-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vm+ODPmkC9g0/7ImdCH99hKlQ/NwdcLE6VVeu4qvzSNwdrDCDH9caGmm80ycHp1J 6jFY9UQ6ObtTlOcR44XiEA== 0000950123-01-000770.txt : 20010205 0000950123-01-000770.hdr.sgml : 20010205 ACCESSION NUMBER: 0000950123-01-000770 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001130 FILED AS OF DATE: 20010201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST CENTRAL INDEX KEY: 0000842891 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133498050 STATE OF INCORPORATION: NY FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05688 FILM NUMBER: 1521031 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123922550 FORMER COMPANY: FORMER CONFORMED NAME: MUNICIPAL PREMIUM INCOME TRUST/MA DATE OF NAME CHANGE: 19930721 FORMER COMPANY: FORMER CONFORMED NAME: ALLSTATE MUNICIPAL PREIMIUM INCOME TRUST/MA DATE OF NAME CHANGE: 19930721 FORMER COMPANY: FORMER CONFORMED NAME: MUNICIPAL PREMIUM INCOME TRUST/ DATE OF NAME CHANGE: 19930721 N-30D 1 y43720an-30d.txt MSDW MUNICIPAL PREMIUM INCOME TRUST 1 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST Two World Trade Center LETTER TO THE SHAREHOLDERS November 30, 2000 New York, New York 10048 DEAR SHAREHOLDER: Signs of a slowing economy and vigilance by the Federal Reserve Board in controlling inflation during the six-month period ended November 30, 2000, contributed to more favorable bond-market conditions. The bond-market rally, which began in January, continued through the summer, with long-term interest rates declining significantly by the end of November. MUNICIPAL MARKET CONDITIONS The long-term insured municipal index declined from 5.91 percent in May 2000 to 5.55 percent at the end of November. Because bond prices move inversely to changes in interest rates, bond prices improved this year. The yield pickup for extending maturities from 1 to 30 years averaged 145 basis points during this six month time period. The ratio of municipal yields as a percentage of Treasury yields has historically been used as a measure of relative value. A rising yield ratio indicates weaker relative performance by municipals and a declining ratio signals strong performance versus Treasuries. Between May and November this ratio was unchanged at 98 percent as municipal yields generally traced the pattern of U.S. Treasury yields. Over the past three years, the high and low ratios of these yields have been 100 percent and 83 percent, respectively. During the first 11 months of 2000, municipal underwriting was 16 percent lower than last year. Refunding activity, the most interest-rate-sensitive component of supply, dropped more than 50 percent. Approximately 40 percent of the underwritings were enhanced with bond insurance, versus a 50 percent share for the previous three years. 2 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST LETTER TO THE SHAREHOLDERS November 30, 2000, continued 30-YEAR U.S. BOND YIELDS 1994-2000
Insured Municipal Yields Insured as a Percentage of Municipal Yields U.S. Treasury Yields U.S. Treasury Yields 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 5.84 5.90 98.98 5.73 5.78 99.13 5.62 5.67 99.12 5.74 5.89 97.45 5.65 5.79 97.58 5.55 5.61 98.93
Source: Municipal Market Data - A Division of Thomson Financial Municipal Group and Bloomberg L.P. PERFORMANCE During the six-month period ended November 30, 2000, the net asset value (NAV) of Morgan Stanley Dean Witter Municipal Premium Income Trust (PIA) increased from $9.08 to $9.65 per share. Based on this change, plus a reinvestment of tax-free dividends totaling $0.27 per share, the Fund's total NAV return was 9.80 percent. PIA's value on the New York Stock Exchange (NYSE) increased from $7.75 to $8.25 per share during this period. PIA's total market return, which includes the reinvestment of tax-free dividends, was 9.98 percent. As of November 30, 2000, PIA's share price was at a 14.51 percent discount to its NAV. Monthly dividends for the fourth quarter of 2000 declared in September were unchanged at $0.045 per share. The Fund's level of undistributed net investment income was $0.089 per share on November 30, 2000, versus $0.106 per share six months earlier. PORTFOLIO STRUCTURE The Fund's net assets of $309.2 million were diversified among 13 long-term sectors and 76 credits. Issues in the refunded bond category comprised 7 percent of net assets. These bonds have been 2 3 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST LETTER TO THE SHAREHOLDERS November 30, 2000, continued 3 refinanced and will be redeemed on the dates shown in the portfolio. At the end of November, the portfolio's average maturity was 19 years. Average duration, a measure of portfolio sensitivity to interest rates, was 7 years. Generally, a portfolio with a longer duration will have greater price volatility than a portfolio with a shorter duration. The accompanying charts provide current information on the portfolios credit quality, maturity distribution and sector concentrations. Optional call provisions by year and their respective cost (book) yields are also charted by year. 