-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, B1K1aRkVpR8SZQpXK6iXovAlY9+m4fRXFV/1UpuyC7kH5ze6pGkgbuf72Axw5Wmk e5iZUILsGPEKLF3uTmgTNw== 0000950123-95-000093.txt : 19950607 0000950123-95-000093.hdr.sgml : 19950607 ACCESSION NUMBER: 0000950123-95-000093 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19941130 FILED AS OF DATE: 19950124 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MUNICIPAL PREMIUM INCOME TRUST/MA 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: 1940 Act SEC FILE NUMBER: 811-05688 FILM NUMBER: 95502379 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123922550 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 MUNICIPAL PREMIUM INCOME TRUST 1 MUNICIPAL PREMIUM INCOME TRUST Two World Trade Center New York, New York 10048 DEAR SHAREHOLDER: - -------------------------------------------------------------------------------- Strong economic growth in the fourth quarter of 1993 and a shift in Federal Reserve Board monetary policy in February of 1994 led to the sharpest increase in interest rates in more than six years. At the beginning of the year, concerns regarding inflation developed as the economy approached full employment and commodity prices moved upward. In response, since early February, the central bank has raised the federal-funds rate -- the interest rate banks charge each other for overnight loans -- 250 basis points from 3.00 percent to 5.50 percent in six separate moves through November. Between May and November, the discount rate -- the interest rate the Federal Reserve charges member banks for loans -- increased 175 basis points to 4.75 percent. In February and March, yields, as measured by The Bond Buyer Revenue Bond Index,* jumped 89 basis points from 5.50 percent to 6.39 percent in response to the Federal Reserve Board's initial tightening and subsequent municipal bond selling pressure. Despite 15 to 20 basis point yield swings in April and May, a semblance of stability returned to the market between June and August. After Labor Day, however, continued economic growth, aggressive tax-loss selling, heavy mutual-fund redemptions and excessive dealer inventory led to further municipal market deterioration. Over the past 12-months, Revenue Bond Index yields rose from 5.71 percent to 7.18 percent. This total yield increase of 147 basis points was equivalent to a 17 percent price decline for a municipal bond with a 30-year maturity. The municipal market was also influenced by supply and demand conditions. New-issue underwriting totaled a record $290 billion in 1993. The pace of new-issue activity through November 1994, however, slowed 43 percent. The estimated issuance for 1994 is $160 billion. By way of comparison, bond maturities and calls for redemption are expected to reach $190 billion this year, resulting in a reduction in the amount of municipal debt outstanding. This scarcity would normally be expected to improve the relative performance of municipal bonds under a stable-to-improving market environment. PERFORMANCE Municipal Premium Income Trust's (NYSE: PIA) net asset value (NAV) declined from $10.24 to $9.50 per share during the six month period ended November 30, 1994. Based on this change and reinvestment of tax-free dividends totaling $0.36 per share, the Fund's total NAV return for the period was -3.66 percent. Concurrently, the Fund's market price on the New York Stock Exchange declined from $9.75 to $9.00 per share. Based on this market change and reinvestment of dividends, the Fund's total market return for the period was -4.15 percent. The common stock began the period trading at a 4.79 percent discount to NAV and closed at a 5.26 percent discount to NAV. - --------------- *The Bond Buyer Revenue Bond Index is an arithmetic average of the yields of 25 selected municipal revenue bonds with 30-year maturities. Credit ratings of these bonds range from Aa1 to Baa1 by Moody's and AA+ to A- by Standard & Poor's. 2 PORTFOLIO STRUCTURE As of November 30, 1994, the Fund had net assets in excess of $346 million. The portfolio's long-term investments were diversified among 13 specific municipal sectors and 73 credits. The four largest sectors were hospital, housing, industrial development/pollution control and electric revenue bonds, representing 66 percent of net assets. The average maturity and call protection of the Fund's long-term holdings was 19 and 7 years, respectively. Bonds subject to the alternative minimum tax (AMT) represented approximately 22 percent of net assets. The credit-quality ratings of the Fund's long-term portfolio as of November 30, 1994 are summarized below:
MOODY'S OR STANDARD & POOR'S RATING PERCENT -------------------------------------------------------------------------- ------- Aaa or AAA................................................................ 51.7% Aa or AA.................................................................. 18.0 A or A.................................................................... 8.1 Baa or BBB................................................................ 19.9 Not Rated................................................................. 2.3
