-----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, sKVp4lxp9YTp4rX6ij7zZE4JlsLNQUV5hgHSeNtLtjGS4Q73jqAfnn4UWUK2JHMy zo+RDZU6VG46ixb8g1ZLwQ== 0000950123-95-002017.txt : 19950724 0000950123-95-002017.hdr.sgml : 19950724 ACCESSION NUMBER: 0000950123-95-002017 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950531 FILED AS OF DATE: 19950721 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: 95555239 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 SEMI-ANNUAL REPORT 1 MUNICIPAL PREMIUM INCOME TRUST Two World Trade Center New York, New York 10048 DEAR SHAREHOLDER: - -------------------------------------------------------------------------------- Fixed-income market conditions have improved steadily since late last year. Bonds began to rally in November on signs of slower economic growth in the wake of progressive tightening of monetary policy by the Federal Reserve Board. This move toward lower long-term interest rates reversed the trend of most of 1994 when rapidly rising rates created a severe bear market in bonds. Long-term municipal bond yields, as tracked by The Bond Buyer Revenue Bond Index*, dropped from a high of 7.37 percent in November to 6.00 percent at the end of May. This 137 basis point decline in yield corresponded to a 13 percent price increase for municipal bonds with 30-year maturities. Short-term yields have remained basically unchanged over the past six months. Thus, the yield spread or difference between long- and short-term municipal bond interest rates narrowed as long rates declined. The seasonal demand pattern for municipals in December more than offset the uncertainty caused by the Orange County, California bankruptcy filing. During a period of scarce supply, the market anticipated cash inflows in January from the reinvestment of coupons and the proceeds from bond calls and maturities. Tax-exempt bonds outperformed U.S. Treasury bonds through February. The ratio of the Revenue Bond Index yield to the 30-year U.S. Treasury bond yield fell from a high of 92 percent in November to 84 percent by the end of February. A declining ratio means that municipal bond prices have been stronger than U.S. Treasury prices. Tax reform proposals advancing the flat tax concept were partially responsible for municipals underperforming Treasuries from March through May. By the end of May, the Revenue Bond Index/Treasury bond yield ratio had again risen to 91 percent. The pace of new-issue underwriting over the first five months of 1995 was 36 percent below the same period last year. With bond maturities and calls for redemptions estimated to exceed new issues coming to market this year, the outstanding supply of municipal securities is expected to decline. This scarcity of municipal issues should strengthen market conditions. PERFORMANCE The net asset value (NAV) of Municipal Premium Income Trust (PIA) rose from $10.24 to $10.36 per share during the fiscal year ended May 31, 1995. Based on this NAV change plus reinvestment of tax-free dividends and capital gains distributions totaling approximately $0.82 per share, the Fund's total NAV return for the period was 10.12 percent. The Fund's market price on the New York Stock Exchange declined slightly from $9.75 to $9.6875 per share. Based on this stock price change and reinvestment of dividends and distributions, the Fund's total market return for the period was 8.15 percent. PIA's market price began the period trading at an 4.8 percent discount to NAV and closed at a 6.5 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 THE IMPACT OF LEVERAGING The Fund's common shares continue to be leveraged. As reported previously, leverage was created through the issuance of auction rate preferred shares (ARPS). The ARPS's auction periods usually range between one week and one year. Proceeds from ARPS underwritings are 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 preferred (yield plus operating and remarketing expenses). Although higher short-term interest rates have narrowed the yield spread, ARPS continue to provide positive incremental income to common shareholders. Leverage also impacts net asset value. ARPS normally account for one-third of a leveraged municipal bond fund's underwritten capital structure. This produces a volatility factor for common shares of 1.5 times the price change of bonds held in the portfolio. Since the value of the preferred shares does not fluctuate, the NAV of the common shares reflects the full market price change of the portfolio's investments. When bond prices eroded in 1994, the degree of leverage and volatility increased. The purchase and retirement of ARPS mitigated the impact of leverage. As bonds rallied in 1995, the remaining leverage aided the Fund's performance. Over