N-Q 1 y75736anvq.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: 212-296-6963
Date of fiscal year end: May 31, 2009
Date of reporting period: February 28, 2009
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 February 28, 2009 (unaudited)
                                 
PRINCIPAL                        
AMOUNT IN         COUPON     MATURITY        
THOUSANDS         RATE     DATE     VALUE  
 
       
Tax-Exempt Municipal Bonds (172.4%)
                        
       
Alabama (2.8%)
                        
  1,000    
Jefferson County, School Ser 2004 A
     5.50 %     01/01/22     $ 664,300  
  2,500    
University of Alabama, Ser 2004 A (MBIA Insd)
     5.25       07/01/20       2,701,075  
       
 
                      
       
 
                     3,365,375  
       
 
                      
       
Alaska (0.9%)
                        
  2,000    
Northern Tobacco Securitization Corporation, Asset Backed Ser 2006 A
     5.00       06/01/46       1,044,500  
       
 
                      
       
 
                        
       
Arizona (9.0%)
                        
  2,000    
Glendale Industrial Development Authority, John C Lincoln Health Ser 2005 B
     5.00       12/01/37       1,386,060  
  1,335    
Pima County Industrial Development Authority, Tucson Electric Power Co Refg Ser 1988 A (FSA Insd)
     7.25       07/15/10       1,344,625  
  2,226    
Salt River Project Agricultural Improvement & Power District, Arizona, 2002 Ser B (b)
     5.00       01/01/22       8,119,781  
       
 
                      
       
 
                     10,850,466  
       
 
                      
       
Arkansas (0.6%)
                        
  1,000    
Washington County, Washington Regional Medical Center Ser 2005 A
     5.00       02/01/35       729,870  
       
 
                      
       
 
                        
       
California (29.2%)
                        
  2,000    
California Educational Facilities Authority, Mills College Ser 2005 A
     5.00       09/01/34       1,693,300  
  2,000    
California Infrastructure & Economic Development Bank, The Scripps Research Institute Ser 2005 A
     5.00       07/01/29       1,972,240  
  2,500    
California Economic Recovery Ser 2004 A (b)
     5.00       07/01/16       2,562,900  
  1,000    
California Statewide Community Development Authority, Huntington Memorial Hospital Ser 2005
     5.00       07/01/27       871,000  
  1,400    
California, Various Purpose dtd 11/01/06
     4.50       10/01/36       1,159,270  
  3,000    
California, Various Purpose dtd 12/01/05
     5.00       03/01/27       2,899,740  
  2,000    
Camarillo Public Finance Authority, Wastewater Ser 2005 (AMBAC Insd)
     5.00       06/01/36       1,900,020  
  3,875    
Golden State Tobacco Securitization Corp, Enhanced Asset Backed Ser 2007 A-1
     5.75       06/01/47       2,336,005  
  4,000    
Golden State Tobacco Securitization Corporation, Asset Backed Ser 2007 A-1
     5.13       06/01/47       2,156,240  
  2,000    
Golden State Tobacco Securitization Corporation, Enhanced Asset Backed Ser 2005 A
     5.00       06/01/45       1,504,500  
  1,000    
Kern County Board of Education, Refg 2006 Ser A (COPs) (MBIA Insd)
     5.00       06/01/31       894,860  
  3,000    
Los Angeles Department of Water and Power, California, 2004 Ser C (MBIA Insd) (b)
     5.00       07/01/23       3,065,005  
  3,000    
Oxnard Financing Authority, Wastewater 2004 Ser A (FGIC Insd)
     5.00       06/01/29       2,917,830  
  1,000    
Port Oakland Intermediate Lien Refunding Revenue Bond Ser L
     5.00       11/01/21       875,750  
  460    
San Francisco City & County, California, Laguna Honda Hospital Refg Ser R-3 (AGC Insd) (b)
     5.00       06/15/28       458,914  
  3,000    
San Diego County, Burnham Institue for Medical Research Ser 2006 (COPs)
     5.00       05/01/29       2,980,965  
  5,000    
Vernon Natural Gas Financing Authority Ser 2006C
     7.50       08/01/21       5,000,000  
       
 
                      
       
 
                     35,248,539  
       
 
                      
       
Colorado (5.9%)
                        
  1,400    
Colorado Health Facilities Authority, Adventist/Sunbelt Ser 2006 D
     5.25       11/15/35       1,179,374  

 

 

                                 
PRINCIPAL                        
AMOUNT IN         COUPON     MATURITY        
THOUSANDS         RATE     DATE     VALUE  
 
