments sold........................................ 167,457
Prepaid expenses and other assets........................... 221,812
------------
TOTAL ASSETS............................................ 353,853,623
------------
LIABILITIES:
Payable for:
Dividends to preferred shareholders..................... 170,426
Investment advisory fee................................. 120,083
Administration fee...................................... 75,052
Shares of beneficial interest repurchased............... 40,289
Accrued expenses and other payables......................... 141,680
------------
TOTAL LIABILITIES....................................... 547,530
------------
NET ASSETS.............................................. $353,306,093
============
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, 24,006,624 shares
outstanding)............................................... 222,973,631
Net unrealized appreciation................................. 20,804,605
Accumulated undistributed net investment income............. 2,132,306
Accumulated undistributed net realized gain................. 7,395,551
------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS............ 253,306,093
------------
TOTAL NET ASSETS........................................ $353,306,093
============
NET ASSET VALUE PER COMMON SHARE
($253,306,093 divided by 24,006,624 common shares
outstanding)............................................... $ 10.55
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended November 30, 1998 (unaudited)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $10,150,683
-----------
EXPENSES
Investment advisory fee..................................... 712,700
Administration fee.......................................... 445,438
Auction commission fees..................................... 156,529
Professional fees........................................... 57,833
Transfer agent fees and expenses............................ 45,943
Registration fees........................................... 16,214
Auction agent fees.......................................... 15,687
Shareholder reports and notices............................. 13,351
Trustees' fees and expenses................................. 10,491
Custodian fees.............................................. 8,446
Other....................................................... 19,265
-----------
TOTAL EXPENSES.......................................... 1,501,897
Less: expense offset........................................ (8,385)
-----------
NET EXPENSES............................................ 1,493,512
-----------
NET INVESTMENT INCOME................................... 8,657,171
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 1,708,007
Net change in unrealized appreciation....................... 1,336,486
-----------
NET GAIN................................................ 3,044,493
-----------
NET INCREASE................................................ $11,701,664
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
NOVEMBER 30, 1998 MAY 31, 1998
- ---------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 8,657,171 $ 18,521,251
Net realized gain.................................... 1,708,007 5,780,796
Net change in unrealized appreciation................ 1,336,486 2,044,112
------------ ------------
NET INCREASE..................................... 11,701,664 26,346,159
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Preferred............................................ (1,788,084) (3,705,932)
Common............................................... (6,939,760) (14,732,173)
------------ ------------
TOTAL............................................ (8,727,844) (18,438,105)
------------ ------------
Decrease from transactions in common shares of
beneficial interest................................. (4,060,082) (2,810,018)
------------ ------------
NET INCREASE (DECREASE).......................... (1,086,262) 5,098,036
NET ASSETS:
Beginning of period.................................. 354,392,355 349,294,319
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$2,132,306 and $2,202,979, respectively)......... $353,306,093 $354,392,355
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Municipal Premium Income Trust (the "Fund"), formerly
Municipal Premium Income Trust (the Fund changed its name effective December 21,
1998), 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.
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited) continued
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, 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.
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited) 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 six months ended November 30, 1998 aggregated
$42,258,714 and $54,054,421, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor and
Administrator, is the Fund's transfer agent. At November 30, 1998, the Fund had
transfer agent fees and expenses payable of approximately $10,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended November 30, 1998
included in Trustees' fees and expenses in the Statement of Operations amounted
to $3,508. At November 30, 1998, the Fund had an accrued pension liability of
$50,563 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. 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 9.86%)*........................................... (426,600) (4,266) (4,055,816)
---------- -------- ------------
Balance, November 30, 1998.................................. 24,006,624 $240,066 $222,733,565
========== ======== ============
</TABLE>
- ---------------------
* The Trustees have voted to retire the shares purchased.
6. 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,
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1998 (unaudited) continued
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.
