-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ObeWWH/VmK9zI3KnozX93iiPMQhTFSRqYckXPhbiHuDV7jxHCJKeqiNgJMEokIRS K0cDgmTlwaryTqWOaKHKpw== 0000950123-96-000236.txt : 19960126 0000950123-96-000236.hdr.sgml : 19960126 ACCESSION NUMBER: 0000950123-96-000236 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951130 FILED AS OF DATE: 19960125 SROS: NONE 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: 96506877 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 SEMIANNUAL REPORT DATED NOVEMBER 30, 1995 1 Two World Trade Center, New York, New York 10048 MUNICIPAL PREMIUM INCOME TRUST LETTER TO THE SHAREHOLDERS November 30, 1995 DEAR SHAREHOLDER: Bonds have rallied significantly since last year. Progressive tightening of monetary policy by the Federal Reserve Board over the 12 months through February 1995 led to slower economic growth and caused bonds to advance. The trend toward lower long-term interest rates was aided in July and December when the Federal Reserve Board reduced the fed funds rate banks charge each other for overnight loans. MUNICIPAL MARKET CONDITIONS Long-term municipal bond yields declined from a high of 7.37 percent in November 1994 to 5.78 percent at the end of November 1995, as tracked by The Bond Buyer Revenue Bond Index*. This 159 basis point decline in yield corresponded to a 12 percent price increase for a callable bond with a 30-year maturity. Similarly, yields on 1-year municipal notes moved from 4.51 percent to 3.59 percent. The yield pickup for extending maturity from 1- to 30-years was 219 basis points in November 1995. Tax-exempt bonds began the year by outperforming U.S. Treasury bonds. The ratio of the Revenue Bond Index yields to the 30-year U.S. Treasury bond yield moved from 89 percent in December 1994 to 84 percent by the end of February 1995. A declining ratio means that municipal bond prices have been stronger than U.S. Treasury prices. In the spring the municipal market began to discount the risk of comprehensive changes in the tax code created by flat tax rhetoric from Washington. This caused municipals to weaken on a relative basis. The yield ratio reached a high of 95 percent during the summer. Over the past 10 years, long municipal yields have averaged 89 percent of U.S. Treasury yields. The municipal market continued to experience consolidation in 1995. Municipal underwriting in the first 11 months of the year was down 12 percent from the same period in 1994. This change followed a - --------------- *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 Investors Service, Inc., and AA+ to A- by Standard & Poor's Corp. 2 MUNICIPAL PREMIUM INCOME TRUST LETTER TO THE SHAREHOLDERS November 30, 1995, continued 44 percent drop in volume for all of 1994. The effects of lower volume and diminished new issue profitability were also apparent in the decision by several major dealers to withdraw from the municipal business. TAX REFORM Flat-tax advocates have general increased publicity for their proposals and have influenced the municipal market since early 1995. Most of the discussion on proposed tax-reform measures is based on theoretical concepts, containing broad assumptions and lacking specific details. Basically, the various plans raise questions about the fairness of changing from a progressive tax structure. Low flat-tax rate plans call for the elimination of deductions of mortgage interest, charitable contributions, property taxes, and state and local income taxes. Should politicians make tax reform a central issue in the 1996 elections, media coverage will expand from the financial page to the front page. If that happens, municipal bonds could come under further pressure. For example, when major tax reform turmoil occurred in 1986, municipal yields briefly exceeded taxable yields. In addition to the market risk associated with the flat-tax proposals, municipal credits would also be negatively affected. If mortgage interest and property tax deductions were eliminated, municipalities would experience a decline in their property tax base. The loss of state and local income tax deductions would increase the relative economic disadvantage that high-tax states already face. The flat tax represents an attempt to shift tax accountability from the federal to local governments. Taxpayer recognition of the extent of change under consideration may impede the passage of comprehensive tax reform. PERFORMANCE The net asset value (NAV) of Municipal Premium Income Trust (PIA) rose from $10.36 to $10.55 per share during the six-month period ended November 30, 1995. Based on this NAV change plus reinvestment of tax-free dividends totaling $0.35 per share, the Fund's total return was 5.53 percent. Over the same period, the Fund's market price on the New York Stock Exchange depreciated from $9.6875 to $9.375 per share. Based on this market price change and reinvestment of tax-free dividends, the Fund's total return was 0.28 percent. The Fund began the period trading at a 6.5 percent discount to NAV and closed at an 11 percent discount. Undistributed net investment income totaled $0.026 per share on November 30, 1995 versus $0.054 per share six months ago. Since the amount of the Fund's undistributed net investment income continued to shrink during the summer, the Trustees voted to reduce the monthly dividend from $0.06 to $0.05 per share beginning with the November 1995 payment. This revised dividend rate more accurately reflects the Fund's current earnings. 