-----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, E6rCEr9nwmxY2c4+4vQfu/m5DRkUdlp7etCVgzta7Gz0chOzN1+wKOqlJkE0bIoi J8EEeazHWruZDSGhdP5PvA== 0000950123-96-003699.txt : 19960723 0000950123-96-003699.hdr.sgml : 19960723 ACCESSION NUMBER: 0000950123-96-003699 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960719 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: 96596928 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 ANNUAL REPORT 1 MUNICIPAL PREMIUM INCOME TRUST Two World Trade Center, LETTER TO THE SHAREHOLDERS May 31, 1996 New York, New York 10048 DEAR SHAREHOLDER: Between June 1995 and January 1996 -- the first eight months of Municipal Premium Income Trust's (PIA) fiscal year -- interest rates declined. Beginning in February 1996, interest rates reversed direction and moved higher over the remainder of PIA's fiscal year. Last year's favorable bond market environment was created by proposals to achieve a balanced federal budget within five to seven years and by continued easing of Federal Reserve Board monetary policy. However, budget negotiations reached a political impasse early in 1996 and federal offices were partially closed. This had an adverse impact on bonds. Concerns also developed about an increase in the pace of the economic recovery, which was marked by strong job growth in March and rising commodity prices. The bond market reacted to these developments by pushing yields sharply higher. MUNICIPAL MARKET CONDITIONS Long-term municipal revenue bond yields as tracked by The Bond Buyer Revenue Bond Index* moved from 6.00 percent in May 1995 to a low of 5.63 percent in January 1996. Interest rates subsequently began to rise in mid-February on signs of stronger economic growth and renewed inflationary fears. The Index yield reached 6.17 percent in May. Yields on one-year municipal notes declined from 3.87 percent to 3.73 percent over the past year. The yield curve pickup by extending maturities from 1 to 30 years was 244 basis points at the end of May. The risk of flat-tax legislation caused the ratio of Revenue Bond Index yields to 30-year U.S. Treasury bond yields to rise from 85 to 94 percent between March and September 1995. However, as the prospects of a flat tax faded, the ratio improved to 89 percent by the end of May 1996. A declining ratio means that municipal bond prices have - --------------------- *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 May 31, 1996, continued outperformed U.S. Treasury prices. It is interesting to note that long-term municipal yields had also averaged 89 percent of U.S. Treasury yields over the previous eight-year period prior to the flat-tax debate. Municipal underwriting activity was fueled by the trend of lower interest rates in 1995. During the first five months of 1996, new issue volume increased 39 percent versus the same period a year ago. Despite a resurgence in underwriting, dealers have continued to announce their withdrawal from the municipal business. PERFORMANCE The net asset value (NAV) of Municipal Premium Income Trust declined from $10.36 to $10.02 per share during the fiscal year ended May 31, 1996. Based on this NAV change plus reinvestment of tax-free dividends totaling $0.65 per share and a long-term capital gains distribution totaling $0.12 per share, the Fund's total return was 4.81 percent. Over the same period, the Fund's market price on the New York Stock Exchange declined from $9.6875 to $9.00 per share. Based on this market price change and reinvestment of tax-free dividends and distributions, the Fund's total return was 0.67 percent. The Fund began the fiscal year trading at 6.5 percent discount to NAV and closed at a 10 percent discount. Undistributed net investment income was $0.047 per share on May 31, 1996, versus $0.054 per share a year earlier. PORTFOLIO STRUCTURE On May 31, 1996, the Fund had $356 million in net assets which were diversified among 13 long- FIVE LARGEST SECTORS AS OF MAY 31, 1996 (% OF NET ASSETS) IDR/PCR* 17% HOSPITAL 15% MORTGAGE 13% ELECTRIC 12% REFUNDED 11% OTHER 32%
*INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE CREDIT RATINGS AS OF MAY 31, 1996 (% OF TOTAL LONG-TERM PORTFOLIO) Aaa or AAA 56% Aa or AA 23% Baa or BBB 16% A or A 5%
AS MEASURED BY STANDARD & POOR'S CORP. OR MOODY'S INVESTORS SERVICE, INC. 3 MUNICIPAL PREMIUM INCOME TRUST LETTER TO THE SHAREHOLDERS May 31, 1996, continued term municipal sectors and 73 credits. The five largest sectors represented 68 percent of the Fund's net assets. The portfolio has consistently maintained investment grade quality with 84 percent of its long-term holdings rated "A" or better. The average maturity and call protection of the Fund's long-term holdings were 21 and 7 years, respectively. THE IMPACT OF LEVERAGING As discussed in previous reports, the total income available for distribution to common shareholders includes incremental income provided by the Fund's outstanding Auction Rate Preferred Shares (ARPS). 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 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. ARPS yields ranged between 3.20 and 5.00 percent during the 12 months ended May 31, 1996. ARPS leverage of $100 million represented 28 percent of net assets and contributed $0.07 per share to common share earnings. LOOKING AHEAD Tax-reduction proposals may receive additional publicity. However, the balance between the supply of new issues and demand created by maturities and calls for redemption is positive for the municipal market. Long-term municipal securities currently yield 89 percent of the yield on U.S. Treasury securities and may be expected to move in tandem with the Treasury market. 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, 1996, the Fund purchased and retired 392,900 shares of common stock at a weighted average market discount of 9.79 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. 4 MUNICIPAL PREMIUM INCOME TRUST LETTER TO THE SHAREHOLDERS May 31, 1996, continued 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 PORTFOLIO OF INVESTMENTS May 31, 1996
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------------ MUNICIPAL BONDS (97.3%) General Obligation (6.5%) $ 5,000 Chicago Park District, Illinois, Ser 1995............................. 6.60 % 11/15/14 $ 5,242,250 Massachusetts, 3,500 1995 Ser A (AMBAC)................................................... 5.00 07/01/12 3,223,290 3,965 1994 Ser C (FGIC).................................................... 6.75 11/01/12 4,273,001 4,500 Shelby County, Tennessee, Refg 1995 Ser A............................. 5.625 04/01/11 4,488,390 6,000 Washington, Ser 1993 A................................................ 5.75 10/01/17 5,813,280 - -------- ------------ 22,965 23,040,211 - -------- ------------ Educational Facilities Revenue (3.3%) 5,500 Oakland University, Michigan, Ser 1995 (MBIA)......................... 5.75 05/15/26 5,317,070 New York State Dormitory Authority, 4,000 State University Refg Ser 1993 A..................................... 5.50 05/15/08 3,824,360 1,350 State University Ser 1990 B.......................................... 7.50 05/15/11 1,533,640 1,000 Pennsylvania Higher Educational Facilities Authority, Temple University First Ser (MBIA)..................................................... 6.50 04/01/21 1,036,080 - -------- ------------ 11,850 11,711,150 - -------- ------------ Electric Revenue (12.3%) 5,000 Sacramento Municipal Utility District, California, Refg 1994 Ser I (MBIA)............................................................... 6.00 01/01/24 4,933,350 4,000 Kansas City, Kansas, Utility Refg & Impr Ser 1994 (FGIC).............. 6.375 09/01/23 4,144,120 7,750 South Carolina Public Service Authority, 1995 Refg Ser A (AMBAC)...... 6.25 01/01/22 7,923,212 20,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C.................... 4.70 02/01/06 18,684,200 Intermountain Power Agency, Utah, 1,270 Refg Ser 1988 B...................................................... 7.50 07/01/21 1,352,055 6,300 Refg Ser 1987 D...................................................... 8.625 07/01/21 6,656,202 - -------- ------------ 44,320 43,693,139 - -------- ------------ Hospital Revenue (15.2%) 5,000 Alabama Special Care Facilities Financing Authority of Birmingham, Daughter's of Charity National Health/St Vincent's & Providence Hospitals Ser 1995................................................... 