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 factor is the amount of ARPS outstanding, while the second is the spread between the portfolio's cost yield and ARPS expenses (ARPS auction rate and expenses). The greater the spread and 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 six-month period, ARPS leverage contributed approximately $0.02 per share to common share earnings. PIA has five ARPS series totaling $100 million representing 32 percent of net assets. The yield on the Fund's three weekly ARPS series ranged between 3.85 and 4.99 percent. LOOKING AHEAD The bond market has begun to anticipate that the Federal Reserve Board will ease its monetary policy in 2001. This expectation is based on continued moderate inflation and clear signs of slowing economic growth. This projected environment is favorable for fixed-income investments. Within the fixed-income asset class, we believe municipals represent good long-term value. The Fund's procedure for reinvesting all dividends and distributions in 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 4 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST LETTER TO THE SHAREHOLDERS November 30, 2000, continued 4 purchase in the open market or in privately negotiated transactions. During the six-month period ended November 30, 2000, the Fund purchased and retired 371,499 shares of common stock 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. Very truly yours, /s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN CHARLES A. FIUMEFREDDO MITCHELL M. MERIN Chairman of the Board President
5 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST LETTER TO THE SHAREHOLDERS November 30, 2000, continued [LARGEST SECTORS BAR GRAPH] LARGEST SECTORS AS OF NOVEMBER 30, 2000 (% OF NET ASSETS) ELECTRIC 15% HOSPITAL 15% TRANSPORTATION 14% GENERAL OBLIGATION 12% IDR/PCR* 12% WATER & SEWER 10% MORTGAGE 6%
* INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. [CREDIT RATINGS PIE CHART] CREDIT RATINGS AS OF NOVEMBER 30, 2000 (% OF TOTAL LONG-TERM PORTFOLIO) Aaa or AAA 66% Aa or AA 19% Baa or BBB 9% A or A 3% N/R 3%
AS MEASURED BY MOODY'S INVESTORS SERVICE, INC. OR STANDARD & POOR'S CORP. PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. [DISTRIBUTION BY MATURITY BAR GRAPH] DISTRIBUTION BY MATURITY (% OF NET ASSETS) WEIGHTED AVERAGE MATURITY: 19 YEARS UNDER 1 YEAR 1.1% 1-5 YEARS 1.8% 5-10 YEARS 15.0% 10-20 YEARS 27.5% 20-30 YEARS 48.8% 30+ YEARS 4.1%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. 5 6 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST LETTER TO THE SHAREHOLDERS November 30, 2000, continued CALL AND COST (BOOK) YIELD STRUCTURE (BASED ON LONG-TERM PORTFOLIO) NOVEMBER 30, 2000 ------------------------ WEIGHTED AVERAGE CALL PROTECTION: 6 YEARS ------------------------ BONDS CALLABLE
YEARS BONDS CALLABLE - ----------- 2000 4% 2001 9% 2002 9% 2003 0% 2004 8% 2005 9% 2006 12% 2007 4% 2008 22% 2009 6% 2010+ 15%
---------------- Weighted Average Book Yield: 6.0% ---------------- COST (BOOK) YIELD* 2000 8.1% 2001 6.9% 2002 6.1% 2003 2004 6.5% 2005 6.1% 2006 5.4% 2007 6.0% 2008 5.4% 2009 5.5% 2010+ 5.7%
* 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 is earning a book yield of 6.9% on 9% of the long-term portfolio that is callable in 2001. Portfolio structure is subject to change. 6 7 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS November 30, 2000 (unaudited)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- TAX-EXEMPT MUNICIPAL BONDS (97.2%) General Obligation (12.0%) $ 4,000 California, Dtd 10/01/98 Refg (MBIA)........................ 4.50% 10/01/28 $ 3,428,000 5,000 Los Angeles Unified School District, California, 1997 Ser B (FGIC)..................................................... 5.00 07/01/23 4,790,900 3,000 Hawaii, 1999 Ser CT (FSA)................................... 5.875 09/01/17 3,144,690 3,500 Massachusetts, 1995 Ser A (Ambac)........................... 5.00 07/01/12 3,539,760 2,300 Berkley School District, Michigan, Refg Ser 1999 (FGIC)..... 4.75 01/01/19 2,092,034 2,000 Michigan Municipal Bond Authority, School Ser 1998.......... 5.25 12/01/13 2,023,280 3,000 Barberton City School District, Ohio, Ser 1998 (FGIC)....... 