3 MUNICIPAL PREMIUM INCOME TRUST LETTER TO THE SHAREHOLDERS November 30, 1995, continued PORTFOLIO STRUCTURE On November 30, 1995, the Fund's long-term portfolio was diversified among 14 specific long-term municipal sectors and 75 credits. The three largest sectors -- refunded, hospital and industrial development/pollution control revenue bonds -- represented approximately 42 percent of the portfolio. The average maturity and call protection of the Fund's long-term holdings were 19 and 6 years, respectively. Net assets exceeded $372 million. The credit-quality ratings of the Fund's long-term portfolio are illustrated at right. MOODY'S OR STANDARD & POOR'S CREDIT RATING AS OF NOVEMBER 30, 1995 (% OF TOTAL LONG-TERM INVESTMENTS) NOT RATED 2.0 Baa OR BBB 17.0 A OR A 8.0 Aa OR AA 18.0 Aaa OR AAA 55.0
THE IMPACT OF LEVERAGING As discussed in previous reports, the total income available for distribution to common shareholders includes incremental income provided by Auction Rate Preferred Share (ARPS) leverage. ARPS dividends reflect prevailing short-term interest rates on maturities normally ranging from one week to one year. Incremental income to common shares depends on two factors: first, the spread between the interest earned on the long-term bonds in the established portfolio of investments and the ARPS auction rate plus ARPS expenses; second, the amount of ARPS outstanding. The greater the amount of ARPS outstanding, the greater the amount of incremental income available for distribution to common shareholders. The profitability of ARPS declined in 1994 and the first half of 1995. ARPS yields have moved somewhat lower since the Federal Reserve Board's initial easing in July 1995. A reduction in the amount of ARPS outstanding -- to control the portfolio's price volatility last year -- also diminished incremental income to common shares. Currently, $100 million in ARPS are outstanding. This represents 27 percent of net assets. LOOKING AHEAD The slower pace of economic growth in 1995 and the Federal Reserve Board's latest interest rate moves have improved bond-market expectations. The decreasing supply of new issues, combined with significant 4 MUNICIPAL PREMIUM INCOME TRUST LETTER TO THE SHAREHOLDERS November 30, 1995, continued maturities and calls for redemption, should continue to be positive for the municipal market. However, tax-reduction proposals are likely to continue to receive publicity and may cloud the outlook for tax-exempt bonds. With long-term municipal securities yielding more than 90 percent of the yield on U.S. Treasuries, the market has already begun the process of discounting the risk that a flat tax might eventually become law. 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 six-month period ended November 30, 1995, the Fund purchased and retired 40,200 shares of common stock at a weighted average market discount of 7.9 percent. The Fund may also utilize procedures to reduce or eliminate the amount of outstanding ARPS, including their purchase 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. Very truly yours, /s/ CHARLES A. FIUMEFREDDO - ---------------------------- CHARLES A. FIUMEFREDDO Chairman of the Board 5 MUNICIPAL PREMIUM INCOME TRUST RESULTS OF ANNUAL MEETING (unaudited) * * * On December 20, 1995, an annual meeting of the Fund's shareholders was held for the purpose of voting on three separate issues, the results of which were as follows: (1) ELECTION OF TRUSTEES BY ALL SHAREHOLDERS: Edwin J. Garn For................................................................................................ 19,635,275 Withheld........................................................................................... 269,135 Michael E. Nugent For................................................................................................ 19,638,107 Withheld........................................................................................... 266,303 Philip J. Purcell For................................................................................................ 19,635,850 Withheld........................................................................................... 268,560
ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS: John R. Haire For................................................................................................ 972 Withheld........................................................................................... --
