<PAGE>
DEAN WITTER PREMIER INCOME TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
While the fiscal year ended October 31, 1993 was characterized by dramatic
declines in interest rates and historically high levels of mortgage prepayments,
the most recent fiscal year ended October 31, 1994 saw rapid and large increases
in interest rates across the yield curve, most notably the short-term end of the
curve. Indeed, since early February of this year the Federal Reserve Board has
raised the federal-funds rate - the interest rate banks charge each other for
overnight loans - from 3.00 percent to 5.50 percent in six separate moves
through November. The central bank's tighter monetary policy has also affected
the discount rate - the interest rate the Federal Reserve charges member banks
for loans - which has increased 175 basis points to 4.75 percent.
Not surprisingly, it has been a challenging investment environment for
fixed-income products. Despite these difficulties, the Fund outperformed its
benchmark index and earned a significantly
higher ranking than in recent periods
among adjustable-rate mortgage funds,
according to Lipper Analytical
Services, Inc.
PERFORMANCE
Many investors look at the 30-year
U.S. Treasury bond to gauge the level
of interest rates (and thus the
influence rates have on the performance
of certain investments). However,
assuming the structure of the portfolio
remained roughly the same as it was on
October 31, 1994, the Fund's overall
net asset value volatility would
generally be expected to reflect that
of the two-and three-year U.S. Treasury
notes.* Over the Fund's recently
concluded fiscal year, the yield on the
2-year note increased 272 basis points
from 4.10 percent to 6.82 percent,
while the 3-year note increased 268
basis points from 4.37 percent to 7.05
percent. Over the same period, the
Fund's net asset value declined from
$9.18 per share to $8.77 per share.
Based on this change in net asset
value, and including the payment of
income dividends totaling approximately
$0.54 per share, the Fund's total
return was 1.44 percent for the fiscal
year. This performance exceeded that of
the Lehman Brothers Mutual Fund Short
(1-3) U.S. Government Index, which
posted a total return of 1.15 percent.
As of October 31, 1994, the Fund's
distribution rate was 5.73 percent. It
is
- --------------------------------------------------------------------------------
*As stated in the prospectus, the Fund expects that under normal circumstances
the market value dollar weighted average life (or period until the next reset
date) of the Fund's portfolio securities will be no greater than 5 years.
<PAGE>
important to note that the Fund's total return for the fiscal year was very
strong relative to similar funds. Lipper Analytical Services, Inc. ranked the
Fund #16 out of 78 adjustable-rate mortgage funds (top quartile) for the 12
months ended October 31, 1994.
INVESTMENT STRATEGY
The Fund seeks to achieve low volatility by investing in a diversified
portfolio of short-average-life mortgage-backed securities, including
adjustable-rate mortgage-backed securities, which have frequent coupon resets.
The Fund's investment adviser, Dean Witter InterCapital Inc., and sub-adviser,
BlackRock Financial Management L.P. (BlackRock), believe these securities will
be resistant to significant fluctuations in market value.
BlackRock utilizes a "targeted-duration" approach with a focus on securities
maturing in 1.5 to 3 years. The values of the Fund's securities, and therefore
the Fund's net asset value, are affected by changes in the prices and yields of
short-term U.S. Treasury securities, as well as by the rate of mortgage
prepayments. Specifically, the Fund's investment in mortgage-backed securities
(MBS) is dependent upon the degree to which homeowners refinance their
mortgages. The actual performance of these securities depends on whether the
rate of prepayments is higher or lower than anticipated at the time these
securities are purchased. During 1993, prepayment fears dominated the mortgage
market, but have now clearly been replaced by concerns of extension risk as
prepayment rates have slowed dramatically. That is, because interest rates are
higher, fewer homeowners are able to economically refinance their home mortgages
and the rate of such prepayments has decreased significantly. Further, when
prepayment rates slow, MBS experience a longer-than-expected period of repayment
- -- this is referred to as extension risk. As interest rates have risen in 1994,
the average lives of many MBS have extended. BlackRock's emphasis on securities
with limited extension and cap risk, combined with active management based on
relative value, enabled the Fund to outperform many of its peers in a
rising-interest-rate environment during the fiscal year.