5.125 11/01/22 2,876,010 700 Puerto Rico, Public Improvement Ser 1998 (MBIA)............. 4.875 07/01/23 654,941 3,500 Shelby County, Tennessee, Refg 1995 Ser A................... 5.625 04/01/11 3,624,285 5,000 La Joya Independent School District, Texas, Building, Ser 2000....................................................... 5.50 02/15/25 4,973,050 6,000 Washington, Ser 1993 A...................................... 5.75 10/01/17 6,092,100 - -------- ----------- 38,000 37,239,050 - -------- ----------- Educational Facilities Revenue (4.1%) 5,500 Oakland University, Michigan, Ser 1995 (MBIA)............... 5.75 05/15/26 5,564,790 New York State Dormitory Authority, 4,000 State University Refg Ser 1993 A............................ 5.50 05/15/08 4,183,920 1,350 State University Refg Ser 1990 B............................ 7.50 05/15/11 1,570,617 1,250 Ohio State University, General Receipts Ser 1999 A.......... 5.75 12/01/24 1,280,725 - -------- ----------- 12,100 12,600,052 - -------- ----------- Electric Revenue (13.5%) 3,000 Los Angeles Department of Water & Power, California, Issue of 1992.................................................... 6.375 02/01/20 3,115,200 5,000 Sacramento Municipal Utility District, California, Refg 1994 Ser I (MBIA)............................................... 6.00 01/01/24 5,172,000 2,950 Kansas City, Kansas, Utility Refg & Impr Ser 1994 (FGIC).... 6.375 09/01/23 3,112,574 7,750 South Carolina Public Service Authority, 1995 Refg Ser A (Ambac).................................................... 6.25 01/01/22 8,175,165 17,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C.......... 4.70 02/01/06 17,014,450 5,000 Intermountain Power Agency, Utah, Refg 1997 Ser B (MBIA).... 5.75 07/01/19 5,098,050 - -------- ----------- 40,700 41,687,439 - -------- ----------- Hospital Revenue (13.4%) 5,000 Birmingham-Carraway Special Care Facilities Financing Authority, Alabama, Carraway Methodist Health Ser 1995 A (Connie Lee)............................................... 5.875 08/15/15 5,148,700 3,500 Colbert County -- Northwest Health Care Authority, Alabama, Hellen Keller Hospital Refg Ser 1990....................... 8.75 06/01/09 3,609,830 10,000 Boston, Massachusetts, Boston City Hospital -- FHA Mtge Refg Ser B...................................................... 5.75 02/15/13 10,053,800 5,000 New Jersey Health Care Authority, St Barnabas Medical Center Ser 1998 B (MBIA).......................................... 4.75 07/01/28 4,393,500 4,000 North Carolina Medical Care Commission, Duke University Health Ser 1998 A................................................. 4.75 06/01/28 3,457,560 2,985 Lehigh County General Purpose Authority, Pennsylvania, St Lukes Hospital Ser 1992 (Ambac)............................ 6.25 07/01/22 3,049,983 2,650 Jefferson County Health Facilities Development Corporation, Texas, Baptist Health Ser 1989............................. 8.30 10/01/14 2,523,780
SEE NOTES TO FINANCIAL STATEMENTS 7 8 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS November 30, 2000 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- $ 5,000 Washington Health Care Facilities Authority, Swedish Health Ser 1998 (Ambac)........................................... 5.125% 11/15/22 $ 4,666,000 5,000 Wisconsin Health & Educational Facilities Authority, Wausau Hospital Refg Ser 1998 A (Ambac)........................... 5.125 08/15/20 4,676,400 - -------- ----------- 43,135 41,579,553 - -------- ----------- Industrial Development/Pollution Control Revenue (12.2%) 9,585 Pima County Industrial Development Authority, Arizona, Tucson Electric Power Co Refg Ser 1988 A (FSA)............. 7.25 07/15/10 10,074,123 10,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA)..................................................... 7.00 06/01/31 10,304,900 8,000 New York City Industrial Development Agency, New York, Brooklyn Navy Yard Cogeneration Partners LP Ser 1997 (AMT)...................................................... 5.65 10/01/28 7,157,600 10,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990 (AMT)...................................................... 7.50 12/01/29 10,209,400 - -------- ----------- 37,585 37,746,023 - -------- ----------- Mortgage Revenue - Multi-Family (2.9%) 1,250 Lake Charles Non-Profit Housing Development Corporation, Louisiana, Ser 1990 A (FSA)................................ 7.875 02/15/25 1,253,150 Massachusetts Housing Finance Agency, 1,790 Rental 1994 Ser A (AMT) (Ambac)............................ 6.60 07/01/14 1,864,303 3,460 Rental 1994 Ser A (AMT) (Ambac)............................ 