the last 12 months, the Fund purchased and retired $25 million in par amount of ARPS. Currently, $100 million ARPS are outstanding in a weekly auction mode and represent 27 percent of net assets. Additional purchases may occur if ARPS become unprofitable (a negative yield spread) or the degree of leverage increases beyond its normal range. DIVIDEND RESERVES On May 31, 1995, the Fund had undistributed net investment income totaling $0.054 per share. A year earlier, undistributed net investment income totaled $0.093 per share. Use of the dividend reserve or "cushion" helped maintain the Fund's dividend at $0.06 per share. Yields in future ARPS auctions and ARPS retirements may further erode this cushion. Declines in the Fund's cushion may lead to adjustment of the common-share dividend. PORTFOLIO STRUCTURE As of May 31, 1995, the Fund's long-term investments were diversified among 14 municipal sectors and 75 separate issuers. The three largest municipal sectors -- refunded, industrial development/ pollution control revenue and hospital revenue -- represented 49 percent of net assets. The average maturity and call protection of the Fund's long-term holdings were 19 and 6 years, respectively. At the end of the fiscal year, the Fund's net assets totaled approximately $368 million. The credit quality ratings of the Fund's long-term portfolio are summarized below:
Moody's or Standard & Poor's Rating Percent ------------------------------------------------------------------------------------ --- Aaa or AAA.......................................................................... 51% Aa or AA............................................................................ 18 A or A.............................................................................. 9 Baa or BBB.......................................................................... 17 Ba or BB............................................................................ 1 Not Rated........................................................................... 4
3 LOOKING AHEAD Slower economic growth in 1995 and the extent of the Federal Reserve Board's previous interest rate moves have improved bond market expectations. Investor demand for municipal securities should also be sustained by significant bond maturities, calls for redemption and diminished new-issue supply. Changing market conditions and bond sales in anticipation of redemptions are among the factors that will determine the Fund's future level of income and influence its market price. Even with the move to higher yields that occurred last year, the Fund cannot replace the yield attributable to many older investments which may be called or sold in the next few years. The Fund's procedure for reinvestment of all dividends and distributions on common shares is through purchases in the open market. This method helps to support the market value of the Fund's shares. In addition, we would like to remind you that the Trustees have approved a procedure whereby the Fund, when appropriate, may purchase shares in the open market or in privately negotiated transactions at a price not above market value or net asset value, whichever is lower at the time of purchase. During the fiscal year ended May 31, 1995, PIA purchased and retired 317,300 shares of common stock at a weighted average market discount of 8.5 percent. The Fund may also utilize procedures to reduce or eliminate the amount of outstanding ARPS, including repurchase in the open market or in privately negotiated transactions. We appreciate your ongoing support of Municipal Premium Income Trust and look forward to continuing to serve your investment needs. Sincerely yours, /s/ CHARLES A. FIUMEFREDDO Charles A. Fiumefreddo Chairman of the Board 4 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS May 31, 1995 - --------------------------------------------------------------------------------
Principal Amount (in Coupon Maturity thousands) Rate Date Value --------- ------ --------- ------------- MUNICIPAL BONDS (97.1%) GENERAL OBLIGATION (4.7%) $ 5,000 Chicago Park District, Illinois, Ser 1995.............. 6.60 % 11/15/14 $ 5,283,800 Massachusetts, 3,500 1995 Ser A (AMBAC)................................... 5.00 07/01/12 3,289,125 3,965 1994 Ser C (FGIC).................................... 6.75 11/01/12 4,387,669 4,500 Shelby County, Tennessee, Refg 1995 Ser A.............. 5.625 04/01/11 4,530,420 --------- ------------- 16,965 17,491,014 --------- ------------- EDUCATIONAL FACILITIES REVENUE (1.8%) New York State Dormitory Authority, 4,000 State University Refg Ser 1993 A..................... 5.50 05/15/08 3,877,440 1,350 State University Ser 1990 B.......................... 7.50 05/15/11 1,562,112 1,000 Pennsylvania Higher Educational Facilities Authority, Temple University First Ser (MBIA)................... 