N-Q 1 y71555bnvq.htm FORM N-Q N-Q
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number: 811-05689
Morgan Stanley Municipal Premium Income Trust
(Exact name of registrant as specified in charter)
     
522 Fifth Avenue, New York, New York   10036
(Address of principal executive offices)   (Zip code)
Randy Takian
522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)
Registrant’s telephone number, including area code: 212-296-6990
Date of fiscal year end: May 31, 2009
Date of reporting period: August 31, 2008
 
 
Item 1. Schedule of Investments.
The Fund’s schedule of investments as of the close of the reporting period prepared pursuant to Rule 12-12 of Regulation S-X is as follows:

 

 

Morgan Stanley Municipal Premium Income Trust
Portfolio of Investments August 31, 2008 (unaudited)
                         
PRINCIPAL                
AMOUNT IN       COUPON   MATURITY    
THOUSANDS       RATE   DATE   VALUE
 
  Tax-Exempt Municipal Bonds (175.2%)                    
 
  Alabama (2.4%)                    
$1,000
  Jefferson County, Alabama, School Ser 2004 A     5.50 %   01/01/22   $ 883,630  
2,500
  University of Alabama, Ser 2004 A (MBIA Insd)     5.25     07/01/20     2,657,275  
 
                       
 
                    3,540,905  
 
                       
 
                        
 
  Alaska (1.0%)                    
2,000
  Northern Tobacco Securitization Corporation, Alaska, Asset Backed
Ser 2006 A 		    5.00     06/01/46     1,417,420  
 
                       
 
                        
 
  Arizona (8.6%)                    
2,000
  Glendale Industrial Development Authority, Arizona, John C Lincoln Health
Ser 2005 B 		    5.00     12/01/37     1,715,840  
2,870
  Pima County Industrial Development Authority, Arizona, Tucson Electric Power Co
Refg Ser 1988 A (FSA Insd) 		    7.25     07/15/10     2,888,425  
8,004
  Salt River Project Agricultural Improvement & Power District, Arizona, Ser
2002 B (a) 		    5.00     01/01/26     8,164,180  
 
                       
 
                    12,768,445  
 
                       
 
                        
 
  Arkansas (0.6%)                    
1,000
  Washington County, Arkansas, Washington Regional Medical
Center Ser 2005 A 		    5.00     02/01/35     892,470  
 
                       
 
                        
 
  California (26.3%)                    
5,000
  California Economic Recovery, Ser 2004 A (a)     5.00     07/01/39     5,288,875  
2,000
  California Educational Facilities Authority, Mills College Ser 2005 A     5.00     09/01/34     1,946,100  
2,000
  California Infrastructure & Economic Development Bank, The Scripps Research Institute
Ser 2005 A 		    5.00     07/01/29     2,038,140  
1,000
  California Statewide Communities Development Authority, Huntington Memorial Hospital
Ser 2005 		    5.00     07/01/27     972,000  
4,000
  California, Various Purpose Dtd 11/01/06 (a)     4.50     10/01/36     3,572,500  
3,000
  California, Various Purpose Dtd 12/01/05     5.00     03/01/27     3,026,130  
2,000
  Camarillo Public Finance Authority, California, Wastewater Ser 2005
(AMBAC Insd) 		    5.00     06/01/36     1,979,120  
4,005
  Golden State Tobacco Securitization Corporation, Asset Backed Ser 2007 A-1 (a)     5.125     06/01/47     2,992,242  
2,000
  Golden State Tobacco Securitization Corporation, Enhanced Asset Backed Ser
2005 A 		    5.00     06/01/45     1,802,260  
4,000
  Golden State Tobacco Securitization Corporation, Enhanced Asset Backed Ser
2007 A-1 		    5.75     06/01/47     3,348,559  
1,000
  Kern County Board of Education, Refg 2006 Ser A COPs (MBIA Insd)     5.00     06/01/31     1,001,200  
1,550
  Los Angeles Department of Water & Power, California, 2001 Ser A     5.00     07/01/24     1,558,510  
3,000
  Los Angeles Department of Water & Power, California, 2004 Ser C (MBIA Insd) (a)     5.00     07/01/25     3,097,050  
3,000
  Oxnard Financing Authority, California, Wastewater 2004 Ser A (FGIC Insd)     5.00     06/01/29     2,992,081  
3,000
  San Diego County Water Authority, California, Ser 2004 A COPs (FSA Insd) (a)     5.00     05/01/29     3,038,850  
460
  San Francisco City and County, Laguna Honda Hospital Ser 2008 R3 (AGC Insd) (a)     5.00     06/15/28     467,914  
 