THE IMPACT OF LEVERAGING The Fund's common shares are leveraged. Leverage was created through the issuance of Auction Rate Preferred Shares (ARPS). The ARPS's auction periods normally range between one week and one year. Proceeds from ARPS underwritings were used to purchase additional long-term municipal bonds. Following the payment of ARPS dividends, the common shares earn incremental income when the portfolio yield is higher than the cost of the ARPS (yield plus operating and remarketing expenses). Although rising short-term interest has narrowed the yield spread this year, the ARPS continue to provide positive incremental income to common shareholders. The leveraged capital structure of closed-end municipal bond funds additionally impacts net asset value (NAV). ARPS normally account for one-third of a fund's underwritten capital structure. This produces a volatility factor for common shares of approximately 1.5 times the price change of bonds held in the portfolio. The common stock's NAV per share reflects the full price change of the portfolio's investments since the value of the preferred shares does not fluctuate. As the bond market has eroded, the degree of leverage and volatility has increased. The purchase and retirement of ARPS counteracts this trend. During the period, PIA purchased and retired $25 million in par amount of ARPS so that $100 million in ARPS remain outstanding. Additional ARPS purchases may occur if the degree of leverage increases or ARPS profitability (spread) declines significantly. DIVIDEND RESERVES At the end of the period, PIA had undistributed net investment income of $0.087 per share available for future distributions. This dividend reserve or "cushion" helps sustain the Fund's current monthly dividend. Higher yields in future ARPS auctions and ARPS retirements may erode the cushion. Declines in the dividend reserve may cause the Fund to adjust the common share dividend. 3 LOOKING AHEAD The overall direction of interest rates will primarily be determined by the strength of the economy, the trend of inflation and the Federal Reserve Board's responses. These conditions may continue to move interest rates higher through mid-1995. Investor demand for municipal securities should be sustained by significant bond maturities, calls for redemption and diminished new-issue supply. Changing market conditions and the profitability of ARPS are among the factors that will determine the Fund's future level of income and influence the direction of the common stock market price. The Fund's procedure for reinvestment of all dividends and distributions on common shares is by purchase in the open market. This method helps to support the market value of the Fund's shares. In addition, the Trustees have approved a procedure whereby the Fund, when appropriate, purchases 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 this procedure to reduce or eliminate the amount of outstanding ARPS. During the first half of the 1995 fiscal year, the Fund purchased 223,000 shares of common stock at a weighted average discount of 9.15 percent. We appreciate your ongoing support of MUNICIPAL PREMIUM INCOME TRUST and look forward to continuing to serve your investment needs. Very truly yours, CHARLES A. FIUMEFREDDO Charles A. Fiumefreddo Chairman of the Board 4 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS November 30, 1994 (unaudited) - --------------------------------------------------------------------------------
Principal Amount (in Coupon Maturity thousands) Rate Date Value - ---------- ------ -------- ------------ MUNICIPAL BONDS (95.7%) GENERAL OBLIGATION (6.4%) $ 8,000 District of Columbia, Ser 1990 A (AMBAC Insured) (Prerefunded)........................................ 7.50 % 6/ 1/10 $ 8,753,680 3,965 Massachusetts, 1994 Ser C (FGIC Insured)............... 6.75 11/ 1/12 3,944,263 5,000 New York City, New York 1987 Ser A (Prerefunded)....... 8.75 11/ 1/14 5,542,050 3,675 Puerto Rico, Pub Impr Ser 1990 (Prerefunded)........... 7.70 7/ 1/20 4,073,958 - ---------- ------------ 20,640 22,313,951 - ---------- ------------ EDUCATIONAL FACILITIES REVENUE (1.7%) New York State Dormitory Authority, 4,000 Refg Ser 1993 A........................................ 5.50 5/15/08 3,432,280 1,350 State University Ser 1990 B (Prerefunded).............. 7.50 5/15/11 1,391,243 1,000 Pennsylvania Higher Educational Facilities Authority, Temple University First Ser (MBIA Insured)........... 6.50 4/ 1/21 946,990 - ---------- ------------ 6,350 5,770,513 - ---------- ------------ ELECTRIC REVENUE (13.4%) 5,000 Sacramento Municipal Utility District, California Refg 1994 Ser I (MBIA Insured).............................. 6.00 1/ 1/24 4,387,400 4,000 Kansas City, Kansas, Utility Refg & Impr Ser 1994 (FGIC Insured)............................................. 6.375 9/ 1/23 3,747,800 20,000 San Antonio, Texas, Electric & Gas Refg Ser 1994....... 4.56 2/ 1/06 16,343,200 Intermountain Power Agency, Utah, 1,270 Refg Ser 1988 B........................................ 7.50 7/ 1/21 1,306,170 6,300 Refg Ser 1987 D........................................ 8.625 7/ 1/21 6,798,204 12,550 Washington Public Power Supply System, Nuclear Proj #2 Refg Ser 1990 C (Prerefunded)........................ 7.625 7/ 1/10 13,798,474 - ---------- ------------ 49,120 46,381,248 - ---------- ------------ HOSPITAL REVENUE (24.1%) 3,500 Colbert County - Northwest Health Care Authority, Alabama, Helen Keller Hospital Refg Ser 1990......... 8.75 6/ 1/09 3,775,800 3,500 Houston County Health Care Authority, Alabama, Southeast Alabama Medical Center Ser 1989 (Prerefunded)........................................ 7.25 10/ 1/19 3,785,635 1,000 California Health Facilities Financing Authority, Alexian Brothers/San Jose Refg Ser 1990 (MBIA Insured)............................................. 7.125 1/ 1/16 1,007,910 1,000 Jacksonville Health Facilities Authority, Florida, Riverside Hospital Ser 1989.......................... 7.625 10/ 1/13 990,480 3,750 Evergreen Park, Illinois, Little Company of Mary Hospital Refg Ser 1988 (MBIA Insured)................ 7.25 2/15/11 3,810,075 1,800 Southwestern Illinois Development Authority, Anderson Hospital Ser 1992 A.................................. 7.00 8/15/22 1,582,308 4,000 Indiana Health Facility Financing Authority, Hancock Memorial Hospital Ser 1990........................... 8.30 8/15/20 4,101,840 3,420 Kentucky Development Finance Authority, Ashland Hospital King's Daughters Refg Ser 1987.............. 9.75 8/ 1/05 3,819,285 9,500 Boston, Massachusetts, Boston City Hospital - FHA Insured Mtge Refg Ser B........................................ 5.75 2/15/13 8,286,945 5,000 Massachusetts Health & Educational Facilities Authority, St John's Hospital 1990 Ser B (Prerefunded)........................................ 8.375 12/ 1/20 5,707,600
