<PAGE> 1
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST Two World Trade Center
LETTER TO THE SHAREHOLDERS May 31, 2000 New York, New York 10048
DEAR SHAREHOLDER:
The U.S. economy continued its unprecedented expansion into the new year as real
personal consumption accelerated and unemployment reached a 30-year low. The
surge in oil prices also heightened the risk of inflation. In response, the
Federal Reserve Board raised the federal funds rate on six occasions over the
last eleven months to a nine-year high of 6.50 percent. Economic growth and a
less accommodative monetary policy caused long-term interest rates to increase
throughout 1999. In February, however, the U.S. Treasury announced plans to use
the federal budget surplus to reduce its debt. This announcement precipitated a
50 to 75 basis point drop in yields of longer Treasury maturities. Municipal
bond yields also declined but lagged the trend of Treasury yields. With data in
April still indicating a robust economy, long-term interest rates again
increased. By the end of May, however, interest rates had stabilized as the
financial markets began to perceive the possibility of an economic soft landing.
MUNICIPAL MARKET CONDITIONS
The long-term insured municipal index began 1999 near a record low yield of 5.05
percent but increased to 5.97 percent by calendar year-end. This index reached a
high of 6.18 percent in January 2000 and ended May at 5.91 percent. Because bond
prices move inversely to changes in interest rates, higher yields caused bond
prices to decline significantly last year and improve marginally in the first
five months of 2000.
The ratio of municipal yields as a percentage of Treasury yields has
historically been used as a measure of relative value. Over the past five years
the ratio has ranged between an average high of 93 percent and an average low of
85 percent. The increase in the ratio from 92 percent at the end of 1999 to 98
percent at the end of May 2000 can be attributed primarily to the magnitude of
the rally in long-term Treasuries. A rising yield ratio indicates weaker
relative performance by municipals.
<PAGE> 2
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS May 31, 2000, continued
During the first five months of 2000, new-issue underwriting volume was 25
percent lower than in the same period last year. Refunding activity, the most
interest-rate-sensitive component of supply, dropped more than 75 percent.
[BAR GRAPH]
<TABLE>
<CAPTION>
30-YEAR BOND YIELDS 1994-2000
Insured Insured Municipal Yields as a
Municipal Yields U.S. 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
5.47 5.96 91.78
5.55 6.10 90.98
5.75 6.06 94.88
5.85 6.05 96.69
6.03 6.16 97.90
6.00 6.29 95.39
5.97 6.48 92.13
2000 6.18 6.49 95.22
6.04 6.14 98.37
5.82 5.83 99.83
5.91 5.96 99.16
5.91 6.01 98.34
</TABLE>
Source: Municipal Market Data - A Division of Thomson Financial Municipal Group
and Bloomberg L.P.
PERFORMANCE
The performance of Morgan Stanley Dean Witter Municipal Premium Income Trust
(PIA) was affected by the higher-interest-rate environment. For the 12-month
period ended May 31, 2000, the Fund's net asset value (NAV) declined from $10.03
to $9.08 per share. Based on this change plus a reinvestment of tax-free
dividends totaling $0.53 per share and short-term and long-term capital gain
distributions paid in December, the Fund's total NAV return was -2.35 percent.
PIA's value on the New York Stock Exchange (NYSE) decreased from $8.75 to $7.75
per share during this period. Based on this change plus reinvestment of
dividends and distributions, PIA's total market return was -4.55 percent. PIA's
share price was at a 14.65 percent discount to its NAV on May 31, 2000.
Monthly dividends for the second calendar quarter of 2000, declared in March,
were unchanged at $0.045 per share. The Fund's level of undistributed net
investment income was $0.106 per share on
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS May 31, 2000, continued
May 31, 2000, versus $0.107 per share 12 months earlier. Subsequent to the
fiscal year end, the Fund declared the same level of monthly dividends for July,
August and September.
PORTFOLIO STRUCTURE
The Fund's investments were diversified among 13 long-term sectors and 77
credits. At the end of May, the portfolio's average maturity was 18 years.
Average duration, a measure of portfolio sensitivity to interest rates, was 7.9
years. Issues in the refunded bond category comprised 5 percent of net assets.
These bonds have been refinanced and will be redeemed on the dates shown in the
portfolio. The accompanying charts and tables provide current information on the
portfolio's credit quality, sector distribution and geographic diversification.
Optional call provisions, by year, with their respective cost (book) yields are
also shown.