5.00 11/01/25 4,204,350 5,000 Birmingham-Carraway Special Care Facilities Financing Authority, Alabama, Carraway Methodist Health Systems Ser 1995 A (Connie Lee)... 5.875 08/15/15 4,873,200 3,500 Colbert County - Northwest Health Care Authority, Alabama, Helen Keller Hospital Refg Ser 1990........................................ 8.75 06/01/09 3,875,760 1,000 California Health Facilities Financing Authority, Alexian Brothers/San Jose Refg Ser 1990 (MBIA)............................................ 7.125 01/01/16 1,073,000 1,000 Jacksonville Health Facilities Authority, Florida, Riverside Hospital Ser 1989............................................................. 7.625 10/01/13 1,052,790 Hall County and Gainesville Hospital Authority, Georgia, 2,000 Northeast Georgia Healthcare Ser 1995 (MBIA)......................... 5.75 10/01/17 1,949,480 3,000 Northeast Georgia Healthcare Ser 1995 (MBIA)......................... 6.00 10/01/20 2,965,650 3,750 Evergreen Park, Illinois, Little Company of Mary Hospital Refg Ser 1988 (MBIA).......................................................... 7.25 02/15/11 3,965,625 1,800 Southwestern Illinois Development Authority, Anderson Hospital Ser 1992 A............................................................... 7.00 08/15/22 1,811,988
SEE NOTES TO FINANCIAL STATEMENTS 6 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS May 31, 1996, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------------ $ 4,000 Indiana Health Facility Financing Authority, Hancock Memorial Hospital Ser 1990............................................................. 8.30 % 08/15/20 $ 4,268,440 3,420 Kentucky Development Finance Authority, Ashland Hospital/King's Daughters Refg Ser 1987.............................................. 9.75 08/01/05 3,704,749 9,500 Boston, Massachusetts, Boston City Hospital - FHA Mtge Refg Ser B..... 5.75 02/15/13 9,231,150 2,985 Lehigh County General Purpose Authority, Pennsylvania, St Lukes Hospital Ser 1992 (AMBAC)............................................ 6.25 07/01/22 3,032,044 2,375 Montgomery County Higher Educational & Health Authority, Pennsylvania, Holy Redeemer Hospital 1990 Ser A (AMBAC)............................ 7.625 02/01/20 2,561,485 2,750 Jefferson County Health Facilities Development Corporation, Texas, Baptist Health Care Ser 1989......................................... 8.30 10/01/14 2,711,362 2,400 Peninsula Ports Authority, Virginia, Mary Immaculate Hospital Ser 1989................................................................. 8.375 08/01/04 2,614,008 - -------- ------------ 53,480 53,895,081 - -------- ------------ Industrial Development/Pollution Control Revenue (17.1%) 14,500 Pima County Industrial Development Authority, Arizona, Tucson Electric Power Co Refg Ser 1988 A (FSA Surety)................................ 7.25 07/15/10 15,810,510 10,000 Burlington, Kansas, Kansas Gas & Electric Co Refg Ser 1991 (MBIA)..... 7.00 06/01/31 10,860,000 5,000 New Jersey Economic Development Authority, Elizabethtown Water Co 1995 Ser (AMT) (MBIA)................................................ 5.60 12/01/25 4,655,300 5,000 New York State Energy Research & Development Authority, Brooklyn Union Gas Co 1996 Ser (MBIA)............................................... 5.50 01/01/21 4,686,550 1,000 Ohio Water Development Authority, Toledo Edison Co Ser 1990 A (Secondary FSA)...................................................... 7.75 05/15/19 1,109,820 9,500 Montgomery County Industrial Development Authority, Pennsylvania, Philadelphia Electric Co Refg 1991 Ser B (MBIA)...................... 6.70 12/01/21 10,108,950 13,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990 (AMT)............ 