                       
 
                    39,121,531  
 
                       
 
                        
 
  Colorado (5.1%)                    
1,400
  Colorado Health Facilities Authority, Adventist/Sunbelt Ser 2006 D     5.25     11/15/35     1,346,968  
45
  Colorado Housing Finance Authority, Ser 1997 A-2 (AMT)     7.25     05/01/27     45,753  
2,000
  Denver Convention Center Hotel Authority, Colorado, Refg Ser 2006
(XLCA Insd) 		    5.00     12/01/30     1,714,320  
2,040
  Fort Collins, Colorado, Ser 2004 A COPs (AMBAC Insd)     5.375     06/01/21     2,115,133  
2,155
  Fort Collins, Colorado, Ser 2004 A COPs (AMBAC Insd)     5.375     06/01/22     2,226,891  
125
  Public Authority For Colorado Energy, Natural Gas Purchase Revenue
Ser 2008 		    6.25     11/15/28     121,496  
 
                       
 
                    7,570,561  
 
                       
 
                        
 
  District of Columbia (2.9%)                    
3,000
  District of Columbia Ballpark, Ser 2006 B-1 (FGIC Insd)     5.00     02/01/31     2,807,940  
380
  District of Columbia Washington, D.C., Ser 2008 E (BHAC Insd) (a)     5.00     06/01/28     389,999  
380
  District of Columbia Washington, D.C., Ser 2008 E (BHAC Insd) (a)     5.00     06/01/28     389,999  
760
  District of Columbia Washington, D.C., Ser 2008 E (BHAC Insd) (a)     5.00     06/01/28     779,997  
 
                       
 
                    4,367,935  
 
                       
 
  Florida (13.8%)                    
2,000
  Broward County Educational Facilities Authority, Florida, Nova Southeastern
University Ser 2006 (AGC Insd) 		    5.00     04/01/31     1,983,860  
2,460
  JEA, Florida, Water & Sewer Sub-Second Crossover Ser (MBIA Insd)     5.00     10/01/24     2,501,180  
2,500
  Miami-Dade County, Florida, Miami Int’l Airport, Ser 2000 B (FGIC Insd)     5.75     10/01/24     2,621,050  
5,000
  Orlando Utilities Commission, Florida, Water & Electric Ser 2001     5.00     10/01/22     5,201,150  
8,000
  South Miami Health Facilities Authority, Florida, Baptist Health South Florida
Ser 2007 RITES-PA-1488 (a) 		    5.00     08/15/42     7,456,520  
1,000
  St Johns County Industrial Development Authority, Florida, Glenmoor
Ser 2006 A 		    5.25     01/01/26     845,260  
 
                       
 
                    20,609,020  
 
                       
 
                        
 
  Georgia (5.6%)                    
3,000
  Atlanta, Georgia, Water & Wastewater Ser 1999 A (FGIC Insd)     5.50     11/01/22     3,111,510  
2,000
  Georgia Road & Tollway Authority, Ser 2004     5.00     10/01/22     2,090,260  
3,000
  Georgia Road & Tollway Authority, Ser 2004     5.00     10/01/23     3,126,960  
 
                       
 
                    8,328,730  
 
                       
 
                        
 