THE IMPACT OF LEVERAGING
As discussed in previous shareholder 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 is the amount of ARPS outstanding, while the second is the
spread between the portfolio's cost yield and ARPS expenses (i.e., 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. ARPS leverage also increases the price volatility of common shares and
has the effect of extending portfolio duration.
During the fiscal year, ARPS leverage contributed approximately $0.07 per share
to common share earnings. Weekly ARPS yields ranged between 3.00 percent and
5.50 percent. In comparison, the yield on 1-year municipal notes increased from
3.18 percent at the end of May 1999 to 4.59 percent at the end of May 2000. Five
ARPS series totaling $100 million represented 33 percent of net assets.
LOOKING AHEAD
The Federal Reserve Board has expressed concern about consumer wealth and rising
prices. We anticipate that the central bank will continue to focus on inflation
and may increase short-term rates if it feels that economic momentum is not
slowing significantly. We believe municipal bonds continue to offer
tax-conscious investors good long-term value.
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS May 31, 2000, 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 12-month period ended
May 31, 2000, the Fund purchased and retired 6.5 percent of its common stock
(1,536,776 shares) at a weighted average market discount of 14.21 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.
<TABLE>
<S> <C>
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
</TABLE>
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS May 31, 2000, continued
[LARGEST SECTORS PIE CHART]
<TABLE>
<CAPTION>
LARGEST SECTORS AS OF MAY 31, 2000 (% OF NET ASSETS)
<S> <C>
TRANSPORTATION 16%
ELECTRIC 15%
HOSPITAL 15%
IDR/PCR* 12%
GENERAL OBLIGATION 10%
WATER & SEWER 8%
MORTGAGE 6%
REFUNDED 5%
* INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
</TABLE>
[CREDIT RATINGS PIE CHART]
<TABLE>
<CAPTION>
CREDIT RATINGS AS OF MAY 31, 2000
(% OF TOTAL LONG-TERM PORTFOLIO)
<S> <C>
Aaa OR AAA 66%
Aa OR AA 20%
A OR A 3%
Baa OR BBB 9%
NR 2%
AS MEASURED BY MOODY'S INVESTORS SERVICE, INC. OR
STANDARD & POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
</TABLE>
GEOGRAPHIC SUMMARY OF INVESTMENTS
BASED ON MARKET VALUE AS A PERCENT OF NET ASSETS
MAY 31, 2000
<TABLE>
<CAPTION>
<S> <C>
ALABAMA 3.4%
ARIZONA 3.4
CALIFORNIA 7.8
COLORADO 2.2
GEORGIA 3.7
FLORIDA 0.8
HAWAII 1.0
ILLINOIS 7.0
KANSAS 4.8
LOUISIANA 0.8
MASSACHUSETTS 8.2
MICHIGAN 3.9
MINNESOTA 2.0
MISSISSIPPI 0.1
MISSOURI 1.2
NEW JERSEY 2.7
NEW MEXICO 1.3
NEW YORK 8.3
NORTH CAROLINA 1.0
OHIO 4.5
PENNSYLVANIA 1.0
PUERTO RICO 0.9
SOUTH CAROLINA 2.9
TENNESSEE 1.2
TEXAS 16.4
UTAH 1.6
VIRGINIA 2.6
WASHINGTON 3.4
WISCONSIN 1.4
------
TOTAL 99.5%
======
=====================
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
</TABLE>
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS May 31, 2000, continued
<TABLE>
<CAPTION>
CALL AND COST (BOOK) YIELD STRUCTURE
MAY 31, 2000
WEIGHTED AVERAGE
PERCENT CALLABLE* CALL PROTECTION: 6 YEARS
<S> <C>
2000 11%
2001 4%
2002 9%
2003
2004 10%
2005 10%
2006 12%
2007 4%
2008 22%
2009 6%
2010+ 12%
YEARS BONDS CALLABLE
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
COST (BOOK) YIELD ** BOOK YIELD: 6.0%
<S> <C>
2000 7.40%
2001 7.10%
2002 6.10%
2003
2004 6.50%
2005 6.10%
2006 5.40%
2007 6.10%
2008 5.40%
2009 5.50%
2010+ 9.80%
* % BASED ON LONG-TERM PORTFOLIO.