6.50 04/01/21 1,054,730 --------- ------------- 6,350 6,494,282 --------- ------------- ELECTRIC REVENUE (12.0%) 5,000 Sacramento Municipal Utility District, California, Refg 1994 Ser I (MBIA).................................... 6.00 01/01/24 5,073,950 4,000 Kansas City, Kansas, Utility Refg & Impr Ser 1994 (FGIC)............................................... 6.375 09/01/23 4,228,320 7,750 South Carolina Public Service Authority, 1995 Refg Ser A (AMBAC) (WI)....................................... 6.25 01/01/22 7,873,535 20,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C..... 4.70 02/01/06 18,752,600 Intermountain Power Agency, Utah, 1,270 Refg Ser 1988 B...................................... 7.50 07/01/21 1,370,101 6,300 Refg Ser 1987 D...................................... 8.625 07/01/21 6,869,457 --------- ------------- 44,320 44,167,963 --------- ------------- HOSPITAL REVENUE (13.5%) 3,500 Colbert County - Northwest Health Care Authority, Alabama, Helen Keller Hospital Refg Ser 1990......... 8.75 06/01/09 3,904,775 1,000 California Health Facilities Financing Authority, Alexian Brothers/San Jose Refg Ser 1990 (MBIA)....... 7.125 01/01/16 1,094,680 1,000 Jacksonville Health Facilities Authority, Florida, Riverside Hospital Ser 1989.......................... 7.625 10/01/13 1,043,320 Hall County and Gainesville Hospital Authority, Georgia, Northeast Georgia Healthcare 2,500 Ser 1995 (MBIA) (WI)................................. 5.75 10/01/17 2,484,225 3,000 Ser 1995 (MBIA) (WI)................................. 6.00 10/01/20 3,032,280 3,750 Evergreen Park, Illinois, Little Company of Mary Hospital Refg Ser 1988 (MBIA)........................ 7.25 02/15/11 4,049,288 1,800 Southwestern Illinois Development Authority, Anderson Hospital Ser 1992 A.................................. 7.00 08/15/22 1,767,546 4,000 Indiana Health Facility Financing Authority, Hancock Memorial Hospital Ser 1990........................... 8.30 08/15/20 4,301,560 3,420 Kentucky Development Finance Authority, Ashland Hospital/ King's Daughters Refg Ser 1987............. 9.75 08/01/05 3,870,585
5 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS May 31, 1995 (continued) - --------------------------------------------------------------------------------
Principal Amount (in Coupon Maturity thousands) Rate Date Value --------- ------ --------- ------------- $ 9,500 Boston, Massachusetts, Boston City Hospital - FHA Mtge Refg Ser B........................................... 5.75 % 02/15/13 $ 9,252,145 2,985 Lehigh County General Purpose Authority, Pennsylvania, St Lukes Hospital Ser 1992 (AMBAC)................... 6.25 07/01/22 3,080,729 3,420 Lycoming County Authority, Pennsylvania, Divine Providence Hospital of the Sisters of Christian Charity 1990 Ser B................................... 7.75 07/01/16 3,670,925 2,375 Montgomery County Higher Educational & Health Authority, Pennsylvania, Holy Redeemer Hospital 1990 Ser A (AMBAC)........................................ 7.625 02/01/20 2,620,100 2,750 Jefferson County Health Facilities Development Corporation, Texas, Baptist Health Care Ser 1989..... 8.30 10/01/14 2,899,848 2,400 Peninsula Ports Authority, Virginia, Mary Immaculate Hospital Ser 1989.................................... 8.375 08/01/04 2,626,056 --------- ------------- 47,400 49,698,062 --------- ------------- INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (14.2%) 14,500 Pima County Industrial Development Authority, Arizona, Tucson Electric Power Co Refg Ser 1988 A (FSA Surety).............................................. 7.25 07/15/10 16,298,870 10,000 Burlington, Kansas, Kansas Gas & Electric Co Refg Ser 1991 (MBIA)...................................... 7.00 06/01/31 11,086,700 1,000 Ohio Water Development Authority, Toledo Edison Co Ser 1990 A (Secondary FSA)........................... 7.75 05/15/19 1,131,300 9,500 Montgomery County Industrial Development Authority, Pennsylvania, Philadelphia Electric Co Refg 1991 Ser B (MBIA)............................................. 6.70 12/01/21 10,238,720 13,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990 (AMT) 7.50 12/01/29 13,550,940 --------- ------------- 48,000 52,306,530 --------- ------------- MORTGAGE REVENUE - MULTI-FAMILY (1.7%) Massachusetts Housing Finance Agency, 2,000 Rental 1994 Ser A (AMT) (AMBAC)...................... 6.60 07/01/14 2,087,760 4,000 Rental 1994 Ser A (AMT) (AMBAC)...................... 6.65 07/01/19 4,158,720 --------- ------------- 6,000 6,246,480 --------- ------------- MORTGAGE REVENUE - SINGLE FAMILY (11.9%) 560 Colorado Housing & Finance Authority, Ser 1990 B-2..... 