  Idaho (0.9%)                    
1,240
  Idaho Housing & Finance Association, Federal Highway Trust, Ser 2008 A (AGC
Insd) 		    5.25     07/15/24     1,337,042  
 
                       

 

 

                         
PRINCIPAL                
AMOUNT IN       COUPON   MATURITY    
THOUSANDS       RATE   DATE   VALUE
 
  Illinois (4.4%)                    
2,500
  Chicago Park District, Illinois, 2004 Ser A (AMBAC Insd)     5.00     01/01/28     2,535,200  
4,000
  Chicago, Illinois, O’Hare Int’l Airport 3rd Lien Ser 2005 A (MBIA Insd)     5.25     01/01/26     4,036,080  
 
                       
 
                    6,571,280  
 
                       
 
                        
 
  Indiana (1.9%)                    
3,000
 
Indiana Health & Educational Facility Financing Authority, Clarian Health
Ser 2006 A
     5.25     02/15/40     2,811,810  
 
                       
 
                        
 
  Iowa (1.6%)                    
3,000
  Tobacco Settlement Authority, Iowa, Ser 2005 C     5.50     06/01/42     2,348,610  
 
                       
 
                        
 
  Kansas (0.9%)                    
1,500
  Lawrence Memorial Hospital, Kansas Ser 2006     5.125     07/01/36     1,396,005  
 
                       
 
                        
 
  Kentucky (2.3%)                    
3,215
 
Louisville & Jefferson County Metropolitan Sewer District, Kentucky,
Ser 2001 A (MBIA Insd)
     5.375     05/15/22     3,385,041  
 
                       
 
                        
 
  Louisiana (3.5%)                    
3,000
 
Louisiana Public Facilities Authority, Baton Rouge General Medical Center-FHA
Insured Mtge Ser 2004 (MBIA Insd)
     5.25     07/01/33     3,005,760  
2,000
  Louisiana Public Facilities Authority, Ochsner Clinic Ser 2002 (c)     5.50     05/15/32 (b)     2,259,280  
 
                       
 
                    5,265,040  
 
                       
 
                        
 
  Maryland (3.3%)                    
1,000
  Baltimore County, Maryland, Oak Crest Village Ser 2007 A     5.00     01/01/37     903,390  
2,430
 
Maryland Department of Housing and Community Development Administration, Ser 2006 P (AMT)
     4.625     09/01/31     2,029,293  
1,000
 
Maryland Health & Higher Education Facilities Authority, Johns Hopkins
Hospital Ser 2003
     5.00     11/15/28 (b)     1,089,480  
1,000
 
Maryland Health & Higher Educational Facilities Authority, King Farm
Presbyterian Community 2006 Ser B
     5.00     01/01/17     942,250  
 
                       
 
                    4,964,413  
 
                       
 
                        
 
  Michigan (4.7%)                    
3,500
  Kent Hospital Finance Authority, Michigan, Metropolitan Hospital Ser 2005 A     6.25     07/01/40     3,414,705  
3,000
  Michigan Hospital Finance Authority, Henry Ford Health Refg Ser 2006 A     5.25     11/15/46     2,754,960  
870
  Wayne State University, Michigan, Board of Governors Refg Ser 2008 (FSA Insd)     5.00     11/15/25     905,966  
 
                       
 
                    7,075,631  
 
                       
 
                        
 
  Minnesota (0.9%)                    
1,100
  Glencoe, Minnesota, Glencoe Regional Health Ser 2005     5.00     04/01/31     967,054  
320
  Minnesota Housing Finance Agency, Rental 1995 Ser D (MBIA Insd)     6.00     02/01/22     324,192  
 
                       
 
                    1,291,246  
 
                       
 
                        
 
  Missouri (2.2%)                    
1,760
  Fenton, Missouri, Gravois Bluffs Refg Ser 2006     4.50     04/01/21     1,760,968  
1,340
 
Missouri Health & Educational Facilities Authority, Missouri, Baptist Medical
Center Refg Ser 1989 (ETM)
     7.625     07/01/18     1,575,572  
 