** COST OR "BOOK" YIELD IS THE ANNUAL INCOME EARNED ON A PORTFOLIO INVESTMENT BASED ON ITS ORIGINAL PURCHASE
PRICE BEFORE FUND OPERATING EXPENSES. FOR EXAMPLE, THE FUND EARNED A BOOK YIELD OF 7.1% ON 4% OF THE
BONDS IN THE LONG-TERM PORTFOLIO THAT ARE CALLABLE IN 2001.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
</TABLE>
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On December 21, 1999, an annual meeting of the Fund's shareholders was held for
the purpose of voting on two separate matters, the results of which were as
follows:
(1) ELECTION OF TRUSTEES BY ALL SHAREHOLDERS:
<TABLE>
<S> <C>
Michael Bozic
For......................................................... 18,597,722
Withheld.................................................... 442,271
</TABLE>
ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS:
<TABLE>
<S> <C>
Charles A. Fiumefreddo
For......................................................... 897
Withheld.................................................... 0
</TABLE>
The following Trustees were not standing for reelection at this meeting: Edwin
J. Garn, Wayne E. Hedien, Dr. Manuel H. Johnson, Michael E. Nugent, Philip J.
Purcell and John L. Schroeder.
(2) RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS:
<TABLE>
<S> <C>
For......................................................... 18,469,753
Against..................................................... 197,244
Abstain..................................................... 372,996
</TABLE>
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (97.1%)
General Obligation (10.1%)
$ 4,000 California, Dtd 10/01/98 Refg (MBIA)........................ 4.50% 10/01/28 $ 3,115,440
5,000 Los Angeles Unified School District, California, 1997 Ser B
(FGIC)..................................................... 5.00 07/01/23 4,368,050
3,000 Hawaii, 1999 Ser CT (FSA)................................... 5.875 09/01/17 2,988,420
3,500 Massachusetts, 1995 Ser A (AMBAC)........................... 5.00 07/01/12 3,334,940
2,300 Berkley School District, Michigan, Refg Ser 1999 (FGIC)..... 4.75 01/01/19 1,946,168
2,000 Michigan Municipal Bond Authority, School Ser 1998.......... 5.25 12/01/13 1,912,420
3,000 Barberton City School District, Ohio, Ser 1998 (FGIC)....... 5.125 11/01/22 2,659,050
700 Puerto Rico, Public Improvement Ser 1998 (MBIA)............. 4.875 07/01/23 596,043
3,500 Shelby County, Tennessee, Refg 1995 Ser A................... 5.625 04/01/11 3,519,565
6,000 Washington, Ser 1993 A...................................... 5.75 10/01/17 5,915,400
-------- -----------
33,000 30,355,496
-------- -----------
Educational Facilities Revenue (4.0%)
5,500 Oakland University, Michigan, Ser 1995 (MBIA)............... 5.75 05/15/26 5,264,380
New York State Dormitory Authority,
4,000 State University Refg Ser 1993 A........................... 5.50 05/15/08 4,002,440
1,350 State University Refg Ser 1990 B........................... 7.50 05/15/11 1,515,605
1,250 Ohio State University, General Receipts Ser 1999 A.......... 5.75 12/01/24 1,210,150
-------- -----------
12,100 11,992,575
-------- -----------
Electric Revenue (14.5%)
3,000 Los Angeles Department of Water & Power, California, Issue
of 1992.................................................... 6.375 02/01/20 3,072,600
5,000 Sacramento Municipal Utility District, California, Refg 1994
Ser I (MBIA)............................................... 6.00 01/01/24 4,999,700
2,950 Kansas City, Kansas, Utility Refg & Improvement Ser 1994
(FGIC)..................................................... 6.375 09/01/23 3,018,942
7,750 South Carolina Public Service Authority, 1995 Refg Ser A
(AMBAC).................................................... 6.25 01/01/22 7,866,173
4,000 Lower Colorado River Authority, Texas, Jr Lien Seventh Ser
(FSA)...................................................... 4.75 01/01/28 3,339,040
17,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C.......... 4.70 02/01/06 16,496,799
5,000 Intermountain Power Agency, Utah, Refg 1997 Ser B
(MBIA)**................................................... 5.75 07/01/19 4,853,250
-------- -----------
44,700 43,646,504
-------- -----------
Hospital Revenue (15.1%)
5,000 Birmingham-Carraway Special Care Facilities Financing
Authority, Alabama, Carraway Methodist Health Ser 1995 A
(Connie Lee)............................................... 5.875 08/15/15 4,957,350
3,500 Colbert County - Northwest Health Care Authority, Alabama,
Hellen Keller Hospital Refg Ser 1990....................... 8.75 06/01/09 3,609,340
2,000 Montgomery Special Care Facilities Financing Authority,
Alabama, Baptist Health Ser 1998 B (MBIA).................. 5.00 11/15/29 1,646,740
10,000 Boston, Massachusetts, Boston City Hospital - FHA Mtge Refg