8.00 02/01/18 585,928 22,475 Pinnellas County Housing Finance Authority, Florida, Ser 1983............................................. 0.00 01/01/15 2,886,464 635 Idaho Housing Agency, 1988 Ser D-2 (AMT)............... 8.25 01/01/20 684,282 2,745 Illinois Housing Development Authority, 1988 Ser C (AMT)................................................ 8.10 02/01/22 2,933,746 1,290 Indiana Housing Finance Authority, Ser 1990 A-2 (AMT)................................................ 8.10 01/01/22 1,383,925 1,390 Kansas City Leavenworth & Lenexa, Kansas, GNMA-Backed Ser 1988 C (AMT)..................................... 8.00 11/01/20 1,482,032 Olathe, Kansas, GNMA Collateralized 205 Ser 1990 B........................................... 7.50 09/01/10 220,553 710 Ser 1989 A (AMT) (MBIA).............................. 8.00 11/01/20 761,312
6 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS May 31, 1995 (continued) - --------------------------------------------------------------------------------
Principal Amount (in Coupon Maturity thousands) Rate Date Value --------- ------ --------- ------------- $ 1,250 Lake Charles Non-Profit Housing Development Corporation, Louisiana, Ser 1990 A (CGIC)............ 7.875% 02/15/25 $ 1,266,250 1,940 New Orleans Home Mortgage Authority, Louisiana, 1989 Ser B-1 (AMT)................................... 8.25 12/01/21 2,056,672 Maine Housing Authority, 3,540 Purchase Ser 1988 D4 (AMT)........................... 7.55 11/15/19 3,754,418 1,000 Purchase Ser 1988 D5 (AMT)........................... 7.55 11/15/19 1,051,100 Massachusetts Housing Finance Agency, 1,660 Residential Ser 1989 A (AMT)......................... 8.20 08/01/15 1,751,914 5,120 1989 Ser 7 (AMT)..................................... 8.10 06/01/20 5,460,787 900 Mississippi Housing Finance Corporation, Purchase GNMA-Backed Ser 1989 (AMT)........................... 8.25 10/15/18 961,992 505 Muskogee County Home Finance Authority, Oklahoma, 1990 Ser A (FGIC)......................................... 7.60 12/01/10 541,320 Pennsylvania Housing Finance Agency, 1,975 1990 Ser 27 (AMT).................................... 8.15 10/01/21 2,123,658 685 1990 Ser X (AMT)..................................... 8.15 04/01/24 723,552 Rhode Island Housing & Mortgage Finance Corporation, Homeownership 720 1989 Ser 1-B (AMT)................................... 8.40 10/01/21 750,434 2,560 1988 Ser 1-D (AMT)................................... 7.875 10/01/22 2,692,531 990 1988 Ser 1-B (AMT)................................... 8.40 10/01/22 1,036,599 South Carolina Housing Finance & Development Authority, Homeownership 3,000 1988 Ser C-1 (AMT)................................... 8.125 07/01/21 3,153,570 1,220 1991 Ser A (AMT)..................................... 7.40 07/01/23 1,284,977 2,870 El Paso Housing Finance Corporation, Texas, Ser 1989 (AMT) 8.20 03/01/21 2,994,357 Utah Housing Finance Agency, 570 Ser 1991 B-1......................................... 7.50 07/01/16 609,803 715 Ser 1989 B (AMT)..................................... 8.25 07/01/21 753,617 --------- ------------- 61,230 43,905,793 --------- ------------- NURSING & HEALTH RELATED FACILITIES REVENUE (1.3%) New York State Medical Care Facilities Finance Agency, Mental Health 1,625 Ser 1987............................................. 8.875 08/15/07 1,786,184 1,555 Ser 1990 (MBIA)...................................... 7.75 02/15/20 1,754,102 990 Ser 1991 A........................................... 7.50 02/15/21 1,078,892 --------- ------------- 4,170 4,619,178 --------- ------------- PUBLIC FACILITIES REVENUE (1.7%) 4,000 Metropolitan Pier & Exposition Authority, Illinois, Ser 1992 A (FGIC).................................... 0.00 06/15/07 3,735,160 New York State Urban Development Corporation, 1,000 Ser 1991............................................. 7.60 04/01/03 1,119,640 1,300 Ser 1991............................................. 7.50 04/01/11 1,423,175 --------- ------------- 6,300 6,277,975 --------- -------------
7 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS May 31, 1995 (continued) - --------------------------------------------------------------------------------