6.65 07/01/19 3,586,740 2,400 Minnesota Housing Finance Agency, Rental 1995 Ser D (MBIA)..................................................... 6.00 02/01/22 2,414,496 - -------- ----------- 8,900 9,118,689 - -------- ----------- Mortgage Revenue - Single Family (3.1%) 2,100 Colorado Housing & Finance Authority Ser 1997 A-2 (AMT)..... 7.25 05/01/27 2,284,716 100 Idaho Housing Agency, Ser 1988 D-2 (AMT).................... 8.25 01/01/20 102,850 530 Kansas City Leavenworth & Lenexa, Kansas, GNMA-Backed Ser 1998 C (AMT)........................................... 8.00 11/01/20 544,824 Olathe, Kansas, 65 GNMA Collateralized Ser 1990 B............................. 7.50 09/01/10 66,718 175 GNMA Collateralized Ser 1989 A (AMT) (MBIA)................ 8.00 11/01/20 177,279 980 New Orleans Home Mortgage Authority, Louisiana, GNMA Collateralized 1989 Ser B-1 (AMT).......................... 8.25 12/01/21 983,107 365 Mississippi Housing Finance Corporation, GNMA-Backed Ser 1989 (AMT) (FGIC).......................................... 8.25 10/15/18 369,161 2,000 Missouri Housing Development Commission, Homeownership 1996 Ser D (AMT)................................................ 7.10 09/01/27 2,057,060 810 South Carolina Housing Finance & Development Authority, Homeownership 1991 Ser A (AMT)............................. 7.40 07/01/23 826,646 45 Utah Housing Finance Agency, Ser 1991 B-1................... 7.50 07/01/16 45,929 2,000 Virginia Housing Development Authority, 1992 Ser A.......... 7.10 01/01/25 2,059,960 - -------- ----------- 9,170 9,518,250 - -------- -----------
SEE NOTES TO FINANCIAL STATEMENTS 8 9 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS November 30, 2000 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- Nursing & Health Related Facilities Revenue (0.5%) New York State Medical Care Facilities Finance Agency, $ 535 Mental Health Ser 1987..................................... 8.875% 08/15/07 $ 546,502 425 Mental Health Ser 1990 A (Secondary MBIA).................. 7.75 02/15/20 434,495 405 Mental Health Ser 1991 A................................... 7.50 02/15/21 415,178 - -------- ----------- 1,365 1,396,175 - -------- ----------- Public Facilities Revenue (1.8%) 2,000 Metropolitan Pier & Exposition Authority, Illinois, McCormick Place Refg Ser 1998 A (FGIC)..................... 5.50 06/15/18 2,038,380 Saint Paul Independent School District #625, Minnesota, 1,700 Ser 1995 C COPs............................................ 5.45 02/01/11 1,732,827 1,800 Ser 1995 C COPs............................................ 5.50 02/01/12 1,834,038 - -------- ----------- 5,500 5,605,245 - -------- ----------- Transportation Facilities Revenue (13.7%) 3,000 Alameda Corridor Transportation Authority, California, Sr Lien Ser 1999 A (MBIA)..................................... 5.25 10/01/21 2,992,230 4,000 Colorado Department of Transportation, Ser 2000 (Ambac)..... 6.00 06/15/14 4,303,520 2,500 Miami-Dade County, Florida, Miami International Airport Ser 2000 B (FGIC).............................................. 5.75 10/01/24 2,573,375 1,940 Atlanta, Georgia, Airport Ser 1994 B (AMT) (Ambac).......... 6.00 01/01/21 1,973,814 Chicago, Illinois, 5,000 Chicago-O'Hare International Airport Ser 1996 A (Ambac).... 5.625 01/01/12 5,160,200 1,805 Midway Airport 1994 Ser A (AMT) (MBIA)..................... 6.25 01/01/24 1,856,190 5,000 New Jersey Transportation Trust Authority, 1998 Ser A (FSA)...................................................... 4.50 06/15/19 4,440,300 2,500 New York State Thruway Authority, Local Highway & Bridge Ser 1998 A (MBIA).............................................. 5.00 04/01/18 2,385,450 2,800 Puerto Rico Highway & Transportation Authority, Ser 1998 A.......................................................... 4.75 07/01/38 2,443,868 8,000 Austin, Texas, Airport Prior Lien Ser 1995 A (AMT) (MBIA)... 6.125 11/15/25 8,215,920 5,000 Pocahontas Parkway Association, Virginia, Route 895 Connector Ser 1998 A....................................... 5.50 08/15/28 4,092,450 2,000 Richmond Metropolitan Authority, Virginia, Expressway & Refg Ser 1998 (FGIC)............................................ 5.25 07/15/17 2,015,360 - -------- ----------- 43,545 42,452,677 - -------- ----------- Water & Sewer Revenue (9.6%) 2,500 Coachella, California, Ser 1992 COPs (FSA).................. 6.10 03/01/22 2,570,650 3,000 Eastern Municipal Water District, Water & Sewer Refg Ser 1998 A COPs (FGIC)......................................... 4.75 07/01/23 2,718,090 3,000 Atlanta, Georgia, Water & Wastewater Ser 1999 A (FGIC)...... 5.50 11/01/22 3,061,440 4,000 Augusta, Georgia, Water & Sewerage Ser 2000 (FSA)........... 5.25 10/01/22 3,918,280 5,000 Rockdale County Water & Sewage Authority, Georgia, Ser 1999 A (MBIA)................................................... 5.50 07/01/25 5,015,100 5,500 Massachusetts Water Resources Authority, 1998 Ser A (FSA)... 4.75 08/01/27 4,849,240 3,000 Detroit, Michigan, Water Supply 1997 Ser A (MBIA)........... 5.00 07/01/21 2,823,420 5,000 Cleveland, Ohio, Waterworks Impr & Refg 1998 Ser I (FSA).... 5.00 01/01/23 4,683,550 - -------- ----------- 31,000 29,639,770 - -------- -----------