The following Trustees were not standing for reelection at this meeting: Jack F. Bennett, Michael Bozic, Charles A. Fiumefreddo, Dr. Manuel H. Johnson, Paul Kolton and John L. Schroeder. (2) CONTINUANCE OF CURRENTLY EFFECTIVE INVESTMENT ADVISORY AGREEMENT: For................................................................................................ 19,238,104 Against............................................................................................ 224,560 Abstain............................................................................................ 441,746
(3) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS: For................................................................................................ 19,488,398 Against............................................................................................ 125,183 Abstain............................................................................................ 290,829
6 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS November 30, 1995 (unaudited)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- MUNICIPAL BONDS (97.9%) General Obligation (4.8%) $ 5,000 Chicago Park District, Illinois, Ser 1995............................... 6.60 % 11/15/14 $ 5,453,350 Massachusetts, 3,500 1995 Ser A (AMBAC)..................................................... 5.00 07/01/12 3,388,665 3,965 1994 Ser C (FGIC)...................................................... 6.75 11/01/12 4,445,162 4,500 Shelby County, Tennessee, Refg 1995 Ser A............................... 5.625 04/01/11 4,656,555 - -------- ---------- 16,965 17,943,732 - -------- ---------- Educational Facilities Revenue (3.3%) 5,500 Oakland University, Michigan, Ser 1995 (MBIA)........................... 5.75 05/15/26 5,545,760 New York State Dormitory Authority, 4,000 State University Refg Ser 1993 A....................................... 5.50 05/15/08 3,989,200 1,350 State University Ser 1990 B............................................ 7.50 05/15/11 1,627,074 1,000 Pennsylvania Higher Educational Facilities Authority, Temple University First Ser (MBIA)....................................................... 6.50 04/01/21 1,071,150 - -------- ---------- 11,850 12,233,184 - -------- ---------- Electric Revenue (12.1%) 5,000 Sacramento Municipal Utility District, California, Refg 1994 Ser I (MBIA)................................................................. 6.00 01/01/24 5,191,300 4,000 Kansas City, Kansas, Utility Refg & Impr Ser 1994 (FGIC)................ 6.375 09/01/23 4,348,240 7,750 South Carolina Public Service Authority, 1995 Refg Ser A (AMBAC)........ 6.25 01/01/22 8,139,670 20,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C...................... 4.70 02/01/06 19,309,200 Intermountain Power Agency, Utah, 1,270 Refg Ser 1988 B........................................................ 7.50 07/01/21 1,377,125 6,300 Refg Ser 1987 D........................................................ 8.625 07/01/21 6,818,679 - -------- ---------- 44,320 45,184,214 - -------- ---------- Hospital Revenue (14.9%) 5,000 Birmingham-Carraway Special Care Facilities Financing Authority, Alabama, Carraway Methodist Health Systems Ser 1995 A (Connie Lee)..... 5.875 08/15/15 5,129,400 3,500 Colbert County - Northwest Health Care Authority, Alabama, Helen Keller Hospital Refg Ser 1990................................................. 8.75 06/01/09 3,953,880 1,000 California Health Facilities Financing Authority, Alexian Brothers/San Jose Refg Ser 1990 (MBIA).............................................. 7.125 01/01/16 1,101,760 1,000 Jacksonville Health Facilities Authority, Florida, Riverside Hospital Ser 1989............................................................... 7.625 10/01/13 1,054,920 Hall County & Gainesville Hospital Authority, Georgia, Northeast Georgia Healthcare 2,500 Ser 1995 (MBIA)........................................................ 5.75 10/01/17 2,525,450 3,000 Ser 1995 (MBIA)........................................................ 6.00 10/01/20 3,115,740 3,750 Evergreen Park, Illinois, Little Company of Mary Hospital Refg Ser 1988 (MBIA)................................................................. 7.25 02/15/11 4,034,587 1,800 Southwestern Illinois Development Authority, Anderson Hospital Ser 1992 A...................................................................... 7.00 08/15/22 1,842,084 4,000 Indiana Health Facility Financing Authority, Hancock Memorial Hospital Ser 1990............................................................... 8.30 08/15/20 4,343,200 3,420 Kentucky Development Finance Authority, Ashland Hospital/King's Daughters Refg Ser 1987................................................ 9.75 08/01/05 3,805,092 9,500 Boston, Massachusetts, Boston City Hospital - FHA Mtge Refg Ser B....... 5.75 02/15/13 9,525,270 2,985 Lehigh County General Purpose Authority, Pennsylvania, St Lukes Hospital Ser 1992 (AMBAC)....................................................... 6.25 07/01/22 3,144,757 3,420 Lycoming County Authority, Pennsylvania, Divine Providence Hospital of the Sisters of Christian Charity 1990 Ser B............................ 7.75 07/01/16 3,855,537