Principal Amount (in Coupon Maturity thousands) Rate Date Value --------- ------ --------- ------------- RESOURCE RECOVERY REVENUE (3.3%) $ 11,500 Cambria County Industrial Development Authority, --------- Pennsylvania, Cambria Cogen Co Ser 1989 F-2 (AMT).... 7.75 % 09/01/19 $ 12,270,155 ------------- TRANSPORTATION FACILITIES REVENUE (4.3%) 3,500 Atlanta, Georgia, Airport Ser 1994 B (AMT) (AMBAC)..... 6.00 01/01/21 3,513,370 7,000 Chicago, Illinois, Chicago Midway Airport 1994 Ser A (AMT) (MBIA)......................................... 6.25 01/01/24 7,113,190 5,000 Regional Transportation Authority, Illinois, Ser 1994 A (AMBAC).............................................. 6.25 06/01/24 5,131,950 --------- ------------- 15,500 15,758,510 --------- ------------- WATER & SEWER REVENUE (4.2%) 3,000 Central Coast Water Authority, California, Ser 1992 (AMBAC).............................................. 6.60 10/01/22 3,213,240 2,500 Coachella, California, Ser 1992 COPs (FSA)............. 6.10 03/01/22 2,548,875 3,500 Chicago, Illinois, Wastewater Ser 1994 (MBIA).......... 6.375 01/01/24 3,628,940 2,500 Rio Rancho, New Mexico, Water & Wastewater Ser 1995 A (FSA) (WI)................................ 6.00 05/15/22 2,519,850 3,500 Texas Water Resource Finance Authority, Ser 1989 (AMBAC).............................................. 7.50 08/15/13 3,748,500 --------- ------------- 15,000 15,659,405 --------- ------------- OTHER REVENUE (1.4%) 2,500 Michigan Municipal Bond Authority, Local Govt Refg Ser 1991 A (FGIC)........................................ 4.75 12/01/09 2,309,550 2,500 Houston, Texas, Hotel Occupancy Tax & Parking Facility Sr Lien Ser A 1991 (Secondary FGIC).................. 7.00 07/01/09 2,737,500 --------- ------------- 5,000 5,047,050 --------- ------------- REFUNDED (21.1%) 3,500 Houston County Health Care Authority, Alabama, Southeast Alabama Medical Center Ser 1989............ 7.25 10/01/19 3,932,530 5,000 District of Columbia, Ser 1990 A (AMBAC)............... 7.50 06/01/10 5,718,350 5,000 Massachusetts Health & Educational Facilities Authority, St John's Hospital 1990 Ser B............. 8.375 12/01/20 5,942,850 11,000 Western Townships Utilities Authority, Michigan, Sewerage Disposal Ser 1989 (Crossover Refunded)...... 8.20 01/01/18 12,419,110 4,000 Duluth Economic Development Authority, Minnesota, Benedictine Health/St Mary's Medical Center Ser 1990................................................. 8.375 02/15/20 4,690,920 Missouri Health & Educational Facilities Authority, Missouri Baptist Medical Center 2,660 Refg Ser 1989........................................ 7.625 07/01/18 3,021,494 1,340 Refg Ser 1989........................................ 7.625 07/01/18 1,676,849 1,985 Ser 1989............................................. 8.00 01/01/19 2,284,239 5,000 New York City, New York, 1987 Ser A.................... 8.75 11/01/14 5,579,600
8 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS May 31, 1995 (continued) - --------------------------------------------------------------------------------
Principal Amount (in Coupon Maturity thousands) Rate Date Value --------- ------ --------- ------------- $ 4,650 New York Local Government Assistance Corporation, Ser 1991 A............................................... 7.25 % 04/01/18 $ 5,358,242 3,675 Puerto Rico, Pub Impr Ser 1990......................... 7.70 07/01/20 4,271,820 4,500 Midland County Hospital District, Texas, Ser 1989...... 8.375 06/01/02 5,018,265 2,900 Loudoun County Sanitation Authority, Virginia, Ser 1989 (AMBAC).............................................. 7.50 01/01/17 3,234,225 12,550 Washington Public Power Supply System, Nuclear Proj #2 Refg Ser 1990 C...................................... 7.625 07/01/10 14,540,682 --------- ------------- 67,760 77,689,176 --------- ------------- 355,495 TOTAL MUNICIPAL BONDS --------- (IDENTIFIED COST $333,000,488)............................................... 357,631,573 ------------- SHORT-TERM MUNICIPAL OBLIGATIONS (5.0%) 11,300 East Baton Rouge Parish, Louisiana, Exxon Corp Ser 1993 (Demand 06/01/95).................................... 4.40* 03/01/22 11,300,000 7,000 Massachusetts, Dedicated Income Tax Ser 1990 B --------- (Demand 06/01/95).................................... 4.15* 12/01/97 7,000,000 ------------- 18,300 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS --------- (IDENTIFIED COST $18,300,000)................................................ 18,300,000 ------------- $ 373,795 ======== TOTAL INVESTMENTS (IDENTIFIED COST $351,300,488) (a)............. 102.1% 375,931,573 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS................... (2.1) (7,706,972) ------ ------------- NET ASSETS....................................................... 100.0% $ 368,224,601 ====== ============= - --------------- AMT Alternative Minimum Tax. COPs Certificates of Participation. WI Security purchased on a when issued basis. * Current coupon of variable rate security. (a) The aggregate cost for federal income tax purposes is $351,300,488; the aggregate gross unrealized appreciation is $26,305,734 and the aggregate gross unrealized depreciation is $1,674,649, resulting in net unrealized appreciation of $24,631,085. Bond Insurance: AMBAC AMBAC Indemnity Corporation. CGIC Capital Guaranty Insurance Company. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation.