SEE NOTES TO FINANCIAL STATEMENTS 9 10 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS November 30, 2000 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- Other Revenue (3.5%) $ 10,000 New York Local Government Assistance Corporation, Refg Ser 1997 B (MBIA).............................................. 5.00 % 04/01/21 $ 9,380,100 1,450 Cuyahoga County, Ohio, The Medical Center Co Ser 1998 (Ambac).................................................... 5.125 02/15/28 1,360,201 - -------- ----------- 11,450 10,740,301 - -------- ----------- Refunded (6.9%) 5,000 Regional Transportation Authority, Illinois, Ser 1994 A (Ambac).................................................... 6.25 06/01/04+ 5,366,200 4,000 Lower Colorado River Authority, Texas, Jr Lien Seventh Ser (FSA) (ETM)................................................ 4.75 01/01/28 3,577,240 1,340 Missouri Health & Educational Facilities Authority, Missouri Baptist Medical Center Refg Ser 1989 (ETM)................. 7.625 07/01/18 1,370,498 4,000 Montgomery County, Ohio, Franciscan Medical Center -- Dayton Ser 1997................................................... 5.50 07/01/18 4,111,640 3,600 Rio Rancho, New Mexico, Water & Wastewater Ser 1995 A (FSA)...................................................... 6.00 05/15/06+ 3,846,132 3,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C (ETM).... 4.70 02/01/06 2,995,740 - -------- ----------- 20,940 21,267,450 - -------- ----------- 303,390 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Cost $296,115,438)............................ 300,590,674 - -------- ----------- SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (1.0%) 1,000 Massachusetts Health & Educational Facilities Authority, St Elizabeth Hospital of Boston Ser D & E (FSA)............... 4.15* 01/01/35 1,000,000 2,200 Harris County Health Facilities Development Corporation, - -------- Texas, Methodist Hospital Ser 1994 (Demand 11/01/00)....... 4.25* 12/01/25 2,200,000 ----------- 3,200 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Cost $3,200,000)............. 3,200,000 - -------- ----------- $306,590 TOTAL INVESTMENTS (Cost $299,315,438) (a)................................ 98.2% 303,790,674 ======== OTHER ASSETS IN EXCESS OF LIABILITIES.................................... 1.8% 5,412,471 ----- ----------- NET ASSETS............................................................... 100.0% $309,203,145 ===== ===========
- ---------- AMT Alternative Minimum Tax. COPs Certificates of Participation. ETM Escrowed to maturity. + Prerefunded to call date shown. * Current coupon of variable rate demand obligation. (a) The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $9,104,976 and the aggregate gross unrealized depreciation is $4,629,740, resulting in net unrealized depreciation of $4,475,236. Bond Insurance: - --------------- Ambac Ambac Assurance Corporation. Connie Lee Connie Lee Insurance Company -- A wholly owned subsidiary of Ambac Assurance Corporation. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS 10 11 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS November 30, 2000 (unaudited) continued Geographic Summary of Investments Based on Market Value as a Percent of Net Assets Alabama..................... 2.8% Arizona..................... 3.3 California.................. 8.0 Colorado.................... 2.1 Florida..................... 0.8 Georgia..................... 4.5 Hawaii...................... 1.0 Illinois.................... 4.6 Kansas...................... 4.6 Louisiana................... 0.7 Massachusetts............... 8.1 Michigan.................... 4.0 Minnesota................... 1.9 Mississippi................. 0.1 Missouri.................... 1.1 New Jersey.................. 3.0 New Mexico.................. 1.2 New York.................... 8.5 North Carolina.............. 1.1 Ohio........................ 4.6 Pennsylvania................ 1.0 Puerto Rico................. 1.0 South Carolina.............. 2.9 Tennessee................... 1.2 Texas....................... 16.8 Utah........................ 1.7 Virginia.................... 2.6 Washington.................. 3.5 Wisconsin................... 1.5 ---- Total....................... 98.2% ====