5 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS November 30, 1994 (unaudited) (continued) - --------------------------------------------------------------------------------
Principal Amount (in Coupon Maturity thousands) Rate Date Value - ---------- ------ -------- ------------ $ 4,000 Duluth Economic Development Authority, Minnesota, Benedictine Health/St Mary's Medical Center Ser 1990 (Prerefunded)........................................ 8.375% 2/15/20 $ 4,508,440 Minneapolis & St Paul Housing & Redevelopment Authority, Minnesota, Health One Obligation Group 12,500 Ser 1990 B (Prerefunded)............................... 8.00 8/15/14 13,979,500 2,405 Ser 1990 C (Prerefunded)............................... 8.00 8/15/19 2,689,656 Missouri Health & Educational Facilities Authority, Missouri Baptist Medical Center 4,000 Refg Ser 1989.......................................... 7.625 7/ 1/18 4,373,360 1,985 Ser 1989 (Prerefunded)................................. 8.00 1/ 1/19 2,201,722 2,985 Lehigh County General Purpose Authority, Pennsylvania, St Lukes Hospital Ser 1992 (AMBAC Insured)........... 6.25 7/ 1/22 2,696,112 3,420 Lycoming County Authority, Pennsylvania, Divine Providence Hospital of the Sisters of Christian Charity 1990 Ser B................................... 7.75 7/ 1/16 3,476,259 2,375 Montgomery County Higher Educational & Health Authority, Pennsylvania, Holy Redeemer Hospital 1990 Ser A (AMBAC Insured)................................ 7.625 2/ 1/20 2,444,279 2,750 Jefferson County Health Facilities Development Corporation, Texas, Baptist Health Care Ser 1989..... 8.30 10/ 1/14 2,834,480 4,500 Midland County Hospital District, Texas, Ser 1989 (Prerefunded)........................................ 8.375 6/ 1/02 4,932,270 2,400 Peninsula Ports Authority, Virginia, Mary Immaculate Hospital Ser 1989.................................... 8.375 8/ 1/04 2,532,624 - ---------- ------------ 79,790 83,536,580 - ---------- ------------ INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (14.0%) 14,500 Pima County Industrial Development Authority, Arizona, Tucson Electric Power Co Refg Ser 1988 A (FSA Surety).............................................. 7.25 7/15/10 14,694,155 10,000 Burlington, Kansas, Kansas Gas & Electric Co Refg Ser 1991 (MBIA Insured).................................. 7.00 6/ 1/31 9,986,700 2,000 Cleveland, Ohio, Continental Airlines Inc Ser 1990(AMT)............................................ 9.00 12/ 1/19 1,906,860 1,000 Ohio Water Development Authority, Toledo Edison Co Ser 1990 A (Secondary FSA Insured)....................... 7.75 5/15/19 1,050,330 9,500 Montgomery County Industrial Development Authority, Pennsylvania, Philadelphia Electric Co Refg 1991 Ser B (MBIA Insured)..................................... 6.70 12/ 1/21 9,122,945 13,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990 (AMT)................................................ 7.50 12/ 1/29 11,887,850 - ---------- ------------ 50,000 48,648,840 - ---------- ------------ MORTGAGE REVENUE - MULTI-FAMILY (2.0%) 1,250 Lake Charles Non-Profit Housing Development Corporation, Louisiana, Ser 1990 A (Capital Guaranty Insured)............................................. 7.875 2/15/25 1,257,950 Massachusetts Housing Finance Agency, 2,000 Rental 1994 Ser A (AMT) (AMBAC Insured)................ 6.60 7/ 1/14 1,870,880 4,000 Rental 1994 Ser A (AMT) (AMBAC Insured)................ 6.65 7/ 1/19 3,713,120 - ---------- ------------ 7,250 6,841,950 - ---------- ------------
6 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS November 30, 1994 (unaudited) (continued) - --------------------------------------------------------------------------------
Principal Amount (in Coupon Maturity thousands) Rate Date Value - ---------- ------ -------- ------------ MORTGAGE REVENUE - SINGLE FAMILY (12.3%) $ 585 Colorado Housing & Finance Authority, Ser 1990 B-2..... 8.00 % 2/ 1/18 $ 589,873 27,400 Pinnellas County Housing Finance Authority, Florida, Ser 1983............................................. 0.00 1/ 1/15 3,369,652 745 Idaho Housing Agency, 1988 Ser D-2 (AMT)............... 8.25 1/ 1/20 816,662 2,910 Illinois Housing Development Authority, 1988 Ser C (AMT)................................................ 8.10 2/ 1/22 3,009,231 1,550 Indiana Housing Finance Authority, Ser 1990 A-2 (AMT)................................................ 8.10 1/ 1/22 1,582,271 1,455 Kansas City Leavenworth & Lenexa, Kansas, GNMA-Backed Ser 1988 C (AMT)..................................... 8.00 11/ 1/20 1,529,671 Olathe, Kansas, GNMA Collateralized 220 Ser 1990 B............................................. 7.50 9/ 1/10 220,939 745 Ser 1989 A (AMT) (MBIA Insured)........................ 8.00 11/ 1/20 759,051 1,975 New Orleans Home Mortgage Authority, Louisiana, 1989 Ser B-1 (AMT)........................................ 8.25 12/ 1/21 2,026,725 Maine Housing Authority, 3,540 Purchase Ser 1988 D4 (AMT)............................. 7.55 11/15/19 3,520,105 1,000 Purchase Ser 1988 D5 (AMT)............................. 7.55 11/15/19 994,380 Massachusetts Housing Finance Agency, 1,660 Residential Ser 1989 A (AMT)........................... 8.20 8/ 1/15 1,702,363 5,270 1989 Ser 7 (AMT)....................................... 