Ser B...................................................... 5.75 02/15/13 9,796,299
5,000 New Jersey Health Care Authority, St Barnabas Medical Center
Ser 1998 B (MBIA).......................................... 4.75 07/01/28 4,026,850
4,000 North Carolina Medical Care Commission, Duke University
Health Ser 1998 A.......................................... 4.75 06/01/28 3,132,560
4,000 Montgomery County, Ohio, Franciscan Medical Center - Dayton
Ser 1997................................................... 5.50 07/01/18 3,999,920
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 2,985 Lehigh County General Purpose Authority, Pennsylvania, St
Lukes Hospital Ser 1992 (AMBAC)............................ 6.25% 07/01/22 $ 2,994,373
2,750 Jefferson County Health Facilities Development Corporation,
Texas, Baptist Health Ser 1989............................. 8.30 10/01/14 2,617,698
5,000 Washington Health Care Facilities Authority, Swedish Health
Ser 1998 (AMBAC)........................................... 5.125 11/15/22 4,298,900
5,000 Wisconsin Health & Educational Facilities Authority, Wausau
Hospital Refg Ser 1998 A (AMBAC)........................... 5.125 08/15/20 4,297,550
-------- -----------
49,235 45,377,580
-------- -----------
Industrial Development/Pollution Control Revenue (12.4%)
9,585 Pima County Industrial Development Authority, Arizona,
Tucson Electric Power Co Refg Ser 1988 A (FSA)............. 7.25 07/15/10 10,078,340
10,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991
(MBIA)..................................................... 7.00 06/01/31 10,372,000
8,000 New York City Industrial Development Agency, New York,
Brooklyn Navy Yard Cogeneration Partners LP Ser 1997
(AMT)...................................................... 5.65 10/01/28 6,761,920
10,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990
(AMT)...................................................... 7.50 12/01/29 10,126,500
-------- -----------
37,585 37,338,760
-------- -----------
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 1,251,063
Massachusetts Housing Finance Agency,
1,790 Rental 1994 Ser A (AMT) (AMBAC)............................ 6.60 07/01/14 1,838,455
3,460 Rental 1994 Ser A (AMT) (AMBAC)............................ 6.65 07/01/19 3,535,912
2,410 Minnesota Housing Finance Agency, Rental 1995 Ser D
(MBIA)..................................................... 6.00 02/01/22 2,349,919
-------- -----------
8,910 8,975,349
-------- -----------
Mortgage Revenue - Single Family (3.4%)
Colorado Housing & Finance Authority,
125 Ser 1990 B-2............................................... 8.00 02/01/18 126,489
2,315 Ser 1997 A-2 (AMT)......................................... 7.25 05/01/27 2,441,493
110 Idaho Housing Agency, 1988 Ser D-2 (AMT).................... 8.25 01/01/20 110,349
635 Kansas City Leavenworth & Lenexa, Kansas, GNMA-Backed Ser
1998 C (AMT)............................................... 8.00 11/01/20 652,621
Olathe, Kansas,
65 GNMA Collateralized Ser 1990 B............................. 7.50 09/01/10 66,522
200 GNMA Collateralized Ser 1989 A (AMT) (MBIA)................ 8.00 11/01/20 202,574
1,050 New Orleans Home Mortgage Authority, Louisiana, GNMA
Collateralized 1989 Ser B-1 (AMT).......................... 8.25 12/01/21 1,058,589
380 Mississippi Housing Finance Corporation, GNMA-Backed Ser
1989 (AMT) (FGIC).......................................... 8.25 10/15/18 388,029
2,285 Missouri Housing Development Commission, Homeownership 1996
Ser D (AMT)................................................ 7.10 09/01/27 2,341,645
5 Muskogee County Home Finance Authority, Oklahoma, 1990 Ser A
(FGIC)..................................................... 7.60 12/01/10 5,078
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 810 South Carolina Housing Finance & Development Authority,
Homeownership 1991 Ser A (AMT)............................. 7.40% 07/01/23 $ 823,697
45 Utah Housing Finance Agency, Ser 1991 B-1................... 7.50 07/01/16 45,869
2,000 Virginia Housing Development Authority, 1992 Ser A.......... 7.10 01/01/25 2,040,860
-------- -----------
10,025 10,303,815
-------- -----------
Nursing & Health Related Facilities Revenue (0.6%)
New York State Medical Care Facilities Finance Agency,
785 Mental Health Ser 1987..................................... 8.875 08/15/07 800,701
565 Mental Health Ser 1990 A (Secondary MBIA).................. 7.75 02/15/20 577,537
405 Mental Health Ser 1991 A................................... 7.50 02/15/21 419,207
-------- -----------
1,755 1,797,445
-------- -----------
Public Facilities Revenue (1.8%)
2,000 Metropolitan Pier & Exposition Authority, Illinois,
McCormick Place Refg Ser 1998 A (FGIC)..................... 5.50 06/15/18 1,916,120