  30    
Colorado Housing & Finance Authority, Ser 1997 A-2 (AMT)
     7.25       05/01/27       30,530  
  2,000    
Denver Convention Center Hotel Authority, Refg Ser 2006 (XLCA Insd)
     5.00       12/01/30       1,371,080  
  2,040    
Fort Collins, Ser 2004 A COPs (AMBAC Insd)
     5.38       06/01/21       2,133,820  
  2,155    
Fort Collins, Ser 2004 A COPs (AMBAC Insd)
     5.38       06/01/22       2,238,721  
  125    
Public Authority for Colorado Energy Natural Gas, Ser 2008
     6.25       11/15/28       103,194  
       
 
                      
       
 
                     7,056,719  
       
 
                      
       
District of Columbia (3.2%)
                        
  15,002    
District of Columbia Ser 2008E (BHAC Insd) (b)
     5.00       06/01/26       1,540,218  
  3,000    
District of Columbia Ballpark, Ser 2006 B-1 (FGIC Insd)
     5.00       02/01/31       2,360,400  
       
 
                      
       
 
                     3,900,618  
       
 
                      
       
Florida (16.3%)
                        
  2,000    
Broward County Educational Facilities Authority, Nova Southeastern University Ser 2006 (AGC Insd)
     5.00       04/01/31       1,942,600  
  2,460    
JEA, Florida, Water & Sewer Sub-Second Crossover Ser (MBIA Insd)
     5.00       10/01/24       2,475,990  
  2,500    
Miami-Dade County, Florida, Miami Int’l Airport, Ser 2000 B (FGIC Insd)
     5.75       10/01/24       2,605,300  
  5,000    
Orlando Utilities Commission, Water & Electric Ser 2001
     5.00       10/01/22       5,213,800  
  8,000    
South Miami Health Facilities Authority, Florida, Baptist Health South
                      
       
Florida Ser 2007 (b)
     5.00       08/15/42       6,855,919  
  1,000    
St Johns County Industrial Development Authority, Glenmoor Ser
2006 A
     5.25       01/01/26       604,560  
       
 
                      
       
 
                     19,698,169  
       
 
                      
       
Georgia (6.9%)
                        
  3,000    
Atlanta Water & Wastewater Ser 1999 A (FGIC Insd)
     5.50       11/01/22       3,134,370  
  2,000    
Georgia Road & Tollway Authority, Ser 2004
     5.00       10/01/22       2,099,640  
  3,000    
Georgia Road & Tollway Authority, Ser 2004
     5.00       10/01/23       3,124,290  
       
 
                      
       
 
                     8,358,300  
       
 
                      
       
Idaho (1.1%)
                        
  1,240    
Idaho Housing & Finance Association, Federal Highway Trust, Ser 2008 A (AGC Insd)
     5.25       07/15/24       1,324,084  
       
 
                      
       
 
                        
       
Illinois (5.4%)
                        
  2,500    
Chicago Park District, 2004 Ser A (AMBAC Insd)
     5.00       01/01/28       2,501,000  
  4,000    
Chicago, O’Hare Int’l Airport 3rd Lien Ser 2005 A (MBIA Insd)
     5.25       01/01/26       3,995,280  
       
 
                      
       
 
                     6,496,280  
       
 
                      
       
Indiana (1.9%)
                        
  3,000    
Indiana Health & Educational Facility Financing Authority, Clarian Health Ser 2006 A
     5.25       02/15/40       2,247,480  
       
 
                      
       
 
                        
       
Iowa (1.4%)
                        
  3,000    
Tobacco Settlement Authority, Ser 2005 C
     5.50       06/01/42       1,654,260  
       
 
                      
       
 
                        
       
Kansas (1.0%)
                        
  1,500    
Lawrence Memorial Hospital, Kansas Ser 2006
     5.13       07/01/36       1,164,540  
       
 
                      
       
 
                        
       
Kentucky (2.8%)
                        
  3,215    
Louisville & Jefferson County Metropolitan Sewer District, Ser 2001 A (MBIA Insd)
     5.38       05/15/22       3,358,100  
       
 
                      
       
 
                        
       
Louisiana (5.8%)
                        
  3,000    
Louisiana Public Facilities Authority, Baton Rouge General Medical Center-FHA Insured Mtge Ser 2004 (MBIA Insd)
     5.25       07/01/33       2,596,830  
  2,000    
Louisiana Public Facilities Authority, Ochsner Clinic Ser 2002 (c)
     5.50       05/15/32 (a)     2,226,240  
  750    
Louisiana Offshore Terminal Authority Ser 2007B-2
     4.30       10/01/37       750,248  
  2,000    
Parish of St.John the Baptist, Ser 2007A
     5.13       06/01/37       1,475,860  
       