11 12 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES November 30, 2000 (unaudited) ASSETS: Investments in securities, at value (cost $299,315,438)........................................ $303,790,674 Cash........................................................ 27,580 Receivable for: Interest................................................ 5,646,277 Investments sold........................................ 145,400 Prepaid expenses and other assets........................... 156,574 ----------- TOTAL ASSETS............................................ 309,766,505 ----------- LIABILITIES: Payable for: Dividends to preferred shareholders..................... 139,218 Investment advisory fee................................. 114,881 Shares of beneficial interest repurchased............... 112,858 Administration fee...................................... 71,801 Accrued expenses and other payables......................... 124,602 ----------- TOTAL LIABILITIES....................................... 563,360 ----------- NET ASSETS.............................................. $309,203,145 =========== 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, 21,676,749 shares outstanding)............................................... 203,717,917 Net unrealized appreciation................................. 4,475,236 Accumulated undistributed net investment income............. 1,931,772 Accumulated net realized loss............................... (921,780) ----------- NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS............ 209,203,145 ----------- TOTAL NET ASSETS........................................ $309,203,145 =========== NET ASSET VALUE PER COMMON SHARE ($209,203,145 divided by 21,676,749 common shares outstanding)............................................... $9.65 ===========
SEE NOTES TO FINANCIAL STATEMENTS 12 13 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST FINANCIAL STATEMENTS continued STATEMENT OF OPERATIONS For the six months ended November 30, 2000 (unaudited) NET INVESTMENT INCOME: INTEREST INCOME............................................. $8,890,140 ---------- EXPENSES Investment advisory fee..................................... 618,163 Administration fee.......................................... 386,352 Auction commission fees..................................... 152,794 Professional fees........................................... 37,499 Transfer agent fees and expenses............................ 32,705 Shareholder reports and notices............................. 21,167 Auction agent fees.......................................... 17,135 Registration fees........................................... 16,988 Custodian fees.............................................. 8,560 Trustees' fees and expenses................................. 7,247 Other....................................................... 16,600 ---------- TOTAL EXPENSES.......................................... 1,315,210 Less: expense offset........................................ (8,544) ---------- NET EXPENSES............................................ 1,306,666 ---------- NET INVESTMENT INCOME................................... 7,583,474 ---------- NET REALIZED AND UNREALIZED GAIN: Net realized gain........................................... 535,686 Net change in unrealized depreciation....................... 11,900,466 ---------- NET GAIN................................................ 12,436,152 ---------- NET INCREASE................................................ $20,019,626 ==========
SEE NOTES TO FINANCIAL STATEMENTS 13 14 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST FINANCIAL STATEMENTS continued
STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED NOVEMBER 30, 2000 MAY 31, 2000 - --------------------------------------------------------------------------------------- (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................ $ 7,583,474 $ 15,649,034 Net realized gain (loss)............................. 535,686 (1,457,465) Net change in unrealized depreciation................ 11,900,466 (20,713,171) ------------ ------------ NET INCREASE (DECREASE).......................... 20,019,626 (6,521,602) ------------ ------------ Dividends to preferred shareholders from net investment income................................... (2,075,258) (3,734,450) ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income................................ (5,907,135) (12,096,798) Net realized gain.................................... -- (1,623,826) ------------ ------------ TOTAL DIVIDENDS AND DISTRIBUTIONS................ (5,907,135) (13,720,624) ------------ ------------ Decrease from transactions in common shares of beneficial interest................................. (3,089,647) (12,263,531) ------------ ------------ NET INCREASE (DECREASE).......................... 8,947,586 (36,240,207) NET ASSETS: Beginning of period.................................. 300,255,559 336,495,766 ------------ ------------ END OF PERIOD (Including undistributed net investment income of $1,931,772 and $2,330,691, respectively)......... $309,203,145 $300,255,559 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 14 15 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS November 30, 2000 (unaudited) 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. 15 16 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS November 30, 2000 (unaudited) continued D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and distributions to its shareholders on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes 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 six months ended November 30, 2000 aggregated $8,768,320 and $12,177,206, respectively. Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Advisor and Administrator, is the Fund's transfer agent. At November 30, 2000, the Fund had transfer agent fees and expenses payable of approximately $1,600. The Fund has an unfunded noncontributory defined benefit pension plan covering all independent Trustees of the Fund who will have served as independent Trustees for at least five years at the time of retirement. Benefits under this plan are based on years of service and compensation during the last five years of service. Aggregate pension costs for the six months ended November 30, 2000 included in 16 17 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS November 30, 2000 (unaudited) continued Trustees' fees and expenses in the Statement of Operations amounted to $2,987. At November 30, 2000, the Fund had an accrued pension liability of $53,156 which is included in accrued expenses in the Statement of Assets and Liabilities. 4. RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS The Fund may invest a portion of its assets in residual interest bonds, which are inverse floating rate municipal obligations. The prices of these securities are subject to greater market fluctuations during periods of changing prevailing interest rates than are comparable fixed rate obligations. At November 30, 2000, the Fund did not hold positions in residual interest bonds. 5. COMMON SHARES OF BENEFICIAL INTEREST Transactions in shares of beneficial interest were as follows:
CAPITAL PAID IN PAR VALUE EXCESS OF SHARES OF SHARES PAR VALUE ---------- --------- ------------ Balance, May 31, 1999....................................... 23,585,024 $235,850 $218,835,245 Treasury shares purchased and retired (weighted average discount 9.68%)*........................................... (1,536,776) (15,368) (12,248,163) ---------- -------- ------------ Balance, May 31, 2000....................................... 22,048,248 220,482 206,587,082 Treasury shares purchased and retired (weighted average discount 14.21%)*.......................................... (371,499) (3,715) (3,085,932) ---------- -------- ------------ Balance, November 30, 2000.................................. 21,676,749 $216,767 $203,501,150 ========== ======== ============
- --------------------- * The Trustees have voted to retire the shares purchased. 6. PREFERRED SHARES OF BENEFICIAL INTEREST The Fund is authorized to issue up to 1,000,000 non-participating preferred shares of beneficial interest having a par value of $.01 per share, in one or more series, with rights as determined by the Trustees, without the approval of the common shareholders. The Fund has issued Series A through E Auction Rate Preferred Shares ("Preferred Shares") which have a liquidation value of $100,000 per share plus the redemption premium, if any, plus accumulated but unpaid dividends, whether or not declared, 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. 17 18 MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS November 30, 2000 (unaudited) continued Dividends, which are cumulative, are reset through auction procedures.
AMOUNT IN NEXT RANGE OF SERIES SHARES* THOUSANDS* RATE* RESET DATE DIVIDEND RATES** - ------ ------- ---------- ----- ---------- ---------------- A 200 20,000 4.10% 12/06/00 3.95% - 4.60% B 200 20,000 3.85 12/06/00 3.85 - 4.99 C 200 20,000 4.25 09/04/01 3.85 - 4.25 D 200 20,000 4.16 01/02/01 4.16 E 200 20,000 4.10 12/06/00 4.00 - 4.45
- --------------------- * As of November 30, 2000. ** For the six months ended November 30, 2000.