Saint Paul Independent School District #625, Minnesota,
1,700 Ser 1995 C COPs............................................ 5.45 02/01/11 1,691,993
1,800 Ser 1995 C COPs............................................ 5.50 02/01/12 1,792,188
-------- -----------
5,500 5,400,301
-------- -----------
Transportation Facilities Revenue (15.8%)
3,000 Alameda Corridor Transportation Authority, California, Sr
Lien Ser 1999 A (MBIA)..................................... 5.25 10/01/21 2,761,440
4,000 Colorado Department of Transportation, Ser 2000 (AMBAC)
(WI)....................................................... 6.00 06/15/14 4,111,280
2,500 Miami-Dade County, Florida, Miami International Airport Ser
2000 B (FGIC).............................................. 5.75 10/01/24 2,429,650
3,500 Atlanta, Georgia, Airport Ser 1994 B (AMT) (AMBAC).......... 6.00 01/01/21 3,510,688
Chicago, Illinois,
5,000 Chicago-O'Hare International Airport Ser 1996 A (AMBAC).... 5.625 01/01/12 4,976,600
7,000 Midway Airport 1994 Ser A (AMT) (MBIA)..................... 6.25 01/01/24 7,266,567
5,000 New Jersey Transportation Trust Authority, 1998 Ser A
(FSA)...................................................... 4.50 06/15/19 4,091,500
2,500 New York State Thruway Authority, Local Highway & Bridge Ser
1998 A (MBIA).............................................. 5.00 04/01/18 2,223,300
2,800 Puerto Rico Highway & Transportation Authority, Ser 1998
A.......................................................... 4.75 07/01/38 2,195,676
8,000 Austin, Texas, Airport Prior Lien Ser 1995 A (AMT) (MBIA)... 6.125 11/15/25 7,903,199
5,000 Pocahontas Parkway Association, Virginia, Route 895
Connector Ser 1998 A....................................... 5.50 08/15/28 3,954,450
2,000 Richmond Metropolitan Authority, Virginia, Expressway & Refg
Ser 1998 (FGIC)............................................ 5.25 07/15/17 1,877,340
-------- -----------
50,300 47,301,690
-------- -----------
Water & Sewer Revenue (8.0%)
2,500 Coachella, California, Ser 1992 COPs (FSA).................. 6.10 03/01/22 2,512,500
3,000 Eastern Municipal Water District, California, Water & Sewer
Refg Ser 1998 A COPs (FGIC)................................ 4.75 07/01/23 2,492,070
3,000 Atlanta, Georgia, Water & Wastewater Ser 1999 A (FGIC)...... 5.50 11/01/22 2,866,020
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 5,000 Rockdale County Water & Sewage Authority, Georgia, Ser 1999
A (MBIA)................................................... 5.50% 07/01/25 $ 4,671,500
5,500 Massachusetts Water Resources Authority, 1998 Ser A (FSA)... 4.75 08/01/27 4,448,345
3,000 Detroit, Michigan, Water Supply 1997 Ser A (MBIA)........... 5.00 07/01/21 2,608,050
5,000 Cleveland, Ohio, Waterworks Improvement & Refg 1998 Ser I
-------- (FSA)...................................................... 5.00 01/01/23 4,324,700
-----------
27,000 23,923,185
-------- -----------
Other Revenue (3.3%)
10,000 New York Local Government Assistance Corporation, Refg Ser
1997 B (MBIA).............................................. 5.00 04/01/21 8,701,000
1,450 Cuyahoga County, Ohio, The Medical Center Co Ser 1998
-------- (AMBAC).................................................... 5.125 02/15/28 1,251,423
-----------
11,450 9,952,423
-------- -----------
Refunded (5.1%)
5,000 Regional Transportation Authority, Illinois, Ser 1994 A
(AMBAC).................................................... 6.25 06/01/04+ 5,286,150
1,800 Southwestern Illinois Development Authority, Anderson
Hospital Ser 1992 A........................................ 7.00 08/15/02+ 1,898,658
1,340 Missouri Health & Educational Facilities Authority, Missouri
Baptist Medical Center Refg Ser 1989 (ETM)................. 7.625 07/01/18 1,369,882
3,600 Rio Rancho, New Mexico, Water & Wastewater Ser 1995 A
(FSA)...................................................... 6.00 05/15/06+ 3,745,764
3,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C (ETM).... 4.70 02/01/06 2,891,310
-------- -----------
14,740 15,191,764
-------- -----------
306,300 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $298,982,117)................. 291,556,887
-------- -----------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (2.4%)
1,500 Massachusetts Health & Educational Facilities Authority,
Capital Asset Ser D (MBIA) (Demand 06/01/00)............... 4.45* 01/01/35 1,500,000
Harris County Health Facilities Development Corporation,
Texas,
1,800 Methodist Hospital Ser 1994 (Demand 06/01/00).............. 4.35* 12/01/25 1,800,000
3,940 St Luke's Episcopal Hospital Ser 1997 A (Demand
-------- 06/01/00)................................................ 4.40* 02/15/27 3,940,000
-----------