 
                      
       
 
                     7,049,178  
       
 
                      
       
Maryland (2.9%)
                        
  1,000    
Baltimore County, Oak Crest Village Ser 2007 A
     5.00       01/01/37       710,810  
  2,430    
Maryland Department of Housing and Community Development
                        

 

 

                                 
PRINCIPAL                        
AMOUNT IN         COUPON     MATURITY        
THOUSANDS         RATE     DATE     VALUE  
 
       
Administration, Ser 2006 P(AMT)
     4.63       09/01/31       2,041,371  
  1,000    
Maryland Health & Higher Educational Facilities Authority, King Farm Presbyterian Community 2006 Ser B
     5.00       01/01/17       764,370  
       
 
                      
       
 
                     3,516,551  
       
 
                      
       
Michigan (2.6%)
                        
  1,740    
Kent Hospital Finance Authority, Metropolitan Hospital Ser 2005 A
     6.25       07/01/40       1,231,624  
  1,350    
Michigan Hospital Finance Authority, Henry Ford Health Refg Ser 2006 A
     5.25       11/15/46       1,000,661  
  870    
Wayne State University, Univ Revs
     5.00       11/15/25       897,031  
       
 
                      
       
 
                     3,129,316  
       
 
                      
       
Minnesota (0.9%)
                        
  1,100    
Glencoe, Glencoe Regional Health Ser 2005
     5.00       04/01/31       790,053  
  320    
Minnesota Housing Finance Agency, Rental 1995 Ser D (MBIA Insd)
     6.00       02/01/22       320,227  
       
 
                      
       
 
                     1,110,280  
       
 
                      
       
Missouri (2.6%)
                        
  1,695    
Fenton, Gravois Bluffs Refg Ser 2006
     4.50       04/01/21       1,568,977  
  1,340    
Missouri Health & Educational Facilities Authority, Baptist Medical Center Refg Ser 1989 (ETM)
     7.63       07/01/18       1,563,928  
       
 
                      
       
 
                     3,132,905  
       
 
                      
       
Nevada (4.5%)
                        
  1,600    
Nevada Capital Improvement and Cultural Affairs Ser 2008 C (b)
     5.00       06/01/26       1,623,207  
  3,000    
Las Vegas Water District, Impr and Refg Ser 2003 A (FGIC Insd)
     5.25       06/01/22       3,064,230  
  1,000    
Reno, Renown Regional Medical Center Ser 2007 A
     5.25       06/01/37       747,080  
       
 
                      
       
 
                     5,434,517  
       
 
                      
       
New Hampshire (0.2%)
                        
  295    
Pollution Control Refunding Revenue Bonds
     7.13       07/01/27       296,248  
       
 
                      
       
 
                        
       
New Jersey (5.7%)
                        
  2,000    
New Jersey Economic Development Authority, Cigarette Tax Ser 2004
     5.75       06/15/29       1,506,320  
  1,500    
New Jersey Turnpike Authority, Ser 2003 A (AMBAC Insd)
     5.00       01/01/30       1,480,785  
  2,000    
Passaic Valley Sewerage Commissioners, Ser F (FGIC Insd)
     5.00       12/01/19       1,913,780  
  3,000    
Tobacco Settlement Financing Corporation, Ser 2007-1A
     4.63       06/01/26       1,925,370  
  3,000    
Tobacco Settlement Financing Corporation, Ser 2007-1B
     0.00       06/01/41       102,330  
       
 
                      
       
 
                     6,928,585  
       
 
                      
       
New York (21.4%)
                        
  2,850    
New York City Trust for Cultural Resources, Museum of Modern Art Refg Ser 2008 1A (a)b
     5.00       04/01/26       2,905,440  
  2,880    
New York City, New York, Ser A1 (b)
     5.25       08/15/27       2,867,846  
  3,000    
Long Island Power Authority, Ser 2004 A (AMBAC Insd)
     5.00       09/01/34       2,870,850  
  3,000    
Metropolitan Transportation Authority, State Service Contract Refg Ser 2002 B (MBIA Insd)
     5.50       07/01/20       3,107,550  
  2,000    
Nassau County Tobacco Settlement Corporation, Ser 2006 A-3
     5.13       06/01/46       1,233,960  
  2,000    
New York City Industrial Development Agency, 7 World Trade Center, LLC Ser A
     6.25       03/01/15       1,705,360  
  4,000    
New York City Industrial Development Agency, American Airlines Inc Ser 2005 (AMT)
     7.75       08/01/31       2,970,040  
  2,000    
New York City Industrial Development Agency, New York, Yankee Stadium Ser 2006 (FGIC Insd)
     5.00       03/01/46       1,497,960  
  1,995    
New York State Dormitory Authority, Montefiore Hospital -
                        