The accompanying chart illustrates the performance of a $10,000 investment
in the Fund from inception (July 1, 1991) through the fiscal year ended October
31, 1994, versus the performance of a similar hypothetical investment in the
issues that comprise the Lehman Brothers Mutual Fund Short (1-3) U.S. Government
Index.
THE PORTFOLIO
As mentioned above, BlackRock actively manages the Fund's portfolio to
modify its allocation to certain types of investments and to change its
weighting among these sectors in different interest and prepayment rate
environments. Over the past fiscal year, the Fund's portfolio allocation was
modified substantially to reflect changes in BlackRock's relative value
analyses. The table below illustrates the evolution of the portfolio from the
end of the Fund's last fiscal year of operations on October 31, 1993, through
the fiscal year ended October 31, 1994. The table shows the substantial increase
in the portfolio's allocation to asset-backed investments, including
floating-rate asset-backed securities, as well as U.S. Treasury securities and
the large decrease in short-average-life MBS and collateralized
<PAGE>
mortgage obligations (CMOs). The increased liquidity within the portfolio -- the
result of CMO and non-agency adjustable-rate mortgage (ARMs) sales and purchases
of more liquid investments, such as U.S. Treasury and credit card asset-backed
securities (ABS) and Federal National Mortgage Association ARMs -- should enable
the Fund to take advantage of anticipated year-end value opportunities in the
market.
<TABLE>
<CAPTION>
SECURITY 10/31/93 4/30/94 10/31/94
- ------------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
ARMs..................................................................... 35.0% 25.5% 25.1%
Short Avg. Life MBS...................................................... 42.0 48.0 17.2
Fixed Rate ABS........................................................... 5.9 6.8 18.8
CMOs..................................................................... 17.0 12.0 4.8
Floating Rate ABS........................................................ 0.0 0.0 9.0
Interest-Only Securities (IOs)/PAC IOs................................... 0.1 0.0 0.0
U.S. Treasury Securities................................................. 0.0 7.7 16.7
Cash..................................................................... 0.0 0.0 8.4
----- ----- -----
100.0% 100.0% 100.0%
----- ----- -----
----- ----- -----
</TABLE>
LOOKING AHEAD
BlackRock believes the U.S. economy's strength may result in further
near-term interest-rate increases, but that in the latter half of 1995 we may
enter a period of modestly declining rates. As the Fund enters its new fiscal
year, BlackRock anticipates maintaining its active portfolio management approach
and hopes to provide strong performance.
We appreciate your support of Dean Witter Premier Income Trust and look
forward to continuing to serve your investment needs and objectives.
Very truly yours,
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATES VALUE
- ----------- ------------ --------------------- -------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (16.6%)
$ 170 U.S. Treasury Notes........................................ 3.875 % 10/31/95 $ 166,175
250 U.S. Treasury Notes........................................ 6.00 6/30/96 247,422
5,770 U.S. Treasury Notes........................................ 6.50 9/30/96 5,741,150
1,150 U.S. Treasury Notes........................................ 6.50 8/15/97 1,134,008
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $7,290,365)............................. 7,288,755
-------------
MORTGAGE-BACKED SECURITIES (47.0%)
U.S. GOVERNMENT AGENCIES (38.9%)
1,175 Federal Home Loan Mortgage Corp. PC GOLD................... 8.50 7/ 1/06 1,189,992
3,378 Federal Home Loan Mortgage Corp. PC GOLD................... 9.00 5/ 1/06 3,462,011
-------------
4,652,003
-------------
1,300 Federal National Mortgage Assoc. ARM....................... 5.493 + 12/ 1/22 1,305,991