See Notes to Financial Statements 9 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS May 31, 1995 (continued) - -------------------------------------------------------------------------------- GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percentage of Net Assets May 31, 1995 - -------------------------------------------------------------------------------- Alabama................... 2.1% Kentucky.................. 1.1% Oklahoma.................. 0.1% Arizona................... 4.4 Louisiana................. 4.0 Pennsylvania.............. 9.7 California................ 3.2 Maine..................... 1.3 Puerto Rico............... 1.2 Colorado.................. 0.2 Massachusetts............. 11.8 Rhode Island.............. 1.2 District of Columbia...... 1.6 Michigan.................. 4.0 South Carolina............ 3.3 Florida................... 1.1 Minnesota................. 1.3 Tennessee................. 1.2 Georgia................... 2.5 Mississippi............... 0.3 Texas..................... 13.5 Idaho..................... 0.2 Missouri.................. 1.9 Utah...................... 2.6 Illinois.................. 9.1 New Mexico................ 0.7 Virginia.................. 1.6 Indiana................... 1.5 New York.................. 6.4 Washington................ 3.9 Kansas.................... 4.8 Ohio...................... 0.3 ----- Total..................... 102.1% =====
10 MUNICIPAL PREMIUM INCOME TRUST FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES May 31, 1995 - --------------------------------------------- ASSETS: Investments in securities, at value (identified cost $351,300,488).............. $ 375,931,573 Cash......................................... 103,232 Receivable for: Interest.................................... 7,798,302 Investments sold............................ 295,000 Prepaid expenses and other assets............ 19,905 ------------- TOTAL ASSETS............................ 384,148,012 ------------- LIABILITIES: Payable for: Investments purchased....................... 15,549,184 Investment advisory fee..................... 131,814 Administration fee.......................... 82,384 Accrued expenses and other payables.......... 160,029 ------------- TOTAL LIABILITIES....................... 15,923,411 ------------- NET ASSETS: Preferred shares of beneficial interest, (1,000,000 shares authorized of non-participating $.01 par value, 1,000 shares outstanding)......................... 100,000,000 ------------- Common shares of beneficial interest, (unlimited shares authorized of $.01 par value, 25,894,324 shares outstanding)....... 240,719,792 Net unrealized appreciation.................. 24,631,085 Accumulated undistributed net investment income...................................... 1,386,471 Accumulated undistributed net realized gain........................................ 1,487,253 ------------- NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS.......................... 268,224,601 ------------- TOTAL NET ASSETS........................ $ 368,224,601 ============ NET ASSET VALUE PER COMMON SHARE, ($268,224,601 divided by 25,894,324 common shares outstanding)......................... $10.36 ===== STATEMENT OF OPERATIONS For the year ended May 31, 1995 - --------------------------------------------- NET INVESTMENT INCOME: INTEREST INCOME............................. $ 24,855,792 ------------- EXPENSES Investment advisory fee.................... 1,487,947 Administration fee......................... 929,967 Auction commission fees.................... 261,779 Transfer agent fees and expenses........... 126,526 Professional fees.......................... 109,059 Auction agent fees......................... 88,140 Shareholder reports and notices............ 40,865 Registration fees.......................... 33,277 Trustees' fees and expenses................ 30,887 Other...................................... 34,452 ------------- TOTAL EXPENSES............................ 3,142,899 ------------- NET INVESTMENT INCOME..................... 21,712,893 ------------- NET REALIZED AND UNREALIZED GAIN: Net realized gain.......................... 1,494,255 Net change in unrealized appreciation...... 4,565,857 ------------- NET GAIN.................................. 6,060,112 ------------- NET INCREASE.............................. $ 27,773,005 ============ STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- For the For the year ended year ended May 31, 1995 May 31, 1994 ------------- ------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income............................................................... $ 21,712,893 $ 23,609,419 Net realized gain................................................................... 1,494,255 2,848,400 Net change in unrealized appreciation............................................... 4,565,857 (14,499,271) ------------- ------------- Net increase...................................................................... 27,773,005 11,958,548 ------------- ------------- Dividends to preferred shareholders from net investment income........................ (4,023,613) (3,158,208) Dividends and distributions to common shareholders from: Net investment income............................................................... (18,749,585) (19,943,950) Net realized gain................................................................... (2,498,582) -- ------------- ------------- Total............................................................................. (25,271,780) (23,102,158) ------------- ------------- Transactions in shares of beneficial interest: Common.............................................................................. (2,808,603) (302,929) Preferred........................................................................... (25,000,000) -- ------------- ------------- Total............................................................................. (27,808,603) (302,929) ------------- ------------- Total decrease.................................................................... (25,307,378) (11,446,539) NET ASSETS: Beginning of period................................................................... 393,531,979 404,978,518 ------------- ------------- END OF PERIOD (including undistributed net investment income of $1,386,471 and $2,446,776, respectively)........................................................... $ 368,224,601 $ 393,531,979 ============ ============
See Notes to Financial Statements 11 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 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 on 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, it uses both a computerized matrix of tax-exempt securities and evaluations by its staff, in each case based on information concerning market transactions and quotations from dealers which reflect the bid side of the market each day. The 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 by the identified cost method. The Fund amortizes premiums and accretes discounts on securities purchased 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. Under the terms of the Advisory 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. 12 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- 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 year ended May 31, 1995 aggregated $56,360,549 and $61,426,552, respectively. Dean Witter Trust Company, an affiliate of the Investment Adviser and Administrator, is the Fund's transfer agent. At May 31, 1995, the Fund had transfer agent fees and expenses payable of approximately $18,000. 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 year ended May 31, 1995 included in Trustees' fees and expenses in the Statement of Operations amounted to $8,164. At May 31, 1995, the Fund had an accrued pension liability of $49,672 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. During the year ended May 31, 1995, 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
Dividends, which are cumulative, are reset through auction procedures.
Next Range of Reset Dividend Shares* Series Rate* Date Rates** ------------------------------------------------------ -------- ---- -------- ------------- 200................................................... A 4.12% 6/06/95 2.90% - 4.62% 200................................................... B 4.25 6/06/95 2.83 - 4.78 200................................................... C 4.35 6/06/95 2.96 - 4.40 200................................................... D 4.19 6/06/95 3.00 - 4.88 200................................................... E 4.19 6/06/95 2.74 - 6.25 - --------------- * As of May 31, 1995. ** For the year ended May 31, 1995.
13 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- Subsequent to May 31, 1995 and up through July 10, 1995, the Fund paid dividends to each of the Series A through E in the aggregate amount of $439,880 at following rates:
Rates ranging ------------------ Series From To ------------------------------------------------------------------------------------ ------ ------ A................................................................................... 3.99% 4.25% B................................................................................... 3.93 4.25 C................................................................................... 3.96 4.35 D................................................................................... 3.91 4.26 E................................................................................... 4.00 4.19
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. 6. COMMON SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial interest were as follows:
Par Value Capital Paid of in Excess of Shares Shares Par Value ----------- --------- ------------- Balance, May 31, 1993...................................... 26,243,024 $ 262,430 $ 243,568,894 Treasury shares purchased and retired (weighted average discount 4.53%)*....................... (31,400) (314) (302,615) ----------- --------- ------------- Balance, May 31, 1994...................................... 26,211,624 262,116 243,266,279 Treasury shares purchased and retired (weighted average discount 8.49%)*....................... (317,300) (3,173) (2,805,430) ----------- --------- ------------- Balance, May 31, 1995...................................... 25,894,324 $ 258,943 $ 240,460,849 ========== ========= ============= - --------------- * The Trustees have voted to retire the shares purchased.