8.10 6/ 1/20 5,379,511 945 Mississippi Housing Finance Corporation, Purchase GNMA-Backed Ser 1989 (AMT)........................... 8.25 10/15/18 973,719 590 Muskogee County Home Finance Authority, Oklahoma, 1990 Ser A (FGIC Insured)................................. 7.60 12/ 1/10 595,003 Pennsylvania Housing Finance Agency, 1,975 1990 Ser 27 (AMT)...................................... 8.15 10/ 1/21 2,049,675 685 1990 Ser X (AMT)....................................... 8.15 4/ 1/24 703,221 Rhode Island Housing & Mortgage Finance Corporation, Home 730 1989 Ser 1-B (AMT)..................................... 8.40 10/ 1/21 736,614 2,560 1988 Ser 1-D (AMT)..................................... 7.875 10/ 1/22 2,573,594 990 1989 Ser 1-B (AMT)..................................... 8.40 10/ 1/22 1,002,375 South Carolina Housing Finance & Development Authority, Home 3,000 1988 Ser C-1 (AMT)..................................... 8.125 7/ 1/21 3,040,620 1,220 1991 Ser A (AMT)....................................... 7.40 7/ 1/23 1,157,670 2,870 El Paso Housing Finance Corporation, Texas, Ser 1989 (AMT)....................................... 8.20 3/ 1/21 2,882,628 Utah Housing Finance Agency, 605 Ser 1991 B-1........................................... 7.50 7/ 1/16 605,652 815 Ser 1989 B (AMT)....................................... 8.25 7/ 1/21 828,912 - ---------- ------------ 66,040 42,650,117 - ---------- ------------
7 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS November 30, 1994 (unaudited) (continued) - --------------------------------------------------------------------------------
Principal Amount (in Coupon Maturity thousands) Rate Date Value - ---------- ------ -------- ------------ NURSING & HEALTH RELATED FACILITIES REVENUE (1.2%) New York State Medical Care Facilities Finance Agency, Mental Health $ 1,625 Ser 1987............................................... 8.875% 8/15/07 $ 1,755,325 1,555 Ser 1990 (MBIA Insured)................................ 7.75 2/15/20 1,631,055 990 Ser 1991 A............................................. 7.50 2/15/21 989,832 - ---------- ------------ 4,170 4,376,212 - ---------- ------------ PUBLIC FACILITIES REVENUE (2.4%) 4,000 Metropolitan Pier & Exposition Authority, Illinois, Ser 1992 A (FGIC Insured)................................ 0.00 6/15/07 3,262,880 New York State Urban Development Corporation, 1,000 Ser 1991............................................... 7.60 4/ 1/03 1,077,160 1,300 Ser 1991............................................... 7.50 4/ 1/11 1,311,778 2,500 Houston, Texas, Hotel Occupancy Tax & Parking Facility Sr Lien Ser A 1991 (Secondary FGIC Insured).......... 7.00 7/ 1/09 2,540,525 - ---------- ------------ 8,800 8,192,343 - ---------- ------------ RESOURCE RECOVERY REVENUE (3.4%) Cambria County Industrial Development Authority, 11,500 Pennsylvania, Cambria Cogen Co Ser 1989 F-2 (AMT)...... 7.75 9/ 1/19 11,808,890 - ---------- ------------ TRANSPORTATION REVENUE (3.9%) 3,500 Atlanta, Georgia, Airport Ser 1994 B (AMT) (AMBAC Insured)............................................. 6.00 1/ 1/21 3,015,845 7,000 Chicago, Illinois, Chicago Midway Airport 1994 Ser A (AMT) (MBIA Insured)................................. 6.25 1/ 1/24 6,201,510 5,000 Regional Transportation Authority, Illinois, Ser 1994 A (AMBAC Insured)...................................... 6.25 6/ 1/24 4,460,900 - ---------- ------------ 15,500 13,678,255 - ---------- ------------ WATER & SEWER REVENUE (8.3%) 3,000 Central Coast Water Authority, California, Ser 1992 (AMBAC Insured)...................................... 6.60 10/ 1/22 2,871,090 2,500 Coachella, California, Ser 1992 COPs (FSA Insured)..... 6.10 3/ 1/22 2,230,300 3,500 Chicago, Illinois, Wastewater Ser 1994 (MBIA Insured)............................................. 6.375 1/ 1/24 3,173,415 11,000 Western Townships Utilities Authority, Michigan, Sewerage Disposal Ser 1989 (Crossover Refunded)...... 8.20 1/ 1/18 11,962,060 1,750 Bethlehem Authority, Pennsylvania, Ser 1992 (MBIA Insured) (Prerefunded)............................... 6.25 11/15/21 1,783,478 3,500 Texas Water Resource Finance Authority, Ser 1989 (AMBAC Insured)............................................. 7.50 8/15/13 3,578,400 2,900 Loudoun County Sanitation Authority, Virginia, Ser 1989 (AMBAC Insured) (Prerefunded)........................ 7.50 1/ 1/17 3,137,074 - ---------- ------------ 28,150 28,735,817 - ---------- ------------
8 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS November 30, 1994 (unaudited) (continued) - --------------------------------------------------------------------------------
Principal Amount (in Coupon Maturity thousands) Rate Date Value - ---------- ------ -------- ------------ OTHER REVENUE (2.6%) $ 2,500 Michigan Municipal Bond Authority, Local Govt Refg Ser 1991 A (FGIC Insured)................................ 4.75 % 12/ 1/09 $ 1,953,300 4,650 New York Local Government Assistance Corporation, Ser 1991 A (Prerefunded)................................. 7.25 4/ 1/18 5,070,035 2,000 Pennsylvania Industrial Development Authority, Econ Dev Ser 1991 A (Prerefunded)............................. 7.00 1/ 1/11 2,142,359 - ---------- ------------ 9,150 9,165,694 - ---------- ------------ 356,460 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $329,967,679).......................... 332,100,410 - ---------- ------------ SHORT-TERM MUNICIPAL OBLIGATION (0.6%) 2,000 Harris County Health Facilities Development - ---------- Corporation, Texas, Methodist Hospital Ser 1994 (Identified Cost $2,000,000) (Tender 12/1/94)........ 3.50* 12/ 1/25 2,000,000 ------------ $358,460 TOTAL INVESTMENTS (IDENTIFIED COST $331,967,679) (A)............. 96.3% 334,100,410 ========= CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES................... 3.7 12,762,702 ----- ------------ NET ASSETS....................................................... 100.0% $346,863,112 ----- ------------ ----- ------------