1,486 Federal National Mortgage Assoc. ARM....................... 5.547 + 9/ 1/24 1,481,617
1,392 Federal National Mortgage Assoc. ARM....................... 6.109 + 1/ 1/23 1,405,596
2,025 Federal National Mortgage Assoc. ARM....................... 6.070 + 6/ 1/18 2,007,397
1,336 Federal National Mortgage Assoc. ARM....................... 7.719 + 12/ 1/20 1,344,994
1,089 Federal National Mortgage Assoc............................ 8.00 11/ 1/98 1,098,866
-------------
8,644,461
-------------
2,000 Government National Mortgage Assoc. II..................... 7.00 * 1,988,750
-------------
1,816 Government National Mortgage Assoc......................... 7.25 11/15/04 - 4/15/06 1,759,762
-------------
TOTAL U.S. GOVERNMENT AGENCIES
(IDENTIFIED COST $17,224,443)............................ 17,044,976
-------------
COLLATERALIZED MORTGAGE OBLIGATIONS (8.1%)
U.S. GOVERNMENT AGENCIES (8.1%)
701 Federal National Mortgage Assoc. 1991-49 D (PAC)........... 8.00 05/25/05 702,989
1,300 Federal Home Loan Mortgage Corp. 1189 G.................... 9.125 + 01/15/22 1,478,750
1,257 Federal National Mortgage Assoc. 1992 I 2.................. 11.50 04/ 1/09 1,372,607
-------------
TOTAL U.S. GOVERNMENT AGENCIES
(IDENTIFIED COST $3,492,299)............................. 3,554,346
-------------
PRIVATE ISSUES (0.0%)
1 Resolution Funding Corp. 1992 - S2 class A17 (TAC I/O)
(Identified Cost $3,140,687)............................. 8.00 + 1/25/22 524
-------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(IDENTIFIED COST $6,632,986)............................. 3,554,870
-------------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $23,857,429)............................ 20,599,846
-------------
</TABLE>
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATES VALUE
- ----------- ---------- ------------------ -----------
<C> <S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES (27.6%)
$ 1,600 MBNA Master Credit Card Trust 1994-C A.............. 5.25 %+ 3/15/04 $ 1,599,000
2,400 First U.S.A. Credit Card Master Trust 1994-4 A...... 5.495+ 8/15/03 2,401,488
Household Affinity Credit Card Master Trust I 1994-2
1,000 A................................................. 7.00 12/15/99 992,187
1,000 Sears Credit Account Master Trust 1994-2 A.......... 7.25 7/16/01 997,500
1,100 First Chicago Master Trust II 1991 - D A............ 8.40 6/15/98 1,117,875
1,500 Chase Manhattan Credit Card Master Trust 1991-1 A... 8.75 8/15/99 1,532,805
2,000 First Chicago Master Trust II 1990 - A A............ 9.25 12/15/96 2,031,240
1,400 Standard Credit Card Trust 1990-5 A................. 9.375 8/10/96 1,422,302
-----------
TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $12,259,694)..................... 12,094,397
-----------
SHORT-TERM INVESTMENT (9.3%)
REPURCHASE AGREEMENT (9.3%)
4,100 Nikko Securities Co. International, Inc.
(dated 10/31/94, proceeds $4,100,547;
collateralized by $4,410,000 Federal National
Mortgage Association 1992-161C 6.75% due 8/25/17,
valued at $4,189,500)
(Identified Cost $4,100,000)...................... 4.80 11/ 1/94 4,100,000
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS (IDENTIFIED COST $47,507,488)(A)...................... 100.5% 44,082,998
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS.......................... (0.5) (207,738)
---------- ------------
NET ASSETS.............................................................. 100.0% $ 43,875,260
---------- ------------
---------- ------------
<FN>
- ---------------
ARM ADJUSTABLE RATE MORTGAGE.
I/O INTEREST ONLY SECURITY.
PAC PLANNED AMORTIZATION CLASS.
TAC TARGETED AMORTIZATION CLASS.
PC PARTICIPATION CERTIFICATE.
* SECURITIES PURCHASED ON A FORWARD COMMITMENT BASIS WITH AN APPROXIMATE PRINCIPAL AMOUNT AND NO DEFINITE
MATURITY DATE; THE ACTUAL PRINCIPAL AMOUNT AND MATURITY DATE WILL BE DETERMINED UPON SETTLEMENT.
+ FLOATING RATE SECURITIES. RATE SHOWN IS THE RATE IN EFFECT AT OCTOBER 31, 1994.