                       
 
                    3,336,540  
 
                       
 
                        
 
  Nevada (3.9%)                    
3,000
  Las Vegas Water District, Nevada, Impr and Refg Ser 2003 A (FGIC Insd)     5.25     06/01/22     3,147,600  
1,600
  State of Nevada, Capital Improvement and Cultural Affairs Ser 2008 C (FSA Insd) (a)     5.00     06/01/26     1,662,504  
1,000
  Reno, Nevada, Renown Regional Medical Center Ser 2007 A     5.25     06/01/37     928,660  
 
                       
 
                    5,738,764  
 
                       
 
                        
 
  New Jersey (7.8%)                    
2,000
  New Jersey Economic Development Authority, Cigarette Tax Ser 2004     5.75     06/15/29     1,904,380  
5,000
  New Jersey Turnpike Authority, Ser 2003 A (AMBAC Insd)     5.00     01/01/30     5,006,050  
2,000
  Passaic Valley Sewerage Commissioners, New Jersey, Ser F (FGIC Insd)     5.00     12/01/19     2,034,400  
3,000
  Tobacco Settlement Financing Corporation, New Jersey, Ser 2007-1 A     4.625     06/01/26     2,485,200  
3,000
  Tobacco Settlement Financing Corporation, New Jersey, Ser 2007-1 B     0.00     06/01/41     227,580  
 
                       
 
                    11,657,610  
 
                       
 
                        
 
  New York (23.0%)                    
3,000
  Long Island Power Authority, New York, Ser 2004 A (AMBAC Insd)     6.375     12/01/37     2,969,820  
3,000
 
Metropolitan Transportation Authority, New York, State Service Contract Refg Ser 2002 B (MBIA)
     5.50     07/01/20     3,188,670  
2,000
  Nassau County Tobacco Settlement Corporation, New York, Ser 2006 A-3     5.125     06/01/46     1,734,140  
1,440
  New York City General Obligation, The Depository Trust Co., Fiscal 2009 Ser A (a)     5.25     08/15/27     1,495,415  
1,440
  New York City General Obligation, The Depository Trust Co., Fiscal 2009 Ser A (a)     5.25     08/15/27     1,495,415  
2,000
 
New York City Industrial Development Agency, New York, 7 World Trade
Center, LLC Ser A
     6.25     03/01/15     2,022,180  
4,000
 
New York City Industrial Development Agency, New York, American Airlines Inc Ser 2005 (AMT)
     7.75     08/01/31     3,586,800  
8,000
 
New York City Industrial Development Agency, New York, Brooklyn Navy Yard
Cogeneration Partners LP Ser 1997 (AMT)
     5.65     10/01/28     7,715,840  
2,000
 
New York City Industrial Development Agency, New York, Yankee Stadium
Ser 2006 (FGIC Insd)
     5.00     03/01/46     1,921,240  
2,860
 
New York City Trust for Cultural Resources, Museum of Modern Art Refg Ser 2008 1A (a)
     5.00     04/01/28     2,972,255  
1,995
 
New York State Dormitory Authority, Montefiore Hospital — FHA Insured Mtge Ser 2004 (FGIC Insd)
     5.00     08/01/29     1,939,439  
3,000
  Triborough Bridge & Tunnel Authority, New York, Refg Ser 2002 B     5.25     11/15/19     3,181,410  
 
                       
 
                    34,222,624  
 
                       
 
                        
 
  Ohio (4.4%)                    
2,400
  American Municipal Power - Ohio, Inc. Ser 2008 A (AGC Insd) (a)     5.25     02/15/33     2,435,700  
3,900
  Montgomery County, Ohio, Franciscan Medical Center - Dayton Ser 1997     5.50     07/01/18     4,046,718  
 
                       
 
 
 
                 6,482,418  
 
 
 
                    

 

 