7,240 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost
-------- $7,240,000).................................................................... 7,240,000
-----------
$313,540 TOTAL INVESTMENTS (Identified Cost $306,222,117) (a).................. 99.5% 298,796,887
========
OTHER ASSETS IN EXCESS OF LIABILITIES ................................. 0.5 1,458,672
----- -----------
NET ASSETS ............................................................ 100.0% $300,255,559
====== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS May 31, 2000, continued
------------------------
<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to maturity.
WI Security purchased on a "when-issued" basis.
+ Prerefunded to call date shown.
* Current coupon of variable rate demand obligation.
** This security is segregated in connection with the purchase
of a "when-issued" security.
(a) The aggregate cost for federal income tax purposes
approximates identified cost. The aggregate gross unrealized
appreciation is $4,837,370 and the aggregate gross
unrealized depreciation is $12,262,600, resulting in net
unrealized depreciation of $7,425,230.
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.
</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, 2000
ASSETS:
Investments in securities, at value
(identified cost $306,222,117)............................. $298,796,887
Receivable for:
Interest................................................ 5,740,620
Investments sold........................................ 195,200
Cash........................................................ 5,798
Prepaid expenses and other assets........................... 192,924
-----------
TOTAL ASSETS............................................ 304,931,429
-----------
LIABILITIES:
Payable for:
Investments purchased................................... 4,082,400
Dividends to preferred shareholders..................... 198,062
Investment advisory fee................................. 108,591
Shares of beneficial interest repurchased............... 75,360
Administration fee...................................... 67,869
Accrued expenses and other payables......................... 143,588
-----------
TOTAL LIABILITIES....................................... 4,675,870
-----------
NET ASSETS.............................................. $300,255,559
===========
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, 22,048,248 shares
outstanding)............................................... 206,807,564
Net unrealized depreciation................................. (7,425,230)
Accumulated undistributed net investment income............. 2,330,691
Accumulated net realized loss............................... (1,457,466)
-----------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS............ 200,255,559
-----------
TOTAL NET ASSETS........................................ $300,255,559
===========
NET ASSET VALUE PER COMMON SHARE
($200,255,559 divided by 22,048,248 common shares
outstanding)............................................... $9.08
============
</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, 2000
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $18,371,770
-----------
EXPENSES
Investment advisory fee..................................... 1,258,323
Administration fee.......................................... 786,452
Auction commission fees..................................... 326,336
Professional fees........................................... 118,469
Transfer agent fees and expenses............................ 73,233
Shareholder reports and notices............................. 49,408
Auction agent fees.......................................... 38,729
Registration fees........................................... 21,790
Trustees' fees and expenses................................. 18,295
Custodian fees.............................................. 17,476
Other....................................................... 31,615
-----------
TOTAL EXPENSES.......................................... 2,740,126
Less: expense offset........................................ (17,390)
-----------
NET EXPENSES............................................ 2,722,736
-----------
NET INVESTMENT INCOME................................... 15,649,034
-----------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss........................................... (1,457,465)
Net change in unrealized appreciation....................... (20,713,171)
-----------
NET LOSS................................................ (22,170,636)
-----------
NET DECREASE................................................ $(6,521,602)
===========
</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, 2000 MAY 31, 1999
------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 15,649,034 $ 16,784,754