(A) THE AGGREGATE COST OF INVESTMENTS FOR FEDERAL INCOME TAX PURPOSES IS $47,508,368; THE AGGREGATE GROSS
UNREALIZED APPRECIATION IS $308,113 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $3,733,483
RESULTING IN NET UNREALIZED DEPRECIATION OF $3,425,370.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $47,507,488) (Note 1)... $ 44,082,998
Cash....................................... 5,680
Receivable for:
Investments sold......................... 3,890,244
Principal paydowns....................... 89,110
Interest................................. 356,575
Shares of beneficial interest sold....... 2,231
Deferred organizational expenses (Note
1)....................................... 49,917
Prepaid expenses........................... 22,001
------------
TOTAL ASSETS....................... 48,498,756
------------
LIABILITIES:
Payable for:
Investments purchased.................... 4,365,986
Shares of beneficial interest
repurchased............................ 114,276
Dividends to shareholders................ 26,165
Investment management fee (Note 2)....... 19,120
Plan of distribution fee (Note 3)........ 7,648
Accrued expenses and other payables (Note
4)..................................... 90,301
------------
TOTAL LIABILITIES.................. 4,623,496
------------
NET ASSETS:
Paid-in-capital............................ 53,040,822
Accumulated net realized loss.............. (6,417,573)
Net unrealized depreciation on
investments.............................. (3,424,490)
Accumulated undistributed net investment
income................................... 676,501
------------
NET ASSETS......................... $ 43,875,260
------------
------------
NET ASSET VALUE PER SHARE, 5,001,159 shares
outstanding (unlimited shares authorized
of $.01 par value).......................
$8.77
------------
------------
MAXIMUM OFFERING PRICE PER SHARE (net asset
value plus 3.09% of net asset value)*....
$9.04
------------
------------
- ---------------
* On sales of $100,000 or more, the offering price is
reduced.
</TABLE>
STATEMENT OF OPERATIONS FOR THE YEAR
ENDED OCTOBER 31, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME.......................... $ 4,240,056
-----------
EXPENSES
Investment management fee (Note 2)..... 306,372
Plan of distribution fee (Note 3)...... 112,520
Professional fees...................... 103,160
Shareholder reports and notices........ 57,959
Transfer agent fees and expenses....... 55,759
Trustees' fees and expenses (Note 4)... 35,498
Registration fees...................... 32,263
Organizational expenses (Note 1)....... 29,969
Custodian Fees......................... 17,361
Other.................................. 8,972
-----------
TOTAL OPERATING EXPENSES........... 759,833
Interest expense....................... 211,396
-----------
TOTAL EXPENSES..................... 971,229
-----------
NET INVESTMENT INCOME............ 3,268,827
-----------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS (NOTE 1):
Net realized loss on investments....... (1,183,176)
Net change in unrealized depreciation
on investments....................... (1,276,352)
-----------
NET LOSS ON INVESTMENTS............ (2,459,528)
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS...... $ 809,299
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................. $ 3,268,827 $ 9,634,936
Net realized loss on investments...................................... (1,183,176) (5,234,554)
Net change in unrealized depreciation on investments.................. (1,276,352) 397,575
------------------ ------------------
Net increase in net assets resulting from operations................ 809,299 4,797,957
------------------ ------------------
Dividends and distributions to shareholders from:
Net investment income................................................. (3,900,882) (8,326,380)
Net realized gain on investments...................................... -- (2,813,443)
------------------ ------------------
(3,900,882) (11,139,823)
------------------ ------------------
Net decrease from transactions in shares of beneficial interest (Note
5).................................................................. (43,293,361) (58,257,655)
------------------ ------------------
Total decrease.................................................... (46,384,944) (64,599,521)
NET ASSETS:
Beginning of period..................................................... 90,260,204 154,859,725
------------------ ------------------
END OF PERIOD (including undistributed net investment income of $676,501
and $1,308,556, respectively).......................................... $ 43,875,260 $ 90,260,204
------------------ ------------------
------------------ ------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED OCTOBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net investment income................................................................. $ 3,268,827
Adjustments to reconcile net investment income to net cash from operating activities:
Decrease in receivables and other assets related to operations...................... 596,508
Decrease in payables related to operations.......................................... (104,232)
Net amortization of discount/premium................................................ (143,194)
-------------
Net cash from operating activities................................................ 3,617,909
-------------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Purchases of investments.............................................................. (269,793,863)
Principal sales/prepayments of investments............................................ 333,789,185
Net purchases of short-term investments............................................... (4,099,979)
-------------
Net cash provided by investing activities......................................... 59,895,343
-------------