- --------------- * Variable or floating rate security. Coupon rate shown reflects current rate. AMT Alternative Minimum Tax. COPs Certificates of Participation. (a) The aggregate cost for federal income tax purposes is $331,967,679; the aggregate gross unrealized appreciation is $12,412,043 and the aggregate gross unrealized depreciation is $10,279,312, resulting in net unrealized appreciation of $2,132,731. See Notes to Financial Statements - -------------------------------------------------------------------------------- GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percent of Net Assets November 30, 1994 (unaudited) - -------------------------------------------------------------------------------- Alabama............ 2.2% Arizona............ 4.2 California......... 3.0 Colorado........... 0.2 District of Columbia......... 2.5 Florida............ 1.3 Georgia............ 0.9 Idaho.............. 0.2 Illinois........... 7.4% Indiana............ 1.6 Kansas............. 4.7 Kentucky........... 1.1 Louisiana.......... 0.9 Maine.............. 1.3 Massachusetts...... 8.8 Michigan........... 4.0 Minnesota.......... 6.1% Mississippi........ 0.3 Missouri........... 1.9 New York........... 6.4 Ohio............... 0.9 Oklahoma........... 0.2 Pennsylvania....... 10.7 Puerto Rico........ 1.2 Rhode Island....... 1.2% South Carolina..... 1.2 Texas.............. 13.5 Utah............... 2.8 Virginia........... 1.6 Washington......... 4.0 ---- Total.............. 96.3% ====
- -------------------------------------------------------------------------------- 9 MUNICIPAL PREMIUM INCOME TRUST FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES November 30, 1994 (unaudited) - ----------------------------------------- ASSETS: Investments in securities, at value (identified cost $331,967,679) (Note 1)..................................... $ 334,100,410 Cash..................................... 403,431 Receivable for: Interest............................... 8,302,897 Investments sold....................... 4,409,767 Prepaid expenses and other assets........ 30,655 ------------- TOTAL ASSETS..................... 347,247,160 ------------- LIABILITIES: Payable for: Investment advisory fee (Note 2)....... 130,968 Administration fee (Note 3)............ 81,855 Accrued expenses and other payables (Note 4)..................................... 171,225 ------------- TOTAL LIABILITIES................ 384,048 ------------- NET ASSETS: Preferred shares of beneficial interest (1,000,000 shares authorized of non- participating $.01 par value, 1,000 shares outstanding) (Note 5)........... 100,000,000 ------------- Common shares of beneficial interest (unlimited shares authorized of $.01 par value, 25,988,624 shares outstanding) (Note 6).................. 241,553,465 Net unrealized appreciation on investments............................ 2,132,731 Accumulated undistributed net investment income................................. 2,268,526 Accumulated undistributed net realized gain on investments.................... 908,390 ------------- NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS................... 246,863,112 ------------- TOTAL NET ASSETS................. $ 346,863,112 ============= NET ASSET VALUE PER COMMON SHARE, ($246,863,112 divided by 25,988,624 common shares outstanding)............. $9.50 ----- ----- STATEMENT OF OPERATIONS For the six months ended November 30, 1994 (unaudited) - ----------------------------------------- INVESTMENT INCOME: INTEREST INCOME......................... $ 12,806,093 ------------- EXPENSES Investment advisory fee (Note 2)....... 773,736 Administration fee (Note 3)............ 483,585 Auction commission fees................ 154,195 Professional fees...................... 56,367 Transfer agent fees and expenses (Note 4)................................... 52,841 Auction agent fees..................... 44,770 Shareholder reports and notices........ 16,190 Registration fees...................... 16,113 Trustees' fees and expenses (Note 4)... 14,848 Other.................................. 17,115 ------------- TOTAL EXPENSES....................... 1,629,760 ------------- NET INVESTMENT INCOME.............. 11,176,333 ------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (Note 1): Net realized loss on investments....... (1,583,190) Net change in unrealized appreciation on investments....................... (17,932,497) ------------- NET LOSS ON INVESTMENTS.............. (19,515,687) ------------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ (8,339,354) =============
See Notes to Financial Statements 10 MUNICIPAL PREMIUM INCOME TRUST FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
For the six months ended November 30, For the 1994 year ended (unaudited) May 31, 1994 ------------- ------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income..................................................... $ 11,176,333 $ 23,609,419 Net realized gain (loss) on investments................................... (1,583,190) 2,848,400 Net change in unrealized appreciation on investments...................... (17,932,497) (14,499,271) ------------- ------------- Net increase (decrease) in net assets resulting from operations......... (8,339,354) 11,958,548 ------------- ------------- Dividends to preferred shareholders from net investment income.............. (1,933,009) (3,158,208) Dividends to common shareholders from net investment income................. (9,421,574) (19,943,950) ------------- ------------- Total dividends......................................................... (11,354,583) (23,102,158) ------------- ------------- Decrease from transactions in shares of beneficial interest (Notes 5 & 6): Common.................................................................... (1,974,930) (302,929) Preferred................................................................. (25,000,000) -- ------------- ------------- Total transactions...................................................... (26,974,930) (302,929) ------------- ------------- Total decrease.......................................................... (46,668,867) (11,446,539) NET ASSETS: Beginning of period......................................................... 