SEE NOTES TO FINANCIAL STATEMENTS 7 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS November 30, 1995 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- $ 2,375 Montgomery County Higher Educational & Health Authority, Pennsylvania, Holy Redeemer Hospital 1990 Ser A (AMBAC).............................. 7.625% 02/01/20 $ 2,638,839 2,750 Jefferson County Health Facilities Development Corporation, Texas, Baptist Health Care Ser 1989........................................... 8.30 10/01/14 2,838,935 2,400 Peninsula Ports Authority, Virginia, Mary Immaculate Hospital Ser 1989................................................................... 8.375 08/01/04 2,667,192 - -------- ---------- 52,400 55,576,643 - -------- ---------- 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 16,334,105 10,000 Burlington, Kansas, Kansas Gas & Electric Co Refg Ser 1991 (MBIA)....... 7.00 06/01/31 11,243,200 1,000 Ohio Water Development Authority, Toledo Edison Co Ser 1990 A (Secondary FSA)........................................................ 7.75 05/15/19 1,138,490 9,500 Montgomery County Industrial Development Authority, Pennsylvania, Philadelphia Electric Co Refg 1991 Ser B (MBIA)........................ 6.70 12/01/21 10,397,275 13,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990 (AMT).............. 7.50 12/01/29 13,891,670 - -------- ---------- 48,000 53,004,740 - -------- ---------- Mortgage Revenue - Multi-Family (2.5%) Massachusetts Housing Finance Agency, 2,000 Rental 1994 Ser A (AMT) (AMBAC)........................................ 6.60 07/01/14 2,083,340 4,000 Rental 1994 Ser A (AMT) (AMBAC)........................................ 6.65 07/01/19 4,172,640 3,000 Minnesota Housing Finance Agency, Rental 1995 Ser D (MBIA) (WI)......... 6.00 02/01/22 3,021,540 - -------- ---------- 9,000 9,277,520 - -------- ---------- Mortgage Revenue - Single Family (10.7%) 535 Colorado Housing & Finance Authority, Ser 1990 B-2...................... 8.00 02/01/18 565,372 18,200 Pinnellas County Housing Finance Authority, Florida, Ser 1993........... 0.00 01/01/15 2,599,870 635 Idaho Housing Agency, 1988 Ser D-2 (AMT)................................ 8.25 01/01/20 680,675 2,530 Illinois Housing Development Authority, 1988 Ser C (AMT)................ 8.10 02/01/22 2,686,025 1,195 Indiana Housing Finance Authority, Ser 1990 A-2 (AMT)................... 8.10 01/01/22 1,284,541 1,325 Kansas City Leavenworth & Lenexa, Kansas, GNMA-Backed Ser 1988 C (AMT).. 8.00 11/01/20 1,404,102 Olathe, Kansas, GNMA Collateralized 195 Ser 1990 B............................................................. 7.50 09/01/10 211,078 675 Ser 1989 A (AMT) (MBIA)................................................ 8.00 11/01/20 725,051 1,250 Lake Charles Non-Profit Housing Development Corporation, Louisiana, Ser 1990 A (CGIC)...................................................... 7.875 02/15/25 1,254,775 1,870 New Orleans Home Mortgage Authority, Louisiana, 1989 Ser B-1 (AMT)...... 8.25 12/01/21 2,008,885 Maine Housing Authority, 3,540 Purchase Ser 1988 D4 (AMT)............................................. 7.55 11/15/19 3,773,428 1,000 Purchase Ser 1988 D5 (AMT)............................................. 7.55 11/15/19 1,062,460 Massachusetts Housing Finance Agency, 1,660 Residential Ser 1989 A (AMT)........................................... 8.20 08/01/15 1,783,023 4,960 1989 Ser 7 (AMT)....................................................... 8.10 06/01/20 5,266,478 855 Mississippi Housing Finance Corporation, GNMA-Backed Ser 1989 (AMT)..... 8.25 10/15/18 917,868 460 Muskogee County Home Finance Authority, Oklahoma, 1990 Ser A (FGIC)..... 7.60 12/01/10 494,321 630 Pennsylvania Housing Finance Agency, 1990 Ser 27 (AMT).................. 8.15 10/01/21 652,611 Rhode Island Housing & Mortgage Finance Corporation, Homeownership 2,560 1988 Ser 1-D (AMT)..................................................... 7.875 10/01/22 2,725,402 990 1988 Ser 1-B (AMT)..................................................... 8.40 10/01/22 1,034,223