       
FHA Insured Mtge Ser 2004 (FGIC Insd)
     5.00       08/01/29       1,896,906  
  1,500    
The City of New York, Tax-Exempt Bonds, Subseries H-1
     5.00       03/01/16       1,587,840  
  3,000    
Triborough Bridge & Tunnel Authority, Refg Ser 2002 B
     5.25       11/15/19       3,213,749  
       
 
                      
       
 
                     25,857,501  
       
 
                      
       
Ohio (2.0%)
                        
  2,400    
American Municipal Power, Ohio, Prairie State Energy Campus (AGC Insd) (b)
     5.25       02/15/33       2,413,693  
       
 
                      
       
 
                        
       
Pennsylvania (1.8%)
                        
  2,000    
Allegheny County Redevelopment Authority, Pennsylvania, West Penn Allegheny Health Ser 2007 A (b)
     5.38       11/15/40       1,084,000  

 

 

                                 
PRINCIPAL                        
AMOUNT IN         COUPON     MATURITY        
THOUSANDS         RATE     DATE     VALUE  
 
  1,000    
Philadelphia, Gas Works Eighteenth Ser (AGC Insd)
     5.25       08/01/20       1,054,780  
       
 
                      
       
 
                     2,138,780  
       
 
                      
       
Rhode Island (2.4%)
                        
  3,000    
Rhode Island Economic Development Corporation, Airport 2005 Ser C (MBIA Insd)
     5.00       07/01/28       2,888,190  
       
 
                      
       
 
                        
       
South Carolina (2.8%)
                        
  5,000    
Charleston County School District, Ser 2004 A
     5.00       02/01/22       3,157,560  
  35    
Lexington County, Health Services District, Lexmed Inc, Ser 2007 A
     5.00       11/01/16       36,066  
  165    
Richland County Enviromental Improvement Revenue, International Paper Company Ser 2007 A
     4.60       09/01/12       149,074  
       
 
                      
       
 
                     3,342,700  
       
 
                      
       
Tennessee (4.3%)
                        
  3,000    
Johnson City Health & Educational Facilities Board, Mountain States Health Alliance Ser 2006 A
     5.50       07/01/36       2,132,730  
  4,000    
Tennessee Energy Acquisition Corporation, Ser 2006 A
     5.25       09/01/19       3,010,720  
       
 
                      
       
 
                     5,143,450  
       
 
                      
       
Texas (14.7%)
                        
  5,000    
Austin, Water & Wastewater Refg Ser 2001 A & B (FSA Insd) (b)
     5.125       05/15/27       5,030,070  
  555    
Bexar County Health Facilities Development Corp,
Health Facilities Development Corp.
     5.00       07/01/27       368,581  
  735    
Bexar County, Health Facilities Development Corp.
     5.00       07/01/33       451,753  
  580    
Bexar County, Helath Facilities Development Corp.
     5.00       07/01/37       344,769  
  2400    
Board of Regents of the University of Houston System Ser 2008 (FSA Insd) (b)
     5.00       02/15/33       2,389,232  
  6,135    
Houston, Combined Utility First Lien Refg 2004 Ser A (FGIC Insd)
     5.25       05/15/23       6,218,252  
  1,000    
Lubbock Health Facilities Development Corporation, Carillon Senior Life Care Ser 2005 A
     6.63       07/01/36       693,960  
  4,100    
North Texas Tollway Authority, First Tier Capital Appreciation Refg 2008 D (AGC Insd)
     0.00       01/01/28       1,328,605  
  1,000    
Tarrant County Cultural Educational Facilities Finance Corp, Air Force Village II Inc Ser 2007
     5.13       05/15/37       657,061  
  250    
Texas Mun Gas Acquisition & Supply
     6.25       12/15/26       206,758  
       
 
                      
       
 
                     17,689,041  
       
 
                      
       
Virginia (0.5%)
                        
  1,000    
Fairfax County Economic Development Authority, Goodwin House Inc Ser 2007
     5.13       10/01/42       643,450  
       
 
                      
       
 
                        
       
Washington (8.9%)
                        