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Shares of beneficial interest sold.................................................... 1,699,138
Shares of beneficial interest repurchased............................................. (47,502,914)
Net payments for reverse repurchase agreements........................................ (16,063,333)
-------------
(61,867,109)
Dividends to shareholders (net of reinvested dividends of $2,249,370)................. (1,657,486)
-------------
Net cash used for financing activities............................................ (63,524,595)
-------------
Net decrease in cash.................................................................. (11,343)
Cash at beginning of year............................................................. 17,023
-------------
CASH AT END OF YEAR................................................................... $ 5,680
-------------
-------------
Cash paid during the year for interest.................................................. $ 211,396
-------------
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES - Dean Witter Premier Income Trust (the
"Fund") is registered under the Investment Company Act of 1940, as amended (the
"Act"), as a diversified, open-end management investment company. The Fund was
organized as a Massachusetts business trust on March 27, 1991 and commenced
operations on July 1, 1991.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS - (1) an equity security listed or traded on
the New York or American Stock Exchange is valued at its latest sale price
on that exchange prior to the time when assets are valued (if there were no
sales that day, the security is valued at the latest bid price); (2)
portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest available bid price prior to the
time of valuation; (3) when market quotations are not readily available,
portfolio securities are valued at their fair value as determined in good
faith under procedures established by and under the general supervision of
the Trustees (valuation of debt securities for which market quotations are
not readily available may be based upon current market prices of securities
which are comparable in coupon, rating and maturity or an appropriate matrix
utilizing similar factors); (4) certain of the Fund's portfolio securities
may be valued by an outside pricing service approved by the Trustees. The
pricing service utilizes a matrix system incorporating security quality,
maturity and coupon as the evaluation model parameters, and/or research and
evaluations by its staff, including review of broker-dealer market price
quotations, in determining what it believes is the fair valuation of the
portfolio securities valued by such pricing service; and (5) 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 on the identified cost
method. In computing net investment income, the Fund amortizes premiums and
accrues discounts on securities purchased based on the expected life of the
securities. Interest income is accrued daily.
C. DOLLAR ROLLS - The Fund may enter into dollar rolls in which the Fund
sells securities for delivery and simultaneously contracts to repurchase
substantially similar securities at the current sales price on a specified
future date. The difference between the current sales price and the lower
forward price for the future purchase (often referred to as the "drop") is
amortized over the life of the dollar roll.
D. 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 income to its shareholders.
Accordingly, no federal income tax provision is required.
E. 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
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (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.
F. ORGANIZATIONAL EXPENSES - Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Fund in the amount of
approximately $150,000 which have been reimbursed for the full amount
thereof. Such expenses have been deferred and are being amortized on the
straight-line method over a period not to exceed five years from the
commencement of operations.
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS - Pursuant to an
Investment Management Agreement, the Fund pays its Investment Manager a
management fee, accrued daily and payable monthly, by applying the annual rate
of 0.50% to the net assets of the Fund determined as of the close of each
business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager 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 Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
Under a Sub-Advisory Agreement between BlackRock Financial Management L.P.
(the "Sub-Advisor") and the Investment Manager, the Sub-Advisor provides the
Fund with investment advice and portfolio management relating to the Fund's
investment in securities, subject to the overall supervision of the Investment
Manager. As compensation for its services provided pursuant to the Sub-Advisory
Agreement, the Investment Manager pays the Sub-Advisor monthly compensation
equal to 40% of its monthly compensation.
On June 16, 1994, the Sub-Advisor announced that it had entered into a
definitive agreement to be acquired by PNC Bank, N.A. ("PNC"). The acquisition,
which is subject to regulatory approval, is expected to close in early 1995.
Following closing, the Sub-Advisor will become a subsidiary of PNC Asset
Management Group, Inc., the holding company for PNC's asset management business.
The acquisition will constitute an assignment of the Sub-Advisory Agreement
between the Investment Manager and the Sub-Advisor. Under federal securities
laws, an assignment of the Sub-Advisory Agreement will result in its immediate
termination.
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Prior to closing, the Fund will seek approval from the Fund's shareholders
of a new advisory agreement between Investment Manager and Sub-Advisor to take
effect following the closing. Shareholder approval will be solicited by a proxy
statement.