7.50 12/01/29 13,712,010 - -------- ------------ 58,000 60,943,140 - -------- ------------ Mortgage Revenue - Multi-Family (2.6%) Massachusetts Housing Finance Agency, 2,000 Rental 1994 Ser A (AMT) (AMBAC)...................................... 6.60 07/01/14 2,054,660 4,000 Rental 1994 Ser A (AMT) (AMBAC)...................................... 6.65 07/01/19 4,106,040 3,000 Minnesota Housing Finance Agency, Rental 1995 Ser D (MBIA)............ 6.00 02/01/22 2,953,380 - -------- ------------ 9,000 9,114,080 - -------- ------------ Mortgage Revenue - Single Family (10.2%) 505 Colorado Housing & Finance Authority, Ser 1990 B-2.................... 8.00 02/01/18 528,326 14,860 Pinellas County Housing Finance Authority, Florida, Ser 1983.......... 0.00 01/01/15 2,179,813 620 Idaho Housing Agency, 1988 Ser D-2 (AMT).............................. 8.25 01/01/20 642,711 2,330 Illinois Housing Development Authority, 1988 Ser C (AMT).............. 8.10 02/01/22 2,421,918 990 Indiana Housing Finance Authority, Ser 1990 A-2 (AMT)................. 8.10 01/01/22 1,007,365 1,260 Kansas City Leavenworth & Lenexa, Kansas, GNMA-Backed Ser 1988 C (AMT)................................................................ 8.00 11/01/20 1,312,303 Olathe, Kansas, 180 GNMA Collateralized Ser 1990 B....................................... 7.50 09/01/10 190,750 665 GNMA Collateralized Ser 1989 A (AMT) (MBIA).......................... 8.00 11/01/20 696,182
SEE NOTES TO FINANCIAL STATEMENTS 7 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS May 31, 1996, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------------ $ 1,250 Lake Charles Non-Profit Housing Development Corporation, Louisiana, Ser 1990 A (FSA)..................................................... 7.875% 02/15/25 $ 1,253,587 1,795 New Orleans Home Mortgage Authority, Louisiana, 1989 Ser B-1 (AMT).... 8.25 12/01/21 1,887,012 Maine Housing Authority, 3,540 Purchase Ser 1988 D4 (AMT)........................................... 7.55 11/15/19 3,701,955 1,000 Purchase Ser 1988 D5 (AMT)........................................... 7.55 11/15/19 1,043,390 Massachusetts Housing Finance Agency, 1,660 Residential Ser 1989 A (AMT)......................................... 8.20 08/01/15 1,756,695 4,960 1989 Ser 7 (AMT)..................................................... 8.10 06/01/20 5,175,016 805 Mississippi Housing Finance Corporation, GNMA-Backed Ser 1989 (AMT)... 8.25 10/15/18 844,630 435 Muskogee County Home Finance Authority, Oklahoma, 1990 Ser A (FGIC)... 7.60 12/01/10 456,158 2,560 Rhode Island Housing & Mortgage Finance Corporation, Homeownership 1988 Ser 1-D (AMT)................................................... 7.875 10/01/22 2,684,954 South Carolina Housing Finance & Development Authority, 3,000 Homeownership 1988 Ser C-1 (AMT)..................................... 8.125 07/01/21 3,156,720 1,220 Homeownership 1991 Ser A (AMT)....................................... 7.40 07/01/23 1,263,969 2,870 El Paso Housing Finance Corporation, Texas, Ser 1989 (AMT)............ 8.20 03/01/21 3,010,974 Utah Housing Finance Agency, 490 Ser 1991 B-1......................................................... 7.50 07/01/16 517,126 575 Ser 1989 B (AMT)..................................................... 8.25 07/01/21 589,800 - -------- ------------ 47,570 36,321,354 - -------- ------------ Nursing & Health Related Facilities Revenue (1.3%) New York State Medical Care Facilities Finance Agency, 1,625 Mental Health Ser 1987............................................... 8.875 08/15/07 1,735,939 1,555 Mental Health Ser 1990 (MBIA)........................................ 7.75 02/15/20 1,709,303 990 Mental Health Ser 1991 A............................................. 7.50 02/15/21 1,087,198 - -------- ------------ 4,170 4,532,440 - -------- ------------ Public Facilities Revenue (2.1%) 4,000 Metropolitan Pier & Exposition Authority, Illinois, Ser 1992 A (FGIC)............................................................... 0.00 06/15/07 3,924,640 Saint Paul Independent School District #625, Minnesota, 1,700 Ser 1995 C COPs...................................................... 5.45 02/01/11 1,668,244 1,800 Ser 1995 C COPs...................................................... 5.50 02/01/12 1,766,520 - -------- ------------ 7,500 7,359,404 - -------- ------------ Resource Recovery Revenue (3.4%) 11,500 Cambria County Industrial Development Authority, Pennsylvania, Cambria - -------- Cogen Co Ser 1989 F-2 (AMT).......................................... 7.75 09/01/19 12,053,495 ------------