Subsequent to November 30, 2000 and up through January 5, the Fund paid dividends to each of the Series A through E at rates ranging from 3.84% to 5.10% in the aggregate amount of $396,214. The Fund is subject to certain restrictions relating to the preferred shares. Failure to comply with these restrictions could preclude the Fund from declaring any distributions to common shareholders or purchasing common shares and/or could trigger the mandatory redemption of preferred shares at liquidation value. The preferred shares, which are entitled to one vote per share, generally vote with the common shares but vote separately as a class to elect two Trustees and on any matters affecting the rights of the preferred shares. 7. DIVIDENDS TO COMMON SHAREHOLDERS The Fund declared the following dividends from net investment income:
DECLARATION AMOUNT RECORD PAYABLE DATE PER SHARE DATE DATE - ------------------ --------- ------------------ ------------------ September 26, 2000 $0.045 December 8, 2000 December 22, 2000 December 26, 2000 $0.045 January 5, 2001 January 19, 2001 December 26, 2000 $0.045 February 9, 2001 February 23, 2001 December 26, 2000 $0.045 March 9, 2001 March 23, 2001
8. EXPENSE OFFSET The expense offset represents a reduction of the custodian fees for earnings on cash balances maintained by the Fund. 18 19 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:
FOR THE SIX FOR THE YEAR ENDED MAY 31* MONTHS ENDED ---------------------------------------------------- NOVEMBER 30, 2000 2000 1999 1998 1997 1996 - --------------------------------------------------------------------------------------------------------------------------------- (unaudited) SELECTED PER SHARE DATA: Net asset value, beginning of period............... $ 9.08 $10.03 $10.41 $10.08 $10.02 $10.36 ------ ------ ------ ------ ------ ------ Income from investment operations: Net investment income............................. 0.34 0.68 0.70 0.75 0.78 0.79 Net realized and unrealized gain (loss)........... 0.57 (0.96) (0.18) 0.33 0.19 (0.22) ------ ------ ------ ------ ------ ------ Total income (loss) from investment operations..... 0.91 (0.28) 0.52 1.08 0.97 0.57 ------ ------ ------ ------ ------ ------ Less dividends and distributions from: Net investment income............................. (0.27) (0.53) (0.54) (0.60) (0.60) (0.65) Common share equivalent of dividends paid to preferred shareholders.......................... (0.09) (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.................. (0.36) (0.76) (0.94) (0.75) (0.94) (0.92) ------ ------ ------ ------ ------ ------ Anti-dilutive effect of acquiring treasury shares............................................ 0.02 0.09 0.04 -- 0.03 0.01 ------ ------ ------ ------ ------ ------ Net asset value, end of period..................... $ 9.65 $ 9.08 $10.03 $10.41 $10.08 $10.02 ====== ====== ====== ====== ====== ====== Market value, end of period........................ $ 8.25 $ 7.75 $ 8.75 $9.625 $9.375 $ 9.00 ====== ====== ====== ====== ====== ====== TOTAL RETURN+...................................... 9.98%(3) (4.55)% (1.21)% 9.08% 13.52% 0.67% RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS: Expenses........................................... 1.26%(1)(2) 1.28%(1) 1.19%(1) 1.18%(1) 1.14%(1) 1.16%(1) Net investment income before preferred stock dividends......................................... 7.27%(2) 7.30% 6.73% 7.31% 7.70% 7.68% Preferred stock dividends.......................... 1.99%(2) 1.74% 1.39% 1.46% 1.41% 1.44% Net investment income available to common shareholders...................................... 5.28%(2) 5.56% 5.34% 5.85% 6.29% 6.24% SUPPLEMENTAL DATA: Net assets, end of period, in thousands............ $309,203 $300,256 $336,496 $354,392 $349,294 $355,587 Asset coverage on preferred shares at end of period............................................ 309% 300% 336% 354% 349% 355% Portfolio turnover rate............................ 3%(3) 11% 17% 21% 5% 14%
- --------------------- * 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%. (2) Annualized. (3) Not annualized. SEE NOTES TO FINANCIAL STATEMENTS 19 20 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 AUDITORS - ---------------------------------- Deloitte & Touche LLP Two World Financial Center New York, New York 10281 INVESTMENT ADVISOR - ---------------------------------- Morgan Stanley Dean Witter Advisors Inc. Two World Trade Center New York, New York 10048 The financial statements included herein have been taken from the records of the Fund without examination by the independent auditors and accordingly they do not express an opinion thereon. MORGAN STANLEY DEAN WITTER MUNICIPAL PREMIUM INCOME TRUST Semiannual Report November 30, 2000 -----END PRIVACY-ENHANCED MESSAGE-----