                         
PRINCIPAL                
AMOUNT IN       COUPON   MATURITY    
THOUSANDS       RATE   DATE   VALUE
 
  Pennsylvania (11.6%)                    
2,000
 
Allegheny County Hospital Development Authority, West Penn Allegheny Health
Ser 2007 A (a)
     5.375     11/15/40     1,405,191  
5,000
 
Lehigh County General Purpose Authority, Pennsylvania, St Luke’s of Bethlehem Hospital Ser A 2003
     5.375     08/15/33     5,559,400  
2,000
  Pennsylvania Turnpike Commission, Ser R 2001 (AMBAC Insd)     5.00     12/01/30     2,002,600  
2,000
  Pennsylvania, First Ser 2003 (MBIA Insd) (a)     7.85     01/01/19     2,181,510  
1,000
  Philadelphia, Pennsylvania, Gas Works Eighteenth Ser (AGC Insd)     5.25     08/01/20     1,049,380  
5,000
  Swarthmore Boro Authority, Pennsylvania, Swarthmore College Ser 2001     5.00     09/15/31     5,034,950  
 
                       
 
                    17,233,031  
 
                       
 
                        
 
  Rhode Island (1.9%)                    
3,000
  Rhode Island Economic Development Corporation, Airport 2005 Ser C (MBIA Insd)     5.00     07/01/28     2,868,840  
 
                       
 
                        
 
  South Carolina (3.6%)                    
5,000
  Charleston County School District, South Carolina, Ser 2004 A     5.00     02/01/22     5,195,700  
35
 
Lexington County, South Carolina, Health Services District, Lexmed Inc,
Ser 2007 A
     5.00     11/01/16     36,015  
165
 
Richland County Enviromental Improvement Revenue, South Carolina, International
Paper Company Ser 2007 A
     4.60     09/01/12     160,793  
 
                       
 
                    5,392,508  
 
                       
 
                        
 
  Tennessee (4.5%)                    
3,000
 
Johnson City Health & Educational Facilities Board, Tennessee, Mountain States
Health Alliance Ser 2006 A
     5.00     09/01/37     2,752,560  
4,000
  Tennessee Energy Acquisition Corporation, Ser 2006 A     5.25     09/01/19     3,923,720  
 
                       
 
                    6,676,280  
 
                       
 
                        
 
  Texas (15.0%)                    
4,000
  Austin, Texas, Water & Wastewater Refg Ser 2001 A & B (FSA Insd) (a)     5.125     05/15/27     4,048,600  
555
 
Bexar County Health Facilities Development Corp, Army Retirement Residence,
Refg Ser 2007
     5.00     07/01/27     499,478  
735
 
Bexar County Health Facilities Development Corp, Army Retirement Residence,
Refg Ser 2007
     5.00     07/01/33     627,609  
580
 
Bexar County Health Facilities Development Corp, Army Retirement Residence,
Refg Ser 2007
     5.00     07/01/37     490,402  
1,125
  Houston Independent School District, Harris County, Texas Ser 2008     5.00     02/15/26     1,160,123  
8,700
  Houston, Texas, Combined Utility First Lien Refg 2004 Ser A (FGIC Insd)     5.25     05/15/23     8,888,529  
775
  Humble Independent School District, Harris County, Texas, Ser 2008 A     5.00     02/15/26     799,087  
1,000
 
Lubbock Health Facilities Development Corporation, Texas, Carillon Senior Life Care
Ser 2005 A
     6.625     07/01/36     960,330  
4,100
  North Texas Tollway Authority Refg First Tier Ser 2008 D (AGC Insd)     0.00     01/01/28     1,367,268  
1,000
 
Tarrant County Cultural Educational Facilities Finance Corp, Air Force Village II Inc
Ser 2007
     5.125     05/15/37     885,760  
256
  Taxas Municipal Gas Acquisition and Supply Corp. Ser 2008 D     6.25     12/15/26     244,645  
2,400
  University of Houston System, Board of Regents Rfg Ser 2008 (FSA Insd) (a)     5.00     02/15/33     2,429,922  
 