SEE NOTES TO FINANCIAL STATEMENTS 8 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS May 31, 1996, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------------ Transportation Facilities Revenue (6.6%) $ 3,500 Atlanta, Georgia, Airport Ser 1994 B (AMT) (AMBAC).................... 6.00 % 01/01/21 $ 3,438,015 7,000 Chicago, Illinois, Midway Airport 1994 Ser A (AMT) (MBIA)............. 6.25 01/01/24 7,014,490 5,000 Regional Transportation Authority, Illinois, Ser 1994 A (AMBAC)....... 6.25 06/01/24 5,059,250 8,000 Austin, Texas, Airport Prior Lien Ser 1995 A (AMT) (MBIA)............. 6.125 11/15/25 8,002,960 - -------- ------------ 23,500 23,514,715 - -------- ------------ Water & Sewer Revenue (5.8%) 3,000 Central Coast Water Authority, California, Ser 1992 (AMBAC)........... 6.60 10/01/22 3,182,970 2,500 Coachella, California, Ser 1992 COPs (FSA)............................ 6.10 03/01/22 2,474,100 5,000 Santa Rosa, California, Wastewater Refg 1996 Ser A (FGIC)............. 4.75 09/01/16 4,251,700 3,500 Chicago, Illinois, Wastewater Ser 1994 (MBIA)......................... 6.375 01/01/24 3,582,250 3,600 Rio Rancho, New Mexico, Water & Wastewater Ser 1995 A (FSA)........... 6.00 05/15/22 3,590,460 3,500 Texas Water Resource Finance Authority, Ser 1989 (AMBAC).............. 7.50 08/15/13 3,722,810 - -------- ------------ 21,100 20,804,290 - -------- ------------ Refunded (10.9%) 5,000 District of Columbia, Ser 1990 A (AMBAC).............................. 7.50 06/01/00++ 5,592,050 11,000 Western Townships Utilities Authority, Michigan, Sewerage Disposal Ser 1989 (Crossover)..................................................... 8.20 01/01/18 12,103,740 1,340 Missouri Health & Educational Facilities Authority, Missouri Baptist Medical Center Refg Ser 1989 (ETM)................................... 7.625 07/01/18 1,619,417 4,650 New York Local Government Assistance Corporation, Ser 1991 A.......... 7.25 04/01/01++ 5,226,926 12,550 Washington Public Power Supply System, Nuclear Proj #2 Refg Ser 1990 C.................................................................... 7.625 01/01/01++ 14,233,332 - -------- ------------ 34,540 38,775,465 - -------- ------------ 349,495 TOTAL MUNICIPAL BONDS (Identified Cost $333,426,917)........................................... 345,757,964 - -------- ------------
SEE NOTES TO FINANCIAL STATEMENTS 9 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS May 31, 1996, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM MUNICIPAL OBLIGATION (0.7%) $ 2,600 East Baton Rouge Parish, Louisiana, Exxon Corp Ser 1993 (Demand - -------- 06/03/96) (Identified Cost $2,600,000)............................... 3.60*% 03/01/22 $ 2,600,000 ------------ $352,095 TOTAL INVESTMENTS (Identified Cost $336,026,917) (a)................................... 98.0% 348,357,964 ======== CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................................... 2.0 7,229,467 ------ ------------ NET ASSETS............................................................................. 100.0% $355,587,431 ====== ============
- --------------------- AMT Alternative Minimum Tax. COPs Certificates of Participation. ETM Escrowed to Maturity. ++ Prerefunded to call date shown. * Current coupon of variable rate security. (a) The aggregate cost for federal income tax purposes approximates identified cost. The aggregate gross unrealized appreciation was $16,046,806 and the aggregate gross unrealized depreciation was $3,715,759, resulting in net unrealized appreciation of $12,331,047. Bond Insurance: - --------------- AMBAC AMBAC Indemnity Corporation. Connie Lee Connie Lee Insurance Company. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation.