393,531,979 404,978,518 ------------- ------------- END OF PERIOD (including undistributed net investment income of $2,268,526 and $2,446,776, respectively)............................................. $ 346,863,112 $ 393,531,979 ============= =============
See Notes to Financial Statements 11 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS (unaudited) - -------------------------------------------------------------------------------- 1. ORGANIZATION AND ACCOUNTING POLICIES -- 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 was organized as a Massachusetts business trust on November 16, 1988 and commenced operations February 1, 1989. The following is a summary of significant accounting policies: A. Valuation of Investments -- Portfolio securities are valued for the Fund by an outside independent pricing service approved by the Trustees. The pricing service has informed the Fund that in valuing the Fund's portfolio securities each day, it uses both a computerized matrix of tax-exempt securities and evaluations by its staff, in each case based on available information concerning market transactions and quotations from dealers which reflect the bid side of the market. The Fund's 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 on the identified cost method. Discounts and premiums on securities are amortized over the life of the respective securities. Interest income is accrued daily. C. Federal Income Tax Status -- It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable and nontaxable income to its shareholders. Accordingly, no federal income tax provision is required. D. Dividends and Distributions to Shareholders -- The Fund records dividends and distributions to its shareholders on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized capital gains. To the extent they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in-capital. 2. INVESTMENT ADVISORY AGREEMENT -- Pursuant to an Investment Advisory Agreement with Dean Witter InterCapital Inc. (the "Investment Adviser"), the Fund pays its Investment Adviser an advisory fee, calculated weekly and payable monthly, by applying the annual rate of 0.40% to the Fund's average weekly net assets. 12 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) - -------------------------------------------------------------------------------- Under the terms of the Agreement, in addition to managing the Fund's investments, the Investment Adviser pays the salaries of all personnel, including officers of the Fund, who are employees of the Investment Adviser. 3. ADMINISTRATION AGREEMENT -- Pursuant to an Administration Agreement with Dean Witter Services Company Inc. (the "Administrator"), an affiliate of the Investment Adviser, the Fund pays an administration fee, calculated weekly and payable monthly, by applying the annual rate of 0.25% to the Fund's average weekly net assets. Under the terms of the Administration Agreement, the Administrator maintains certain of the Fund's books and records and furnishes, at its own expense, office space, facilities, equipment, clerical, bookkeeping and certain legal services and pays the salaries of all personnel, including officers of the Fund who are employees of the Administrator. The Administrator also bears the cost of telephone services, heat, light, power and other utilities provided to the Fund. 4. 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, 1994 aggregated $28,179,214 and $33,022,764, respectively. Dean Witter Trust Company, an affiliate of the Investment Adviser and Administrator, is the Fund's transfer agent. At November 30, 1994, the Fund had transfer agent fees and expenses payable of approximately $17,000. On April 1, 1991, the Fund established 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, 1994, included in Trustees' fees and expenses in the Statement of Operations amounted to $4,082. At November 30, 1994, the Fund had an accrued pension liability of $46,373 which is included in accrued expenses in the Statement of Assets and Liabilities. 5. PREFERRED SHARES OF BENEFICIAL INTEREST -- The Fund is authorized to issue up to 1,000,000 non-participating preferred shares of beneficial interest having a par value of $.01 per share, in one or more series, with rights as determined by the Trustees, without the approval of the common shareholders. On March 21, 1990, the Fund issued 1,250 shares of Auction Rate Preferred Shares ("Preferred Shares") consisting of 250 shares each of Series A through E for gross total proceeds of $125,000,000. The preferred shares 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. 13 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) - -------------------------------------------------------------------------------- During the six months ended November 30, 1994, the Fund purchased and retired preferred shares as follows:
Series Shares Amount - ----- ---- ------------ A 50 $ 5,000,000 B 50 5,000,000 C 50 5,000,000 D 50 5,000,000 E 50 5,000,000 ---- ------------ Total 250 $ 25,000,000 ==== ============
Dividends, which are cumulative, are reset through auction procedures.