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
AMOUNT IN RESET RANGE OF
SERIES SHARES* THOUSANDS* RATE* DATE DIVIDEND RATES**
- ------ ------- ------------- ----- -------- ----------------
<S> <C> <C> <C> <C> <C>
A 200 $20,000 3.10% 12/01/98 3.10% - 3.75%
B 200 20,000 3.20 12/01/98 3.20 - 3.75
C 200 20,000 3.49 08/31/99 3.49 - 3.75
D 200 20,000 3.69 01/05/99 3.69
E 200 20,000 3.55 07/06/99 3.55 - 3.85
</TABLE>
- ---------------------
* As of November 30, 1998.
** For the six months ended November 30, 1998.
Subsequent to November 30, 1998 and up through January 8, 1999, the Fund paid
dividends to each of the Series A through E at rates ranging from 3.00% to 5.00%
in the aggregate amount of $534,220.
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.
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>
September 29, 1998 $0.0425 December 4, 1998 December 18, 1998
December 29, 1998 $0.0425 January 8, 1999 January 22, 1999
December 29, 1998 $0.0425 February 5, 1999 February 19, 1999
December 29, 1998 $0.0425 March 5, 1999 March 19, 1999
</TABLE>
17
<PAGE> 18
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 SIX FOR THE YEAR ENDED MAY 31*
MONTHS ENDED ----------------------------------------------------
NOVEMBER 30, 1998 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <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 $10.67
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income.............................. 0.36 0.75 0.78 0.79 0.84 0.90
Net realized and unrealized gain (loss)............ 0.12 0.33 0.19 (0.22) 0.26 (0.45)
------ ------ ------ ------ ------ ------
Total income from investment operations............. 0.48 1.08 0.97 0.57 1.10 0.45
------ ------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income.............................. (0.29) (0.60) (0.60) (0.65) (0.72) (0.76)
Common share equivalent of dividends paid to
preferred shareholders........................... (0.07) (0.15) (0.14) (0.15) (0.16) (0.12)
Net realized gain.................................. -- -- (0.20) (0.12) (0.10) --
------ ------ ------ ------ ------ ------
Total dividends and distributions................... (0.36) (0.75) (0.94) (0.92) (0.98) (0.88)
------ ------ ------ ------ ------ ------
Anti-dilutive effect of acquiring treasury shares... 0.02 -- 0.03 0.01 -- --
------ ------ ------ ------ ------ ------
Net asset value, end of period...................... $10.55 $10.41 $10.08 $10.02 $10.36 $10.24
====== ====== ====== ====== ====== ======
Market value, end of period......................... $ 9.50 $9.625 $9.375 $ 9.00 $9.688 $ 9.75
====== ====== ====== ====== ====== ======
TOTAL RETURN+....................................... 1.57%(3) 9.08% 13.52% 0.67% 8.15% (2.72)%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Expenses............................................ 1.17%(2) 1.18%(1) 1.14%(1) 1.16%(1) 1.21% 1.23%
Net investment income before preferred stock
dividends.......................................... 6.77%(2) 7.31% 7.70% 7.68% 8.37% 8.31%
Preferred stock dividends........................... 1.40%(2) 1.46% 1.41% 1.44% 1.55% 1.11%
Net investment income available to common
shareholders....................................... 5.37%(2) 5.85% 6.29% 6.24% 6.82% 7.20%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............. $353,306 $354,392 $349,294 $355,587 $368,225 $393,532
Asset coverage on preferred shares at end of
period............................................. 353% 354% 349% 355% 368% 314%
Portfolio turnover rate............................. 12%(3) 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%.
(2) Annualized.
(3) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE> 19
(This Page Intentionally Left Blank)
<PAGE> 20
TRUSTEES MORGAN STANLEY
- ---------------------------------------- DEAN WITTER
Michael Bozic MUNICIPAL
Charles A. Fuimefreddo PREMIUM
Edwin J. Garn INCOME TRUST
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
- ----------------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- ----------------------------------------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- ----------------------------------------
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT ADVISOR
- ----------------------------------------
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein Semiannual Report
have been taken from the records of the November 30, 1998
Fund without examination by the
independent accountants and accordingly
they do not express an opinion thereon.