SEE NOTES TO FINANCIAL STATEMENTS 8 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS November 30, 1995 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- South Carolina Housing Finance & Development Authority, Homeownership $ 3,000 1988 Ser C-1 (AMT)..................................................... 8.125% 07/01/21 $ 3,229,740 1,220 1991 Ser A (AMT)....................................................... 7.40 07/01/23 1,298,348 2,870 El Paso Housing Finance Corporation, Texas, Ser 1989 (AMT).............. 8.20 03/01/21 3,061,228 Utah Housing Finance Agency, 545 Ser 1991 B-1........................................................... 7.50 07/01/16 586,916 675 Ser 1989 B (AMT)....................................................... 8.25 07/01/21 706,307 - -------- ---------- 53,375 40,012,727 - -------- ---------- Nursing & Health Related Facilities Revenue (1.2%) New York State Medical Care Facilities Finance Agency, Mental Health 1,625 Ser 1987............................................................... 8.875 08/15/07 1,789,905 1,555 Ser 1990 (MBIA)........................................................ 7.75 02/15/20 1,762,157 990 Ser 1991 A............................................................. 7.50 02/15/21 1,087,752 - -------- ---------- 4,170 4,639,814 - -------- ---------- Public Facilities Revenue (2.8%) 4,000 Metropolitan Pier & Exposition Authority, Illinois, Ser 1992 A (FGIC)... 0.00 06/15/07 3,932,720 Saint Paul Independent School District #625, Minnesota, 1,700 Ser 1995 C COPs........................................................ 5.45 02/01/11 1,721,896 1,800 Ser 1995 C COPs........................................................ 5.50 02/01/12 1,823,130 New York State Urban Development Corporation, 1,000 Ser 1991............................................................... 7.60 04/01/03 1,166,490 1,300 Ser 1991............................................................... 7.50 04/01/11 1,510,314 - -------- ---------- 9,800 10,154,550 - -------- ---------- 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 12,302,585 ---------- Transportation Facilities Revenue (6.6%) 3,500 Atlanta, Georgia, Airport Ser 1994 B (AMT) (AMBAC)...................... 6.00 01/01/21 3,603,845 7,000 Chicago, Illinois, Chicago Midway Airport 1994 Ser A (AMT) (MBIA)....... 6.25 01/01/24 7,302,750 5,000 Regional Transportation Authority, Illinois, Ser 1994 A (AMBAC)......... 6.25 06/01/24 5,283,900 8,000 Austin, Texas, Airport Prior Lien Ser 1995 A (AMT) (MBIA)............... 6.125 11/15/25 8,305,680 - -------- ---------- 23,500 24,496,175 - -------- ---------- Water & Sewer Revenue (4.6%) 3,000 Central Coast Water Authority, California, Ser 1992 (AMBAC)............. 6.60 10/01/22 3,262,920 2,500 Coachella, California, Ser 1992 COPs (FSA).............................. 6.10 03/01/22 2,588,125 3,500 Chicago, Illinois, Wastewater Ser 1994 (MBIA)........................... 6.375 01/01/24 3,733,485 3,600 Rio Rancho, New Mexico, Water & Wastewater Ser 1995 A (FSA)............. 6.00 05/15/22 3,738,708 3,500 Texas Water Resource Finance Authority, Ser 1989 (AMBAC)................ 7.50 08/15/13 3,801,105 - -------- ---------- 16,100 17,124,343 - -------- ---------- Other Revenue (0.6%) 2,500 Michigan Municipal Bond Authority, Local Govt Refg Ser 1991 A (FGIC).... 4.75 12/01/09 2,396,275 - -------- ----------
SEE NOTES TO FINANCIAL STATEMENTS 9 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS November 30, 1995 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- Refunded (16.3%) $ 5,000 District of Columbia, Ser 1990 A (AMBAC)................................ 7.50 % 06/01/10 $ 5,742,350 5,000 Massachusetts Health & Educational Facilities Authority, St John's Hospital 1990 Ser B............................................................. 8.375 12/01/20 5,922,300 11,000 Western Townships Utilities Authority, Michigan, Sewerage Disposal Ser 1989 (Crossover Refunded).............................................. 8.20 01/01/18 12,334,740 4,000 Duluth Economic Development Authority, Minnesota, Benedictine Health/ St Mary's Medical Center Ser 1990......................................... 8.375 02/15/20 4,693,120 Missouri Health & Educational Facilities Authority, Missouri Baptist Medical Center 2,660 Refg Ser 1989.......................................................... 7.625 07/01/18 3,005,986 1,340 Refg Ser 1989 (ETM).................................................... 7.625 07/01/18 1,722,141 1,985 Ser 1989............................................................... 8.00 01/01/19 2,270,661 4,650 New York Local Government Assistance Corporation, Ser 1991 A............ 7.25 04/01/18 5,376,470 4,500 Midland County Hospital District, Texas, Ser 1989....................... 8.375 06/01/02 4,964,310 12,550 Washington Public Power Supply System, Nuclear Proj #2 Refg Ser 1990 C...................................................................... 7.625 07/01/10 14,608,326 - -------- ---------- 52,685 60,640,404 - -------- ---------- 356,165 TOTAL MUNICIPAL BONDS (Identified Cost $336,828,599)............................................. 364,986,906 - -------- ---------- SHORT-TERM MUNICIPAL OBLIGATIONS (0.8%) 1,300 Jasper County, Indiana, Northern Indiana Public Service Co Refg Ser 1994 B (Demand 12/01/95).................................................... 3.80* 06/01/13 1,300,000 1,800 Metropolitan Nashville Airport Authority, Tennessee, American Airlines Inc Refg Ser 1995 A (Demand 12/01/95)...................................... 3.85* 10/01/12 1,800,000 - -------- ---------- 3,100 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS (Identified Cost $3,100,000).............................. 3,100,000 - -------- ---------- $359,265 TOTAL INVESTMENTS (Identified Cost $339,928,599) (a).................................... 98.7% 368,086,906 - -------- - -------- CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................ 1.3 4,682,011 ---- ---------- NET ASSETS............................................................................... 100.0% $372,768,917 ---- ---------- ---- ----------