- -------------------------------------------------------------------------------- GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percent of Net Assets May 31, 1996 Alabama.................. 3.6% Arizona.................. 4.5 California............... 4.5 Colorado................. 0.1 District of Columbia..... 1.6 Florida.................. 1.0 Georgia.................. 2.3 Idaho.................... 0.2 Illinois................. 9.3 Indiana.................. 1.5 Kansas................... 4.8 Kentucky................. 1.0 Louisiana................ 1.6% Maine.................... 1.3 Massachusetts............ 8.4 Michigan................. 4.9 Minnesota................ 1.8 Mississippi.............. 0.2 Missouri................. 0.5 New Jersey............... 1.3 New Mexico............... 1.0 New York................. 5.6 Ohio..................... 0.3 Oklahoma................. 0.1 Pennsylvania............. 8.1% Rhode Island............. 0.8 South Carolina........... 3.5 Tennessee................ 1.3 Texas.................... 14.0 Utah..................... 2.6 Virginia................. 0.7 Washington............... 5.6 ---- Total.................... 98.0% ====
SEE NOTES TO FINANCIAL STATEMENTS 10 MUNICIPAL PREMIUM INCOME TRUST FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES May 31, 1996 ASSETS: Investments in securities, at value (identified cost $336,026,917)....................................... $348,357,964 Cash.................................................................. 66,546 Receivable for: Interest.......................................................... 7,366,428 Investments sold.................................................. 100,000 Prepaid expenses and other assets..................................... 41,562 ------------ TOTAL ASSETS...................................................... 355,932,500 ------------ LIABILITIES: Payable for: Investment advisory fee........................................... 137,110 Administration fee................................................ 85,693 Accrued expenses and other payables................................... 122,266 ------------ TOTAL LIABILITIES................................................. 345,069 ------------ 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, 25,501,424 shares outstanding)....................... 237,061,779 Net unrealized appreciation........................................... 12,331,047 Accumulated undistributed net investment income....................... 1,193,811 Accumulated undistributed net realized gain........................... 5,000,794 ------------ NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS...................... 255,587,431 ------------ TOTAL NET ASSETS.................................................. $355,587,431 ============ NET ASSET VALUE PER COMMON SHARE ($255,587,431 divided by 25,501,424 common shares outstanding)....... $10.02 ======
SEE NOTES TO FINANCIAL STATEMENTS 11 MUNICIPAL PREMIUM INCOME TRUST FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS For the year ended May 31, 1996 NET INVESTMENT INCOME: INTEREST INCOME....................................................... $ 23,439,549 ------------ EXPENSES Investment advisory fee............................................... 1,470,252 Administration fee.................................................... 918,907 Auction commission fees............................................... 250,177 Professional fees..................................................... 127,970 Transfer agent fees and expenses...................................... 112,168 Auction agent fees.................................................... 46,809 Shareholder reports and notices....................................... 39,004 Registration fees..................................................... 32,976 Trustees' fees and expenses........................................... 21,668 Custodian fees........................................................ 16,779 Servicing fees........................................................ 13,030 Other................................................................. 