                       
 
                    22,401,753  
 
                       
 
                        
 
  Virginia (0.6%)                    
1,000
  Fairfax County Economic Development Authority, Virginia, Goodwin House Inc. Ser 2007     5.125     10/01/42     870,960  
 
                       
 
                        
 
  Washington (6.0%)                    
2,400
  Goat Hill Properties, Washington, Governmental Office Ser 2005 (MBIA Insd)     5.00     12/01/33     2,389,584  
1,930
 
Grant County Public Utility District #2, Washington, Wanapum Hydroelectric 2005 Ser A (FGIC Insd)
     5.00     01/01/34     1,883,815  
4,010
  Port of Seattle, Passenger Facility Ser 1998 A (MBIA Insd)     5.00     12/01/23     4,032,617  
2,120
  Washington State, Motor Vehicle Fuel Tax, Ser 2004 F (AMBAC Insd)     0.00     12/01/29     700,257  
 
                       
 
                    9,006,273  
 
                       
 
                        
 
  Total Tax-Exempt Municipal Bonds                    
 
  (Cost $267,433,596)                 260,950,736  
 
                       
                     
NUMBER OF                    
SHARES (000)                    
 
  Short-Term Investment (6.7%)                
 
  Investment Company (d)                
10,032
  Morgan Stanley Institutional Liquidity Tax-Exempt Portfolio –
Institutional Class
(Cost $10,032,385) 		            10,032,385  
 
                   
 
                    
 
  Total Investments                
 
  (Cost $277,465,981)             270,983,121  
 
                   
                         
PRINCIPAL                        
AMOUNT IN                        
THOUSANDS                        
 
  Floating Rate Note Obligations Related to Securities Held (-28.1%)                    
$(41,848)
 
Notes with interest rates ranging from 1.81% to 2.19% at August 31, 2008 and contractual maturities of collateral ranging from 10/01/22 to 06/01/47 (e)
(Cost $(41,848,000)).
                 (41,848,000 )
 
                       
 
                        
 
  Total Net Investments         153.8 %     229,135,121  
 
  (Cost $235,617,981) (f) (g)                    
 
  Other Assets in Excess of Liabilities         1.9       2,840,557  
 
                        
 
  Preferred Shares of Beneficial Interest         (55.7 )     (83,000,000 )
 
                       
 
                        
 
  Net Assets Applicable to Common Shareholders         100.0 %   $ 148,975,678  
 
                       
 
                        
 
Note:   The categories of investments are shown as a percentage of net assets applicable to common shareholders.
     
AMT
  Alternative Minimum Tax.

 

 

     
COPs
  Certificates of Participation.
 
ETM
  Escrowed to Maturity.
 
(a)  
  Underlying security related to inverse floater entered into by the Fund.
 
(b)  
  Prerefunded to call date shown.
 
(c)  
  A portion of this security has been physically segregated in connection with open futures contracts and open swap contracts in the amount of $1,081,902.
 
(d)  
   
  The Fund invests in Morgan Stanley Institutional Liquidity Tax-Exempt Portfolio -Institutional Class, an open-end management investment company managed by the Investment Adviser.         Investment Advisory fees paid by the Fund are reduced by an amount equal to the advisory and administrative service fees paid by Morgan Stanley Institutional Liquidity Tax-Exempt         Portfolio — Institutional Class with respect to assets invested by the Fund in Morgan Stanley Institutional Liquidity Tax-Exempt Portfolio — Institutional Class .
 