- --------------------- AMT Alternative Minimum Tax. COPs Certificates of Participation. ETM Escrowed to Maturity. WI Security purchased on a when issued basis. * Current coupon of variable rate security. (a) The aggregate cost for federal income tax purposes is $339,928,599; the aggregate gross unrealized appreciation is $28,978,654 and the aggregate gross unrealized depreciation is $820,347, resulting in net unrealized appreciation of $28,158,307.
Bond Insurance: - ------------------------------------------------------------------------------------------------------------------------- AMBAC AMBAC Indemnity Corporation. CGIC Capital Guaranty Insurance Company. Connie Lee Connie Lee Insurance Company. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS 10 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS November 30, 1995 (unaudited) continued - -------------------------------------------------------------------------------- GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percent of Net Assets November 30, 1995 (unaudited) Alabama.............. 2.4% Arizona.............. 4.4 California........... 3.3 Colorado............. 0.2 District of Columbia............ 1.6 Florida.............. 1.0 Georgia.............. 2.5 Idaho................ 0.2 Illinois............. 9.2 Indiana.............. 1.9 Kansas............... 4.8 Kentucky............. 1.0% Louisiana............ 0.9 Maine................ 1.3 Massachusetts........ 9.8 Michigan............. 5.4 Minnesota............ 1.8 Mississippi.......... 0.2 Missouri............. 3.1 New Mexico........... 1.0 New York............. 4.9 Ohio................. 0.3 Oklahoma............. 0.1% Pennsylvania......... 9.1 Rhode Island......... 1.0 South Carolina....... 3.4 Tennessee............ 1.7 Texas................ 15.1 Utah................. 2.5 Virginia............. 0.7 Washington........... 3.9 --- Total................ 98.7% --- ---
SEE NOTES TO FINANCIAL STATEMENTS 11 MUNICIPAL PREMIUM INCOME TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES November 30, 1995 (unaudited) ASSETS: Investments in securities, at value (identified cost $339,928,599)....................................... $368,086,906 Cash.................................................................. 71,072 Receivable for: Interest.......................................................... 7,675,984 Investments sold.................................................. 275,000 Prepaid expenses and other assets..................................... 33,453 ---------- TOTAL ASSETS...................................................... 376,142,415 ---------- LIABILITIES: Payable for: Investments purchased............................................. 3,014,000 Investment advisory fee........................................... 138,025 Administration fee................................................ 86,266 Accrued expenses and other payables................................... 135,207 ---------- TOTAL LIABILITIES................................................. 3,373,498 ---------- 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, 25,854,124 shares outstanding)....................... 240,338,136 Net unrealized appreciation........................................... 28,158,307 Accumulated undistributed net realized gain........................... 3,600,506 Accumulated undistributed net investment income....................... 671,968 ---------- NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS...................... 272,768,917 ---------- NET ASSETS........................................................ $372,768,917 ---------- ---------- NET ASSET VALUE PER COMMON SHARE ($272,768,917 divided by 25,854,124 common shares outstanding)....... $10.55 ----- -----