3. PLAN OF DISTRIBUTION - Dean Witter Distributors Inc. (the "Distributor"), an
affiliate of the Investment Manager, is the distributor of the Fund's shares
and, in accordance with a Plan of Distribution (the "Plan") pursuant to Rule
12b-1 under the Act, finances certain expenses in connection with the
distribution of shares of the Fund.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses that
the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor under the Plan: (1)
compensation to, and expenses of, Dean Witter Reynolds Inc., an affiliate of the
Investment Manager and Distributor, and other selected broker-dealers; (2) sales
incentives and bonuses to sales representatives and to marketing personnel in
connection with promoting sales of the Fund's shares; (3) expenses incurred in
connection with promoting sales of the Fund's shares; (4) preparing and
distributing sales literature; and (5) providing advertising and promotional
activities, including direct mail solicitation and television, radio, newspaper,
magazine and other media advertisements.
The Fund is authorized to reimburse the Distributor for specific expenses
the Distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. The amount of each monthly reimbursement payment may in no event
exceed an amount equal to a payment at the annual rate of 0.20% of the Fund's
average daily net assets during the month. For the year ended October 31, 1994,
the distribution fee was accrued at the annual rate of 0.18%.
The Distributor has informed the Fund that for the year ended October 31,
1994, it received approximately $19,200 in commissions from the sale of Fund's
shares of beneficial interest. Such commissions are not an expense of the Fund;
they are deducted from the proceeds of sales of shares of beneficial interest.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES - The cost of
purchases and proceeds from sales/prepayments of portfolio securities, excluding
short-term investments, for the year ended October 31, 1994 were $245,451,348
and $295,922,295, respectively. Included in the aforementioned are purchases and
sales of U.S. Government securities of $239,875,992 and $285,348,222,
respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At October 31, 1994, the Fund had
transfer agent fees and expenses payable of approximately $4,800.
On January 1, 1994, the Fund adopted an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Fund who will have
served as an independent Trustee 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 October 31, 1994, included in Trustees' fees and expenses in the
Statement of Operations amounted
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
to $10,006. At October 31, 1994, the Fund had an accrued pension liability of
$9,814 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST - Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold................................. 188,157 $ 1,689,901 2,978,014 $ 28,675,877
Reinvestment of dividends and
distributions....................... 251,787 2,249,370 753,734 7,199,190
------------ --------------- ------------ ---------------
439,944 3,939,271 3,731,748 35,875,067
Repurchased.......................... (5,271,058) (47,232,632) (9,880,854) (94,132,722)
------------ --------------- ------------ ---------------
Net decrease......................... (4,831,114) $ (43,293,361) (6,149,106) $ (58,257,655)
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
</TABLE>
6. FEDERAL INCOME TAX STATUS - At October 31, 1994, the Fund had approximate
net capital loss carryovers of $6,417,000 of which $1,180,000 will be available
through October 31, 2002 and $5,237,000 will be available through October 31,
2001 to offset future capital gains to the extent provided by regulations.
7. REVERSE REPURCHASE AND DOLLAR ROLL AGREEMENTS - Reverse repurchase
agreements and dollar rolls involve the risk that the market value of the
securities the Fund is obligated to repurchase under the agreement may decline
below the repurchase price. In the event the buyer of securities under a reverse
repurchase agreement or dollar roll files for bankruptcy or becomes insolvent,
the Fund's use of proceeds of the agreement may be restricted pending a
determination by the other party, or its trustee or receiver, whether to enforce
the Fund's obligation to repurchase the securities and the Fund's use of the
proceeds of the reverse repurchase agreement may also effectively be restricted
pending such decision.
Reverse repurchase agreements are collateralized by Fund securities with a
market value in excess of the Fund's obligation under the contract.
During the year ended October 31, 1994, the maximum and average daily
amounts outstanding for reverse repurchase agreements were $14,100,000 and
$5,928,019, respectively, with a weighted average interest rate of 3.57%.
8. REPURCHASE AGREEMENTS - When the Trust enters into a repurchase agreement,
the Trust's custodian takes possession on behalf of the Trust of the collateral
pledged for investments in repurchase agreements. It is the policy of the Trust
to value the underlying collateral daily on a mark-to-market basis to insure
that the value, including accrued interest, is at least equal to the repurchase
price plus accrued interest. In the event of a default or bankruptcy by a
selling financial institution, the Trust will seek to liquidate the collateral.
However, the exercising of the Trust's right to liquidate such collateral could
involve certain costs or delays and, to the extent that proceeds from any sale
upon a default of the obligation to repurchase were less than the repurchase
price, the Trust could suffer a loss.