  2,400    
Goat Hill Properties, Governmental Office Ser 2005 (MBIA Insd)
     5.00       12/01/33       2,353,056  
  1,930    
Grant County Public Utility District #2, Wanapum Hydroelectric 2005 Ser A (FGIC Insd)
     5.00       01/01/34       1,837,611  
  4,010    
Port Seattle Washington Passenger Facilities
     5.00       12/01/23       3,847,916  
  2,000    
Washington ST Health Care Facs
     7.38       03/01/38       2,062,740  
  2,120    
Washington, Motor Vehicle Fuel Tax, Ser 2004 F (AMBAC Insd)
     0.00       12/01/29       677,064  
       
 
                      
       
 
                     10,778,387  
       
 
                      
       
 
                        
       
Total Tax-Exempt Municipal Bonds
                     207,990,072  
       
 
                      
       
(Cost $223,671,415)
                        
                 
NUMBER OF            
SHARES (000)   Short-Term Investment (f) (9.2%)        
       
Investment Company
        
  11,487    
Morgan Stanley Institutional Liquidity Funds — Tax-Exempt Portfolio — Institutional Class
(Cost $11,078,329)
     11,078,329  
       
 
        
       
 
        
       
Total Investments (Cost $234,749,744)
     219,068,401  
       
 
        

 

 

                         
PRINCIPAL                      
AMOUNT IN                      
THOUSANDS     Floating Rate Note and Dealer Trust Obligations Related to Securities Held (-18.6%)                
  (22,449 )  
Notes with interest rates ranging from 0.57% to 1.06% at February 28, 2009 and contractual maturities of collateral ranging from 01/01/22 to 02/15/33 (g)
(Cost $(22,449,000))
           $ (22,449,000 )
       
 
              
       
 
                
       
Total Net Investments (Cost $212,300,744) (e)(h)
     163.0 %     196,619,401  
       
Other Assets in Excess of Liabilities
     0.4       514,553  
       
Preferred Shares of Beneficial Interest
     (63.4 )     (76,500,000 )
       
 
              
       
Net Assets Applicable to Common Shareholders
   $ 100.00 %   $ 120,633,954  
       
 
            
 
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)
  Prerefunded to call date shown.
(b)
  Underlying security related to inverse floater entered into by the Fund.
(c)
  A portion of this security has been physically segregated in connection with open futures contracts.
(d)
  Floating rate note obligation related to securities held. The interest rates shown reflect the rates in effect at February 28, 2009.
(e)
  Securities have been designated as collateral in connection with open futures contracts.
(f)
  The Fund invests in Morgan Stanley Institutional Liquidity Funds — 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 Funds — Tax-Exempt Portfolio — Institutional Class with respect to assets invested by the Fund in Morgan Stanley Institutional Liquidity Funds — Tax-Exempt Portfolio — Institutional Class.
(g)
  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 February 28, 2009, Fund investments with a value of $33,394,371 are held by the Dealer Trusts and serve as collateral for the $22,449,000 in floating rate note obligations outstanding at that date.
(h)
  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 February 28, 2009:
                         
                    UNREALIZED  
NUMBER OF       DESCRIPTION, DELIVERY   UNDERLYING FACE     APPRECIATION/  
CONTRACTS   LONG/SHORT   MONTH AND YEAR   AMOUNT AT VALUE     (DEPRECIATION)  
 
49   Long  
U.S. Treasury Notes 5 Year
     5,712,711       (6,820 )
       
June 2009
                
       
 
                
109     Long  
U.S. Treasury Notes 10 Year
     13,265,641       (107,401 )
       
March 2009
                
       
 
                
3   Short  
U.S. Treasury Bond 2 Year
     (649,828 )     (273 )
       
June 2009
                
       
 
                
80   Short  
U.S. Treasury Notes 20 Year
     (9,867,500 )     201,953  
       
March 2009
                
       
 
                
191   Short  
Swap Futures 10 Year
     (23,337,813 )     740,771  
       
 
              
       
March 2009
                
       
 
                
       
Net Unrealized Appreciation
           $ 828,230  
       
 
              

 

 

MS Municipal Premium Income Trust
Notes to the Portfolio of Investments
FAS 157
28/02/2009
The Fund adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”), effective June 1, 2008. In accordance with SFAS 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. SFAS 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 and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
The following is a summary of the inputs used as of February 28, 2009 in valuing the Fund’s investments carried at value:
                                 
            Fair Value Measurements at February 28, 2009 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
   $ 196,619,401     $ 11,078,329     $ 185,541,072       —  
Other Financial Instruments*
     828,230       828,230       —       —  
 
                        
Total
   $ 197,447,631     $ 11,906,559     $ 185,541,072       —  
 
                        
 
*   Other financial instruments include futures 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
April 16, 2009
     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
April 16, 2009
/s/ Francis Smith
Francis Smith
Principal Financial Officer
April 16, 2009

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