SEE NOTES TO FINANCIAL STATEMENTS 12 MUNICIPAL PREMIUM INCOME TRUST FINANCIAL STATEMENTS, continued STATEMENT OF OPERATIONS For the six months ended November 30, 1995 (unaudited) NET INVESTMENT INCOME: INTEREST INCOME........................................................ $11,869,802 --------- EXPENSES Investment advisory fee................................................ 737,132 Administration fee..................................................... 460,707 Auction commission fees................................................ 124,952 Professional fees...................................................... 66,194 Transfer agent fees and expenses....................................... 54,900 Auction agent fees..................................................... 33,109 Trustees' fees and expenses............................................ 16,644 Registration fees...................................................... 16,464 Shareholder reports and notices........................................ 16,221 Other.................................................................. 17,209 --------- TOTAL EXPENSES..................................................... 1,543,532 --------- NET INVESTMENT INCOME.............................................. 10,326,270 --------- NET REALIZED AND UNREALIZED GAIN: Net realized gain...................................................... 2,113,253 Net change in unrealized appreciation.................................. 3,527,222 --------- NET GAIN........................................................... 5,640,475 --------- NET INCREASE........................................................... $15,966,745 --------- ---------
SEE NOTES TO FINANCIAL STATEMENTS 13 MUNICIPAL PREMIUM INCOME TRUST FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED FOR THE YEAR NOVEMBER 30, ENDED 1995 MAY 31, 1995 - --------------------------------------------------------------------------------------- (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income............................. $ 10,326,270 $ 21,712,893 Net realized gain................................. 2,113,253 1,494,255 Net change in unrealized appreciation............. 3,527,222 4,565,857 ---------- ---------- NET INCREASE.................................. 15,966,745 27,773,005 ---------- ---------- DIVIDENDS TO PREFERRED SHAREHOLDERS FROM NET INVESTMENT INCOME............................... (1,982,326) (4,023,613) ---------- ---------- DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income............................. (9,058,447) (18,749,585) Net realized gain................................. -- (2,498,582) ---------- ---------- TOTAL......................................... (9,058,447) (21,248,167) ---------- ---------- TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST: Preferred......................................... -- (25,000,000) Common............................................ (381,656) (2,808,603) ---------- ---------- TOTAL......................................... (381,656) (27,808,603) ---------- ---------- TOTAL INCREASE (DECREASE)..................... 4,544,316 (25,307,378) NET ASSETS: Beginning of period............................... 368,224,601 393,531,979 ---------- ---------- END OF PERIOD (Including undistributed net investment income of $671,968 and $1,386,471, respectively)..... $372,768,917 $368,224,601 ---------- ---------- ---------- ----------
SEE NOTES TO FINANCIAL STATEMENTS 14 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS November 30, 1995 (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 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. Discounts are accreted and premiums are amortized over the life of the respective securities. Interest income is accrued daily. C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable and nontaxable income to its shareholders. Accordingly, no federal income tax provision is required. 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 15 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS November 30, 1995 (unaudited) continued 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"), an affiliate of Dean Witter Services Company Inc. (the "Administrator"), the Fund pays 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 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 the Administrator, the Fund pays an administration fee, calculated weekly and payable monthly, by applying the annual rate of 0.25% to the Fund's 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, 1995 aggregated $25,426,680 and $23,889,592, respectively. Dean Witter Trust Company, an affiliate of the Investment Adviser and Administrator, is the Fund's transfer agent. At November 30, 1995, the Fund had transfer agent fees and expenses payable of approximately $27,000. 16 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS November 30, 1995 (unaudited) continued The Fund has an unfunded noncontributory defined benefit pension plan covering all independent Trustees of the Fund who will have served as independent Trustees for at least five years at the time of retirement. Benefits under this plan are based on years of service and compensation during the last five years of service. Aggregate pension costs for the six months ended November 30, 1995 included in Trustees' fees and expenses in the Statement of Operations amounted to $5,999. At November 30, 1995, the Fund had an accrued pension liability of $54,887 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 of which 50 shares of each Series have subsequently been retired. 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. Dividends, which are cumulative, are reset through auction procedures.