Net realized gain (loss)............................. (1,457,465) 2,192,129
Net change in unrealized depreciation................ (20,713,171) (6,180,178)
------------ ------------
NET INCREASE (DECREASE).......................... (6,521,602) 12,796,705
------------ ------------
Dividends to preferred shareholders from net
investment income................................... (3,734,450) (3,464,520)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS
FROM:
Net investment income................................ (12,096,798) (13,010,308)
Net realized gain.................................... (1,623,826) (6,255,848)
------------ ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS................ (13,720,624) (19,266,156)
------------ ------------
Decrease from transactions in common shares of
beneficial interest................................. (12,263,531) (7,962,618)
------------ ------------
NET DECREASE..................................... (36,240,207) (17,896,589)
NET ASSETS:
Beginning of period.................................. 336,495,766 354,392,355
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$2,330,691 and $2,512,905, respectively)......... $300,255,559 $336,495,766
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 2000
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Municipal Premium Income Trust (the "Fund") is
registered under the Investment Company Act of 1940, as amended, as a
diversified, closed-end management investment company. The Fund's investment
objective is to provide a high level of current income exempt from federal
income tax. The Fund was organized as a Massachusetts business trust on November
16, 1988 and commenced operations on February 1, 1989.
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, 2000, 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/ADMINISTRATION AGREEMENTS
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.
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.
3. 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, 2000 aggregated $33,089,095
and $45,153,813, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor and
Administrator, is the Fund's transfer agent. At May 31, 2000, the Fund had
transfer agent fees and expenses payable of approximately $1,400.
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, 2000 included in
Trustees' fees and expenses in the Statement of Operations amounted to $5,973.
At May 31, 2000, the Fund had
17
<PAGE> 18
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 2000, continued
an accrued pension liability of $52,633 which is included in accrued expenses in
the Statement of Assets and Liabilities.
4. 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, 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
Treasury shares purchased and retired (weighted average
discount 14.21%)*.......................................... (1,536,776) (15,368) (12,248,163)
---------- -------- ------------
Balance, May 31, 2000....................................... 22,048,248 $220,482 $206,587,082
========== ======== ============
</TABLE>
---------------------
* The Trustees have voted to retire the shares purchased.
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.
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
NEXT RANGE OF
SERIES SHARES* AMOUNT IN THOUSANDS* RATE* RESET DATE DIVIDEND RATES**
------ ------- -------------------- ----- ---------- ----------------
<S> <C> <C> <C> <C> <C>
A 200 20,000 4.44% 06/07/00 3.09% - 5.50%
B 200 20,000 4.49 06/07/00 3.00 - 5.50
C 200 20,000 3.85 08/29/00 3.49 - 3.85
D 200 20,000 4.16 01/02/01 3.349 - 4.16
E 200 20,000 3.65 07/03/00 3.545 - 3.65
</TABLE>
---------------------
* As of May 31, 2000.
** For the year ended May 31, 2000.
18
<PAGE> 19
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS May 31, 2000, continued
Subsequent to May 31, 2000 and up through June 30, the Fund paid dividends to
each of the Series A through E at rates ranging from 3.85% to 4.79% in the
aggregate amount of $275,308.
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. 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 28, 2000 $0.045 June 9, 2000 June 23, 2000
June 27, 2000 $0.045 July 7, 2000 July 21, 2000
June 27, 2000 $0.045 August 4, 2000 August 18, 2000
June 27, 2000 $0.045 September 8, 2000 September 22, 2000
</TABLE>
7. FEDERAL INCOME TAX STATUS
At May 31, 2000, the Fund had a net capital loss carryover of approximately
$1,238,000 which will be available through May 31, 2008 to offset future capital
gains to the extent provided by regulations.
Capital losses incurred after October 31 ("post-October losses") within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $219,000 during fiscal 2000.