(e)  
  Floating rate note obligations related to securities held – The Fund enters into transactions in which it transfers to Dealer Trusts (“Dealer Trusts”), fixed rate bonds in exchange for cash and residual interests in the Dealer Trusts’ assets and cash flows, which are in the form of inverse floating rate investments. The Dealer Trusts fund the purchases of the fixed rate bonds by issuing floating rate notes to third parties and allowing the Fund to retain residual interest in the bonds. The Fund enters into shortfall agreements with the Dealer Trusts which commit the Fund to pay the Dealer Trusts, in certain circumstances, the difference between the liquidation value of the fixed rate bonds held by the Dealer Trusts and the  liquidation value of the floating rate notes held by third parties, as well as any shortfalls in interest cash flows. The residual interests held by the Fund (inverse floating rate investments) include the right of the Fund (1) to cause the holders of the floating rate notes to tender their notes at par at the next interest rate reset date, and (2) to transfer the municipal bond from the Dealer Trusts to the Fund, thereby collapsing the Dealer Trusts. The Fund accounts for the transfer of bonds to the Dealer Trusts as secured borrowings, with the securities transferred remaining in the Fund’s investment assets, and the related floating rate notes reflected as Fund liabilities. The notes issued by the Dealer Trusts have interest rates that reset weekly and the floating rate note holders have the option to tender their notes to the Dealer Trusts for redemption at par at each reset date. At August 31, 2008, Fund investments with a value of $55,764,638 are held by the Dealer Trusts and serve as collateral for the $41,848,000 in floating rate note obligations outstanding at that date.
 
(f)  
  Securities have been designated as collateral in an amount equal to $121,295,555 in connection with open futures and swap contracts.
 
(g)  
         
  The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes.
     
Bond Insurance:
           
AGC
   Assured Guaranty Corporation.
AMBAC
   AMBAC Assurance Corporation.
BHAC
   Berkshire Hathaway Assurance Corporation.
FGIC
   Financial Guaranty Insurance Company.
FSA
   Financial Security Assurance Inc.
MBIA
   Municipal Bond Investors Assurance Corporation.
XLCA
   XL Capital Assurance Inc.

 

 

Futures Contracts Open at August 31, 2008:
                         
                    UNREALIZED  
NUMBER OF       DESCRIPTION, DELIVERY   UNDERLYING FACE     APPRECIATION/  
CONTRACTS   LONG/SHORT   MONTH AND YEAR   AMOUNT AT VALUE     (DEPRECIATION)  
 
372
   Long   U.S. Treasury Notes 10 Year   $ 42,966,000     $ 70,883  
 
       December 2008                
 
                        
262
   Long   Swap Futures 5 Year     28,504,783       342,585  
 
       September 2008                
 
                        
142
   Long   U.S. Treasury Notes 10 Year     16,569,625       155,830  
 
       September 2008                
 
                        
63
   Short   U.S. Treasury Notes 2 Year     (13,373,719 )     (11,187 )
 
       December 2008                
 
                        
156
   Short   U.S. Treasury Notes 20 Year     (18,300,750 )     7,970  
 
       December 2008                
 
                        
233
   Short   U.S. Treasury Notes 5 Year     (26,081,438 )     (55,985 )
 
       December 2008                
 
                        
675
   Short   Swap Futures 10 Year     (75,578,906 )     (1,715,739 )
 
                      
 
       September 2008                
 
                        
 
       Net unrealized depreciation           $ (1,276,525 )
 
                      

 

 

Interest Rate Swap Contracts Open at August 31, 2008:
                             
                        UNREALIZED  
    NOTIONAL     PAYMENTS   PAYMENTS   TERMINATION   APPRECIATION  
COUNTERPARTY   AMOUNT (000)     RECEIVED BY FUND   MADE BY FUND   DATE   (DEPRECIATION)  
 
Bank of America N. A.
   $ 2,462     Fixed Rate 5.58   Floating Rate 0.00 @   February 28, 2018   $ 49,954  
 
Bank of America N. A.
     2,925     Fixed Rate 5.070   Floating Rate 0.00 @   April 14, 2018     3,013  
 
Bank of America N. A.
     2,710     Fixed Rate 4.982   Floating Rate 0.00 @   April 15, 2018     (5,854 )
 