21,329 ------------ TOTAL EXPENSES BEFORE EXPENSE OFFSET.............................. 3,071,069 LESS: EXPENSE OFFSET.............................................. (16,642) ------------ TOTAL EXPENSES AFTER EXPENSE OFFSET............................... 3,054,427 ------------ NET INVESTMENT INCOME............................................. 20,385,122 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain..................................................... 6,527,149 Net change in unrealized appreciation................................. (12,300,038) ------------ NET LOSS.......................................................... (5,772,889) ------------ NET INCREASE.......................................................... $ 14,612,233 ============
SEE NOTES TO FINANCIAL STATEMENTS 12 MUNICIPAL PREMIUM INCOME TRUST FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR FOR THE YEAR ENDED ENDED MAY 31, 1996 MAY 31, 1995 - ---------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income.................................. $ 20,385,122 $ 21,712,893 Net realized gain...................................... 6,527,149 1,494,255 Net change in unrealized appreciation.................. (12,300,038) 4,565,857 ------------ ------------ NET INCREASE....................................... 14,612,233 27,773,005 ------------ ------------ DIVIDENDS TO PREFERRED SHAREHOLDERS FROM NET INVESTMENT INCOME............................................... (3,811,460) (4,023,613) ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income.................................. (16,766,322) (18,749,585) Net realized gain...................................... (3,013,608) (2,498,582) ------------ ------------ TOTAL.............................................. (19,779,930) (21,248,167) ------------ ------------ TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST: Preferred.............................................. -- (25,000,000) Common................................................. (3,658,013) (2,808,603) ------------ ------------ TOTAL.............................................. (3,658,013) (27,808,603) ------------ ------------ TOTAL DECREASE..................................... (12,637,170) (25,307,378) NET ASSETS: Beginning of period.................................... 368,224,601 393,531,979 ------------ ------------ END OF PERIOD (Including undistributed net investment income of $1,193,811 and $1,386,471, respectively)........... $355,587,431 $368,224,601 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 13 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS May 31, 1996 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's investment objective is to provide a high level of current income exempt from federal income tax. The Fund was organized as a Massachusetts business trust on November 16, 1988 and commenced operations on February 1, 1989. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of significant accounting policies: A. VALUATION OF INVESTMENTS -- Portfolio securities are valued by an outside independent pricing service approved by the Trustees. The pricing service has informed the Fund that in valuing the 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 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 14 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS May 31, 1996, continued 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"), 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 year ended May 31, 1996 aggregated $50,859,730 and $57,308,169, respectively. 15 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS May 31, 1996, continued Dean Witter Trust Company, an affiliate of the Investment Adviser and Administrator, is the Fund's transfer agent. At May 31, 1996, the Fund had transfer agent fees and expenses payable of approximately $12,000. 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 year ended May 31, 1996 included in Trustees' fees and expenses in the Statement of Operations amounted to $1,808. At May 31, 1996, the Fund had an accrued pension liability of $49,612 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.