19
<PAGE> 20
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*
----------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $10.03 $10.41 $10.08 $10.02 $10.36
------ ------ ------ ------ ------
Income loss from investment operations:
Net investment income...................................... 0.68 0.70 0.75 0.78 0.79
Net realized and unrealized gain (loss).................... (0.96) (0.18) 0.33 0.19 (0.22)
------ ------ ------ ------ ------
Total income (loss) from investment operations.............. (0.28) 0.52 1.08 0.97 0.57
------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income...................................... (0.53) (0.54) (0.60) (0.60) (0.65)
Common share equivalent of dividends paid to preferred
shareholders............................................. (0.16) (0.14) (0.15) (0.14) (0.15)
Net realized gain.......................................... (0.07) (0.26) -- (0.20) (0.12)
------ ------ ------ ------ ------
Total dividends and distributions........................... (0.76) (0.94) (0.75) (0.94) (0.92)
------ ------ ------ ------ ------
Anti-dilutive effect of acquiring treasury shares........... 0.09 0.04 -- 0.03 0.01
------ ------ ------ ------ ------
Net asset value, end of period.............................. $ 9.08 $10.03 $10.41 $10.08 $10.02
====== ====== ====== ====== ======
Market value, end of period................................. $ 7.75 $ 8.75 $9.625 $9.375 $ 9.00
====== ====== ====== ====== ======
TOTAL RETURN+............................................... (4.55)% (1.21)% 9.08% 13.52% 0.67%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Expenses (1)................................................ 1.28% 1.19% 1.18% 1.14% 1.16%
Net investment income before preferred stock dividends...... 7.30% 6.73% 7.31% 7.70% 7.68%
Preferred stock dividends................................... 1.74% 1.39% 1.46% 1.41% 1.44%
Net investment income available to common shareholders...... 5.56% 5.34% 5.85% 6.29% 6.24%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $300,256 $336,496 $354,392 $349,294 $355,587
Asset coverage on preferred shares at end of period......... 300% 336% 354% 349% 355%
Portfolio turnover rate..................................... 11% 17% 21% 5% 14%
</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
return does not reflect brokerage commissions.
(1) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE> 21
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") at May 31, 2000, 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 accounting
principles generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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,
2000 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
June 30, 2000
2000 FEDERAL TAX NOTICE (unaudited)
During the year ended May 31, 2000, the Fund paid the following
per share amounts from tax-exempt income: $0.53 to common
shareholders, $3,781 to Series A preferred shareholders, $3,809 to
Series B preferred shareholders, $3,770 to Series C preferred
shareholders, $3,663 to Series D preferred shareholders and $3,650
to Series E preferred shareholders. For the year ended May 31,
2000, the Fund paid to common shareholders $0.06 per share from
long-term capital gains.
21
<PAGE> 22
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
CHANGE IN INDEPENDENT ACCOUNTANTS
On July 1, 2000 PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with its audits for the two most recent fiscal years and through
July 1, 2000, there have been no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make
reference thereto in their report on the financial statements for such years.
The Fund, with the approval of its Board of Trustees and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent accountants as of July 1,
2000.
22
<PAGE> 23
MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST
REVISED INVESTMENT POLICY (unaudited)
On January 26, 2000, the Trustees of Morgan Stanley Dean Witter Municipal
Premium Income Trust (the "Fund") approved an investment policy whereby the Fund
would be permitted to invest up to 10% of its assets in inverse floating rate
municipal obligations. The inverse floating rate municipal obligations in which
the Fund will invest are typically created through a division of a fixed rate
municipal obligation into two separate instruments, a short-term obligation and
a long-term obligation. The interest rate on the short-term obligation is set at
periodic auctions. The interest rate on the long-term obligation is the rate the
issuer would have paid on the fixed income obligation: (i) plus the difference
between such fixed rate and the rate on the short-term obligation, if the
short-term rate is lower than the fixed rate; or (ii) minus such difference if
the interest rate on the short-term obligation is higher than the fixed rate.
The interest rates on these obligations generally move in the reverse direction
of market interest rates. If market interest rates fall, the interest rate on
the obligation will increase and if market interest rates increase, the interest
rate on the obligation will fall. Inverse floating rate municipal obligations
offer the potential for higher income than is available from fixed rate
obligations of comparable maturity and credit rating. They also carry greater
risks. In particular, the prices of inverse floating rate municipal obligations
are more volatile, i.e., they increase and decrease in response to changes in
interest rates to a greater extent than comparable fixed rate obligations.
23
<PAGE> 24
TRUSTEES
----------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
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 ADVISOR
----------------------------------
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, 2000