Range of Shares* Series Rate* Reset Date Dividend Rates** ------- ------ ----- ---------- ---------------- 200 A 3.45 % 12/20/94 2.90 % - 3.45% 200 B 3.85 12/27/94 2.829 - 3.85 200 C 3.44 12/ 6/94 2.961 - 3.50 200 D 3.73 12/13/94 3.00 - 3.73 200 E 3.79 12/ 6/94 2.74 - 3.80
- --------------- * As of November 30, 1994. ** For the period ended November 30, 1994. Subsequent to November 30, 1994 and up through January 12, 1995, the Fund paid dividends to each of the Series A through E in the aggregate amount of $465,016 at the following rates:
Series Rates Ranging - ------- -------------- A 4.624% B 4.775 C 4.09 - 4.25% D 4.875 - 4.09 E 3.557 - 3.65
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. 14 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) - -------------------------------------------------------------------------------- 6. COMMON SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial interest were as follows:
Capital Paid Par Value in Excess of Shares of Shares Par Value ----------- --------- ------------- Balance, May 31, 1993............................. 26,243,024 $ 262,430 $ 243,672,507 Treasury shares purchased and retired (weighted average discount 4.53%)*.............. (31,400) (314) (302,615) ----------- --------- ------------- Balance, May 31, 1994............................. 26,211,624 262,116 243,369,892 Treasury shares purchased and retired (weighted average discount 9.15%)*.............. (223,000) (2,230) (1,972,700) ----------- --------- ------------- Balance, November 30, 1994........................ 25,988,624 $ 259,886 $ 241,397,192 ========== ========= =============
- --------------- * The Trustees have voted to retire the shares purchased. 7. DIVIDENDS AND DISTRIBUTION TO COMMON SHAREHOLDERS -- The Fund has declared the following dividends from net investment income:
Amount Declaration per Record Payable Date Share Date Date - ------------------ -------- ------------------ ------------------ November 29, 1994 $ 0.06 December 9, 1994 December 23, 1994 January 3, 1995 0.06 January 13, 1995 January 27, 1995
Additionally, the Fund has declared the following capital gain distribution: December 5, 1994 $ 0.0961 December 5, 1994 December 23, 1994
8. FEDERAL INCOME TAX STATUS -- As of May 31, 1994, the Fund had permanent book/tax differences primarily attributable to non-deductible expenses. To reflect cumulative reclassifications arising from permanent book/tax differences for the year ended May 31, 1994, paid-in-capital was charged $103,613, accumulated net realized gain on investments was charged $285 and accumulated undistributed net investment income was credited $103,898. 15 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) - -------------------------------------------------------------------------------- 9. SELECTED QUARTERLY FINANCIAL DATA --
Quarters Ended* -------------------------------------------- 11/30/94 8/31/94 --------------------- ------------------ Per Per Total Share Total Share --------- ------- ------- ------ Total investment income....................................... $ 6,329 $ 0.24 $ 6,477 $ 0.25 Net investment income......................................... 5,544 0.21 5,632 0.22 Net realized and unrealized gain (loss) on investments........ (19,670) (0.75) 154 0.01
Quarters Ended* ------------------------------------------------------------------------------------ 5/31/94 2/28/94 11/30/93 8/31/93 ------------------- ------------------ ------------------ ----------------- Per Per Per Per Total Share Total Share Total Share Total Share --------- ------- -------- ------- -------- ------- -------- ------ Total investment income....... $ 6,804 $ 0.26 $ 6,668 $ 0.25 $ 6,754 $ 0.26 $ 6,870 $ 0.26 Net investment income......... 5,954 0.23 5,796 0.22 5,870 0.22 5,989 0.23 Net realized and unrealized gain (loss) on investments................. (15,611) (0.60) (3,452) (0.13) (1,146) (0.04) 8,558 0.32
Quarters Ended* --------------------------------------------------------------------------------- 5/31/93 2/28/93 11/30/92 8/31/92 ------------------ ----------------- ------------------ ---------------- Per Per Per Per Total Share Total Share Total Share Total Share -------- ------- -------- ------ -------- ------- ------- ------ Total investment income.......... $ 6,997 $ 0.27 $ 6,662 $ 0.25 $ 6,962 $ 0.26 $ 7,032 $ 0.27 Net investment income............ 6,088 0.23 5,731 0.22 6,005 0.23 6,062 0.23 Net realized and unrealized gain (loss) on investments.......... (3,479) (0.13) 13,595 0.51 (2,070) (0.08) 8,760 0.34