RANGE OF NEXT DIVIDEND SHARES* SERIES RATE* RESET DATE RATES** - -------- ------- ------ ---------- ------------- 200 A 3.92 % 12/05/95 3.649% - 4.25% 200 B 3.699 12/05/95 3.699 - 4.25 200 C 3.699 12/05/95 3.64 - 4.35 200 D 3.70 12/05/95 3.70 - 4.26 200 E 4.07 12/05/95 3.70 - 4.15
- --------------------- * As of November 30, 1995. ** For the six months ended November 30, 1995. 17 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS November 30, 1995 (unaudited) continued Subsequent to November 30, 1995 and up through January 12, 1996, the Fund paid dividends to each of the Series A through E at rates ranging from 3.60% to 5.00% in the aggregate amount of $461,576. 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:
CAPITAL PAID PAR VALUE IN EXCESS OF SHARES OF 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 Treasury shares purchased and retired (weighted average discount 7.91%)*....... (40,200) (402) (381,254) ---------- --------- ------------ Balance, November 30, 1995..................................................... 25,854,124 $258,541 $240,079,595 ========== ========= ============
- --------------------- * 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 - ------------------ ---------- ---------------- ----------------- November 28, 1995 $0.05 December 8, 1995 December 22, 1995 January 2, 1996 $0.05 January 12, 1996 January 26, 1996
18 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS November 30, 1995 (unaudited) continued 8. SELECTED QUARTERLY FINANCIAL DATA
QUARTERS ENDED ------------------------------------------- 11/30/95 8/31/95 ------------------- ----------------- PER PER TOTAL* SHARE TOTAL* SHARE -------- ------ ------- ----- Total investment income........................................................ $ 5,872 $ 0.23 $ 5,998 $0.23 Net investment income.......................................................... 5,103 0.20 5,223 0.20 Net realized and unrealized gain (loss)........................................ 7,190 0.28 (1,550) (0.06)
QUARTERS ENDED ---------------------------------------------------------------------------------------------- 5/31/95 02/28/95 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 02/28/94 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
- --------------------- * Amounts in thousands. 19 MUNICIPAL PREMIUM INCOME TRUST FINANCIAL HIGHLIGHTS Selected ratios and per share data for a common share of beneficial interest outstanding throughout each period:
FOR THE SIX FOR THE YEAR ENDED MAY 31 MONTHS ENDED ----------------------------------------------- NOVEMBER 30, 1995* 1995* 1994* 1993* 1992* 1991* --------------------------------------------------------------------------------------------------------------------------- (unaudited) PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period.......... $10.36 $ 10.24 $10.67 $10.02 $ 9.61 $ 9.35 ----- ------ ----- ----- ------ ----- Net investment income......................... 0.40 0.84 0.90 0.91 0.95 0.96 Net realized and unrealized gain (loss)....... 0.22 0.26 (0.45) 0.64 0.42 0.34 ----- ------ ----- ----- ------ ----- Total from investment operations.............. 0.62 1.10 0.45 1.55 1.37 1.30 ----- ------ ----- ----- ------ ----- Less dividends and distributions from: Net investment income...................... (0.35) (0.72) (0.76) (0.77) (0.72) (0.70) Net realized gain.......................... -- (0.10) -- (0.01) (0.05) (0.07) Common share equivalent of dividends paid to preferred shareholders.................. (0.08) (0.16) (0.12) (0.12) (0.19) (0.27) ----- ------ ----- ----- ------ ----- Total dividends and distributions............. (0.43) (0.98) (0.88) (0.90) (0.96) (1.04) ----- ------ ----- ----- ------ ----- Net asset value, end of period................ $10.55 $ 10.36 $10.24 $10.67 $ 10.02 $ 9.61 ----- ------ ----- ----- ------ ----- ----- ------ ----- ----- ------ ----- Market value, end of period................... $9.375 $9.6875 $ 9.75 $10.75 $10.375 $9.625 ----- ------ ----- ----- ------ ----- ----- ------ ----- ----- ------ ----- TOTAL INVESTMENT RETURN+...................... 0.28%(1) 8.15% (2.72)% 11.30% 16.44% 14.62% RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS: Expenses...................................... 1.15%(2) 1.21% 1.23% 1.38% 1.44% 1.59% Net investment income before preferred stock dividends.................................... 7.71%(2) 8.37% 8.31% 8.73% 9.67% 10.20% Preferred stock dividends..................... 1.48%(2) 1.55% 1.11% 1.21% 1.90% 2.88% Net investment income available to common shareholders................................. 6.23%(2) 6.82% 7.20% 7.52% 7.77% 7.32% SUPPLEMENTAL DATA: Net assets, end of period, in thousands....... $372,769 $368,225 $393,532 $404,979 $388,022 $373,207 Asset coverage on preferred shares at end of period....................................... 373% 368% 314% 324% 310% 299% Portfolio turnover rate....................... 7%(1) 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 brokerage commissions. * The per share amounts were computed using an average number of shares outstanding during the period. (1) Not annualized. (2) Annualized. SEE NOTES TO FINANCIAL STATEMENTS 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 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. MUNICIPAL PREMIUM INCOME TRUST SEMIANNUAL REPORT NOVEMBER 30, 1995 -----END PRIVACY-ENHANCED MESSAGE-----