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE
PERIOD
JULY 1,
FOR THE YEAR ENDED 1991*
OCTOBER 31, THROUGH
---------------------------- OCTOBER
1994 1993 1992 31, 1991
------- ------- -------- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of
period...................... $9.18 $9.69 $9.95 $9.60
------- ------- -------- --------
Net investment income......... 0.54 0.73 0.71 0.26
Net realized and unrealized
gain (loss) on
investments................. (0.41) (0.45) (0.21) 0.37
------- ------- -------- --------
Total from investment
operations.................. 0.13 0.28 0.50 0.63
------- ------- -------- --------
Less dividends and
distributions from:
Net investment income..... (0.54) (0.61) (0.71) (0.26)
Net realized gain on
investments................. -- (0.18) (0.05) (0.02)
------- ------- -------- --------
Total dividends and
distributions............... (0.54) (0.79) (0.76) (0.28)
------- ------- -------- --------
Net asset value, end of
period...................... $8.77 $9.18 $9.69 $9.95
------- ------- -------- --------
------- ------- -------- --------
TOTAL INVESTMENT RETURN+...... 1.44% 2.87% 5.18% 6.41%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).................. $43,875 $90,260 $154,860 $132,219
Ratios of expenses to average
net assets:
Operating expenses.......... 1.24% 0.95% 0.99% 0.85%(2)
Interest expense............ 0.34% 0.65% 0.61% 0.84%(2)
Total expenses............ 1.58% 1.60% 1.60% 1.69%(2)(3)
Ratio of net investment income
to average net assets....... 5.32% 7.32% 7.05% 7.50%(2)(3)
Portfolio turnover rate....... 393% 412% 254% 91%(1)
<FN>
- ------------
* COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES LOAD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) IF THE FUND HAD BORNE ALL EXPENSES THAT WERE ASSUMED BY THE INVESTMENT
MANAGER, THE ABOVE ANNUALIZED EXPENSE RATIO WOULD HAVE BEEN 1.85% ($.065
PER SHARE) AND THE ABOVE ANNUALIZED NET INVESTMENT INCOME RATIO WOULD HAVE
BEEN 7.34% ($.253 PER SHARE).
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of Dean Witter Premier Income Trust
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations, of cash
flows and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of Dean Witter Premier Income
Trust (the "Fund") at October 31, 1994, the results of its operations and its
cash flows 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 three years in the period then ended and for the period July 1, 1991
(commencement of operations) through October 31, 1991, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities owned at October 31, 1994 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
December 9, 1994
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
ANNUAL REPORT
OCTOBER 31, 1994
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
SUB-ADVISOR
BlackRock Financial Management L.P.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of the
Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
<PAGE>
DEAN WITTER PREMIER INCOME TRUST
GROWTH OF $10,000
($ IN THOUSANDS)
<TABLE>
<CAPTION>
LEHMAN BROTHERS
GENERAL US GOVT.
DATE TOTAL 1-3 YEAR INDEX
- ------------------------------------------------------------------
- ------------------------------------------------------------------
<S> <C> <C>
July 1, 1991 $ 9,700 $10,000
- ------------------------------------------------------------------
October 31, 1991 $10,322 $10,354
- ------------------------------------------------------------------
October 31, 1992 $10,857 $11,197
- ------------------------------------------------------------------
October 31, 1993 $11,169 $11,845
- ------------------------------------------------------------------
October 31, 1994 $11,330 (3) $11,980
- ------------------------------------------------------------------
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR LIFE OF FUND
---------------------------------------------
---------------------------------------------
<S> <C>
1.44 (1) 4.77 (1)
---------------------------------------------
-1.60 (2) 3.82 (2)
---------------------------------------------
---------------------------------------------
____ Fund ____ Lehman (4)
---------------------------------------------
---------------------------------------------
<FN>
Past performance is not predictive of future returns.
________________________________________
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes the deduction of the maximum applicable front-end
sales charge (3%). See the Fund's current prospectus for complete details
on fees and sales charges.
(3) Closing value including the deduction of a 3% front end sales charge,
assuming a complete redemption on October 31, 1994.
(4) The Lehman Brothers Mutual Fund Short (1-3) U.S. Government Index tracks
the performance of all U.S. Government agency and U.S. Treasury securities
with maturities of one to three years. Unlike the Fund, the index does not
include any expenses, fees or charges.
</TABLE>