7. DIVIDENDS TO COMMON SHAREHOLDERS -- The Fund has declared the following dividends from net investment income:
Amount Declaration Date per Share Record Date Payable Date - ----------------- ---------------- ---------------- ---------------- June 6, 1995 $ 0.06 June 16, 1995 June 30, 1995 July 3, 1995 0.06 July 14, 1995 July 28, 1995
8. SELECTED QUARTERLY FINANCIAL DATA -- (unaudited)
Quarters Ended ---------------------------------------------------------------------------------- 5/31/95 2/28/95 11/30/94 8/31/94 ----------------- ------------------ ------------------ ----------------- Per Per Per Per Total* Share Total* Share Total* Share Total* Share ------- ------ -------- ------ -------- ------ ------- ------ Total investment income.................... $6,084 $ 0.24 $5,966 $ 0.23 $6,329 $ 0.24 $ 6,477 $ 0.25 Net investment income...................... 5,310 0.21 5,227 0.20 5,544 0.21 5,632 0.22 Net realized and unrealized gain (loss).... 7,398 0.30 18,178 0.70 (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)...... (15,611) (0.60) (3,452) (0.13) (1,146) (0.04) 8,558 0.32 - --------------- * Totals expressed in thousands.
14 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 year ended May 31 -------------------------------------------------------------- 1995* 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....................... 0.84 0.90 0.91 0.95 0.96 Net realized and unrealized gain (loss)..... 0.26 (0.45) 0.64 0.42 0.34 --------- --------- --------- --------- --------- Total from investment operations............ 1.10 0.45 1.55 1.37 1.30 --------- --------- --------- --------- --------- Less dividends and distributions from: Net investment income..................... (0.72) (0.76) (0.77) (0.72) (0.70) Net capital gain.......................... (0.10) -- (0.01) (0.05) (0.07) Common share equivalent of dividends paid to preferred shareholders............... (0.16) (0.12) (0.12) (0.19) (0.27) --------- --------- --------- --------- --------- Total dividends and distributions........... (0.98) (0.88) (0.90) (0.96) (1.04) --------- --------- --------- --------- --------- Net asset value, end of period.............. $ 10.36 $ 10.24 $ 10.67 $ 10.02 $ 9.61 ======== ======== ======== ======== ======== Market value, end of period................. $ 9.6875 $ 9.75 $ 10.75 $ 10.375 $ 9.625 ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN+.................... 8.15% (2.72)% 11.30% 16.44% 14.62% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands)............................ $ 368,225 $ 393,532 $ 404,979 $ 388,022 $ 373,207 Ratios to average net assets of common shareholders: Expenses.................................. 1.21% 1.23% 1.38% 1.44% 1.59% Net investment income before preferred stock dividends......................... 8.37% 8.31% 8.73% 9.67% 10.20% Preferred stock dividends................. 1.55% 1.11% 1.21% 1.90% 2.88% Net investment income available to common shareholders............................ 6.82% 7.20% 7.52% 7.77% 7.32% Asset coverage on preferred shares at end of period.................................... 368% 314% 324% 310% 299% Portfolio turnover rate..................... 16% 23% 7% 16% 56% - --------------- + 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. * Per share amounts were computed using an average number of shares outstanding during the period.
See Notes to Financial Statements 15 MUNICIPAL PREMIUM INCOME TRUST REPORT OF INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- To the Shareholders and Trustees of Municipal Premium Income Trust In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Municipal Premium Income Trust (the "Fund") at May 31, 1995, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at May 31, 1995 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, New York July 10, 1995 1995 FEDERAL TAX NOTICE (unaudited) During the year ended May 31, 1995, the Fund paid $0.72 per share to common shareholders from net investment income. All of the Fund's dividends from net investment income to common shareholders were exempt interest dividends, excludable from gross income for Federal income tax purposes. For the year ended May 31, 1995, the Fund paid to common shareholders $0.096 per share from long-term capital gains. 16 BOARD OF DIRECTORS 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 MANAGER Dean Witter InterCapital Inc. Two World Trade Center New York, New York 10048 MUNICIPAL PREMIUM INCOME TRUST ANNUAL REPORT MAY 31, 1995 -----END PRIVACY-ENHANCED MESSAGE-----