NEXT RANGE OF SHARES* SERIES RATE* RESET DATE DIVIDEND RATES** - ------- ------ ----- ---------- ---------------- 200 A 3.49% 06/04/96 3.30%- 5.00% 200 B 3.55 06/04/96 3.36- 5.00 200 C 3.54 06/04/96 3.20- 5.00 200 D 3.60 06/04/96 3.35- 4.26 200 E 3.60 06/04/96 3.35- 5.00
- --------------------- * As of May 31, 1996. ** For the year ended May 31, 1996. Subsequent to May 31, 1996 and up through July 10, 1996, the Fund paid dividends to each of the Series A through E at rates ranging from 3.201% to 3.755% in the aggregate amount of $404,340. 16 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS May 31, 1996, continued 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 IN EXCESS OF SHARES PAR VALUE PAR VALUE ---------- --------- ------------ 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 9.79%)*........ (392,900) (3,929) (3,654,084) ---------- -------- ------------ Balance, May 31, 1996........................................................... 25,501,424 $255,014 $236,806,765 ========== ======== ============
- --------------------- * The Trustees have voted to retire the shares purchased. 7. DIVIDENDS TO COMMON SHAREHOLDERS The Fund declared the following dividends from net investment income:
DECLARATION AMOUNT RECORD PAYABLE DATE PER SHARE DATE DATE - ------------- --------- ------------ ------------- May 28, 1996 $0.05 June 7, 1996 June 21, 1996 June 25, 1996 $0.05 July 5, 1996 July 19, 1996
17 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* -------------------------------------------------------------- 1996 1995 1994 1993 1992 - --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period........................... $ 10.36 $ 10.24 $ 10.67 $ 10.02 $ 9.61 -------- -------- -------- -------- -------- Net investment income.......................................... 0.79 0.84 0.90 0.91 0.95 Net realized and unrealized gain (loss)........................ (0.21) 0.26 (0.45) 0.64 0.42 -------- -------- -------- -------- -------- Total from investment operations............................... 0.58 1.10 0.45 1.55 1.37 -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income....................................... (0.65) (0.72) (0.76) (0.77) (0.72) Common share equivalent of dividends paid to preferred shareholders............................................... (0.15) (0.16) (0.12) (0.12) (0.19) Net realized gain........................................... (0.12) (0.10) -- (0.01) (0.05) -------- -------- -------- -------- -------- Total dividends and distributions.............................. (0.92) (0.98) (0.88) (0.90) (0.96) -------- -------- -------- -------- -------- Net asset value, end of period................................. $ 10.02 $ 10.36 $ 10.24 $ 10.67 $ 10.02 ======== ======== ======== ======== ======== Market value, end of period.................................... $ 9.00 $ 9.6875 $ 9.75 $ 10.75 $ 10.375 ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN+....................................... 0.67% 8.15% (2.72)% 11.30% 16.44% RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS: Total expenses before expense offset........................... 1.16%(1) 1.21% 1.23% 1.38% 1.44% Net investment income before preferred stock dividends......... 7.68% 8.37% 8.31% 8.73% 9.67% Preferred stock dividends...................................... 1.44% 1.55% 1.11% 1.21% 1.90% Net investment income available to common shareholders......... 6.24% 6.82% 7.20% 7.52% 7.77% SUPPLEMENTAL DATA: Net assets, end of period, in thousands........................ $355,587 $368,225 $393,532 $404,979 $388,022 Asset coverage on preferred shares at end of period............ 355% 368% 314% 324% 310% Portfolio turnover rate........................................ 14% 16% 23% 7% 16%
- --------------------- + 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) The above expense ratio was 1.15% after expense offset, which reflects 0.01% effect for custody cash credits. SEE NOTES TO FINANCIAL STATEMENTS 18 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, 1996, 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, 1996 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, New York 10036 July 10, 1996 -------------------------------------------------------------------- 1996 FEDERAL TAX NOTICE (unaudited) During the year ended May 31, 1996, the Fund paid $0.65 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, 1996, the Fund paid to common shareholders $0.12 per share from long-term capital gains. 19 (This page has been left blank intentionally.) 20 TRUSTEES Michael Bozic Charles A. Fiumefreddo Edwin J. Garn John R. Haire Dr. Manuel H. Johnson Michael E. Nugent Philip J. Purcell John L. Schroeder OFFICERS Charles A. Fiumefreddo Chairman and Chief Executive Officer Sheldon Curtis Vice President, Secretary and General Counsel James F. Willison Vice President Thomas F. Caloia Treasurer TRANSFER AGENT Dean Witter Trust Company Harborside Financial Center - Plaza Two Jersey City, New Jersey 07311 INDEPENDENT ACCOUNTANTS Price Waterhouse LLP 1177 Avenue of the Americas New York, New York 10036 INVESTMENT ADVISER Dean Witter InterCapital Inc. Two World Trade Center New York, New York 10048 MUNICIPAL PREMIUM INCOME TRUST ANNUAL REPORT MAY 31, 1996 -----END PRIVACY-ENHANCED MESSAGE-----