Bank of America N. A.
     3,101     Floating Rate 0.00 @   Fixed Rate 5.99   February 28, 2023     (64,935 )
 
Bank of America N. A.
     3,740     Floating Rate 0.00 @   Fixed Rate 5.47   April 14, 2023     (22,851 )
 
Bank of America N. A.
     3,305     Floating Rate 0.00 @   Fixed Rate 5.38   April 15, 2023     (11,799 )
 
JPMorgan Chase Bank N. A.
     10,440     Fixed Rate 5.385%   Floating Rate 0.00% @   February 14, 2018     138,852  
 
JPMorgan Chase Bank N. A.
     13,300     Floating Rate 0.00 @   Fixed Rate 5.831   February 14, 2023     (219,184 )
 
Merrill Lynch & Co.
     3,615     Fixed Rate 5.00   Floating Rate 0.00 @   April 15, 2018     (5,495 )
 
Merrill Lynch & Co.
     4,635     Floating Rate 0.00 @   Fixed Rate 5.395   April 15, 2023     (18,494 )
 
                          
 
 
           Net unrealized depreciation           $ (156,793 )
 
                          
 
@   Floating rate represents USD-3 months LIBOR.

 

 

MS Municipal Premium Income Trust
Notes to the Portfolio of Investments
FAS 157
The Fund adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157,“Fair Value Measurements” (“FAS 157”), effective December 1, 2007. In accordance with FAS 157, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. FAS 157 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund’s investments. The inputs are summarized in the three broad levels listed below.
  •   Level 1 – quoted prices in active markets for identical investments
 
  •   Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
 
  •   Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of August 31, 2008 in valuing the Fund’s investments carried at value:
                                 
            Fair Value Measurements at August 31, 2008 Using  
            Quoted Prices In     Significant     Significant  
            Active Market for     Other Observable     Unobservable  
            Identical Assets     Inputs     Inputs  
    Total     (Level 1)     (Level 2)     (Level 3)  
Investments in Securities
   $ 229,135,121     $ 10,032,385     $ 219,102,736       —  
Other Financial Instruments*
     (1,433,318 )     (1,276,525 )     (156,793 )     —  
 
                        
Total
   $ 227,701,803     $ 8,755,860     $ 218,945,943       —  
 
                        
 
*   Other financial instruments include futures, forwards, options and swap contracts.
Valuation of Investments — (1) portfolio securities are valued by an outside independent pricing service approved by the Trustees. The pricing service uses both a computerized grid matrix of tax-exempt securities and and evaluations by its staff, in each case based on information concerning market transactions and quotations from dealers which reflect the mean between the last reported bid and asked price. 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. The Trustees believe that timely and reliable market quotations are generally not readily available for purposes of valuing tax-exempt securities and that the valuations supplied by the pricing service are more likely to approximate the fair value of such securities; (2) futures are valued at the latest sale price on the commodities exchange on which they trade unless it is determined that such price does not reflect their market value, in which case they will be valued at their fair value as determined in good faith under procedures established by and under the supervision of the Trustees; (3) investments in open-end mutual

 

 

funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value as of the close of each business day; (4) interest rate swaps are marked-to-market daily based upon quotations from market makers; 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.

 

 

Item 2. Controls and Procedures.
(a) The Fund’s principal executive officer and principal financial officer have concluded that the Fund’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-Q was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, based upon such officers’ evaluation of these controls and procedures as of a date within 90 days of the filing date of the report.
(b) There were no changes in the Fund’s internal control over financial reporting that occurred during the registrant’s fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.
Item 3. Exhibits.
(a) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto.

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SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Municipal Premium Income Trust
     
/s/ Randy Takian
 
Randy Takian
   
Principal Executive Officer
    
October 21, 2008
    
     Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
     
/s/ Randy Takian
 
Randy Takian
   
Principal Executive Officer
    
October 21, 2008
    
     
/s/ Francis Smith
 
Francis Smith
   
Principal Financial Officer
    
October 21, 2008
    

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