- --------------- * Totals expressed in thousands. 16 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 months ended November 30, For the year ended May 31, 1994* --------------------------------------------------------------- (unaudited) 1994* 1993* 1992* 1991* --------- ------------ ------------ ------------ ------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period............................. $ 10.24 $ 10.67 $ 10.02 $ 9.61 $ 9.35 --------- ------------ ------------ ------------ ------------ Net investment income................ 0.43 0.90 0.91 0.95 0.96 Net realized and unrealized gain (loss) on investments.............. (0.74) (0.45) 0.64 0.42 0.34 --------- ------------ ------------ ------------ ------------ Total from investment operations..... (0.31) 0.45 1.55 1.37 1.30 --------- ------------ ------------ ------------ ------------ Less dividends, distributions and other charges: Dividends from net investment income........................... (0.36) (0.76) (0.77) (0.72) (0.70) Distributions from net realized gains............................ -- -- (0.01) (0.05) (0.07) Common share equivalent of dividends paid to preferred shareholders..................... (0.07) (0.12) (0.12) (0.19) (0.27) Offering costs charged against capital.......................... -- -- -- -- -- --------- ------------ ------------ ------------ ------------ Total dividends, distributions and other charges...................... (0.43) (0.88) (0.90) (0.96) (1.04) --------- ------------ ------------ ------------ ------------ Net asset value, end of period....... $ 9.50 $ 10.24 $ 10.67 $ 10.02 $ 9.61 ============= ========= ========= ========= ========= Market value, end of period.......... $ 9.00 $ 9.75 $ 10.75 $ 10.375 $ 9.625 ============= ========= ========= ========= ========= TOTAL INVESTMENT RETURN+............. (4.15)%(1) (2.72)% 11.30% 16.44% 14.62% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands)......................... $346,863 $ 393,532 $ 404,979 $ 388,022 $ 373,207 Ratio to average net assets of common shareholders: Total expenses..................... 1.23%(2) 1.23% 1.38% 1.44% 1.59% Net investment income before preferred stock dividends........ 8.41%(2) 8.31% 8.73% 9.67% 10.20% Preferred stock dividends.......... 1.45%(2) 1.11% 1.21% 1.90% 2.88% Net investment income available to common shareholders.............. 6.96%(2) 7.20% 7.52% 7.77% 7.32% Asset coverage on preferred shares at end of period...................... 347% 314% 324% 310% 299% Portfolio turnover rate.............. 8%(1) 23% 7% 16% 56% 1990* ------------ PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period............................. $ 9.59 ------------ Net investment income................ 0.71 Net realized and unrealized gain (loss) on investments.............. -- ------------ Total from investment operations..... 0.71 ------------ Less dividends, distributions and other charges: Dividends from net investment income........................... (0.69) Distributions from net realized gains............................ (0.11) Common share equivalent of dividends paid to preferred shareholders..................... (0.05) Offering costs charged against capital.......................... (0.10) ------------ Total dividends, distributions and other charges...................... (0.95) ------------ Net asset value, end of period....... $ 9.35 ========= Market value, end of period.......... $ 9.125 ========= TOTAL INVESTMENT RETURN+............. 5.92% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands)......................... $ 368,065 Ratio to average net assets of common shareholders: Total expenses..................... 1.02% Net investment income before preferred stock dividends........ 7.46% Preferred stock dividends.......... 0.53% Net investment income available to common shareholders.............. 6.93% Asset coverage on preferred shares at end of period...................... 294% Portfolio turnover rate.............. 150%
- --------------- * The per share amounts were computed using an average number of shares outstanding during the period. + Total investment 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 investment return does not reflect sales charges or brokerage commissions. (1) Not annualized. (2) Annualized. See Notes to Financial Statements - -------------------------------------------------------------------------------- The financial statements included herein have been taken from the records of the Fund without examination by the independent accountants and accordingly they do not express an opinion thereon. 17 (This Page Intentionally Left Blank) 18 (This Page Intentionally Left Blank) 19 (This Page Intentionally Left Blank) 20 TRUSTEES - ----------------------------- Jack F. Bennett Michael Bozic Charles A. Fiumefreddo Edwin J. Garn John R. Haire Dr. Manuel H. Johnson Paul Kolton Michael E. Nugent Philip J. Purcell John L. Schroeder OFFICERS - ----------------------------- Charles A. Fiumefreddo Chairman and Chief Executive Officer Sheldon Curtis Vice President, Secretary and General Counsel James F. Willison Vice President Thomas F. Caloia Treasurer TRANSFER AGENT - ----------------------------- Dean Witter Trust Company Harborside Financial Center - Plaza Two Jersey City, New Jersey 07311 INDEPENDENT ACCOUNTANTS - ----------------------------- Price Waterhouse LLP 1177 Avenue of the Americas New York, New York 10036 INVESTMENT ADVISER - ----------------------------- Dean Witter InterCapital Inc. Two World Trade Center New York, New York 10048 MUNICIPAL PREMIUM INCOME TRUST SEMIANNUAL REPORT NOVEMBER 30, 1994 -----END PRIVACY-ENHANCED MESSAGE-----