-----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, WUMY4RfAPXhY/rQmjW/DJ3jScbpbz0C9FC+lImautXHevex/oMUjvBPKjGe5woUx OcrNttfW+zLo71AG/ZNIzQ== 0000950123-97-006227.txt : 19970728 0000950123-97-006227.hdr.sgml : 19970728 ACCESSION NUMBER: 0000950123-97-006227 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970531 FILED AS OF DATE: 19970725 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: 97645736 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 DEAN WITTER MUNI. PRE. INCOME TRUST 1 MUNICIPAL PREMIUM INCOME TRUST Two World Trade Center, New York, LETTER TO THE SHAREHOLDERS May 31, 1997 New York 10048 DEAR SHAREHOLDER: We are pleased to present the annual report on the operations of Municipal Premium Income Trust (PIA) for the fiscal year ended May 31, 1997. Economic growth moderated during the third quarter of 1996, causing fixed-income yields to move lower through November. However, an acceleration of economic activity led by consumer spending developed in the fourth quarter of 1996 and continued into the first quarter of 1997. This contributed to rising interest rates between December and April. On March 25, 1997, the Federal Reserve Board raised the federal-funds rate 25 basis points to 5.50 percent in a preemptive move against a possible acceleration in the rate of inflation. The fixed-income markets recognized that additional rate hikes were possible, but rallied when the Fed left short-term interest rates unchanged at its May meeting. MUNICIPAL MARKET CONDITIONS Municipal yields followed the trend of Treasury yields, but were less volatile. Long-term insured revenue bond yields fell from 6.00 percent in BOND YIELDS 1994-1997
Muni Yields Treasury Yields 5.45 6.35 Jan '94 5.29 6.24 5.64 6.66 6.19 7.09 6.24 7.31 6.23 7.43 6.31 7.61 6.15 7.4 6.17 7.45 6.42 7.82 6.66 7.97 6.99 8 6.65 7.88 Jan '95 6.42 7.7 6.12 7.44 6.07 7.43 6.05 7.34 5.84 6.65 6 6.62 5.99 6.85 5.98 6.65 5.97 6.5 5.79 6.33 5.61 6.13 5.49 5.95 Jan '96 5.42 6.03 5.55 6.47 5.89 6.67 5.94 6.91 5.99 6.99 5.86 6.87 5.77 6.97 5.82 7.12 5.71 6.92 5.6 6.64 5.45 6.35 5.56 6.64 Jan '97 5.63 6.79 5.53 6.8 5.83 7.1 5.74 6.96 5.58 6.91
Ratio Dec '93 0.8586 0.8481 0.8468 0.8728 0.854 0.8387 Jun '94 0.8293 0.8314 0.828 0.8212 0.8356 0.8738 Dec '94 0.8438 0.834 0.8222 0.8167 0.8245 0.8784 Jun '95 0.9066 0.875 0.8997 0.9184 0.915 0.9151 Dec '95 0.923 0.8989 0.8577 0.8835 0.8601 0.8571 Jun '96 0.8529 0.8278 0.8176 0.8248 0.8431 0.8583 Dec '96 0.8372 0.8293 0.8129 0.8216 0.8251 0.8081
2 MUNICIPAL PREMIUM INCOME TRUST LETTER TO THE SHAREHOLDERS May 31, 1997, continued FIVE LARGEST SECTORS AS OF MAY 31, 1997 (% OF NET ASSETS) REFUNDED 16% ID/PCR* 14% MORTGAGE 14% HOSPITAL 14% ELECTRIC 12% ALL OTHERS 30%
* Industrial Development/Pollution Control Revenue Portfolio structure is subject to change. CREDIT RATINGS AS OF MAY 31, 1997 (% OF TOTAL LONG-TERM PORTFOLIO) Aaa OR AAA 57% Aa OR AA 22% A OR A 5% Baa OR BBB 13% NR 3%
As measured by Moody's Investors Service, Inc. or Standard & Poor's Corp. Portfolio structure is subject to change. CALL STRUCTURE AS OF MAY 31, 1997 WEIGHTED AVERAGE (% OF TOTAL LONG-TERM PORTFOLIO) CALL PROTECTION: 5.4 YEARS
YEARS BONDS CALABLE PERCENT CALLABLE 1997 1.2% 1998 8.2% 1999 10.2% 2000 13.1% 2001 14.4% 2002 8.9% 2003 1.2% 2004 10.6% 2005 13.7% 2006 11.6% 2007+ 6.9%
3 MUNICIPAL PREMIUM INCOME TRUST LETTER TO THE SHAREHOLDERS May 31, 1997, continued May 1996 to as low as 5.45 percent in November 1996, before rising to 5.85 percent in April 1997. The Index ended May 1997 at 5.60 percent. Similarly, yields on one-year municipal notes moved from 3.70 to 3.90 percent over the past twelve months. The yield curve pick-up by extending maturity from 1 to 30 years was 170 basis points. The ratio of 30-year insured revenue bond yields to 30-year U.S. Treasury yields declined from 86 percent at the end of May 1996 to 81 percent in May 1997. A declining ratio means that municipals have outperformed Treasuries, but have become relatively more expensive. The annual range of the ratio has averaged from 80 to 92 percent over the past three years. New-issue municipal volume was down 5 percent during the first five months of 1997. However, underwriting volume for the full year is expected to exceed bond maturities and redemptions. PERFORMANCE The Fund's net asset value (NAV) moved from $10.02 to $10.08 per share during the fiscal year ended May 31, 1997. Based on this NAV change plus reinvestment of tax-free dividends totaling $0.60 per share and taxable capital gains distributions of $0.20 per share, the Fund's total NAV return was 9.64 percent. PIA's market price on the New York Stock Exchange increased from $9.00 to $9.375 per share. Based on this change in market price plus reinvestment of tax-free dividends and taxable distributions, the Fund's total market return was 13.52 percent. On May 31, 1997, PIA was trading at a 7 percent discount to NAV. Undistributed net investment income available for dividends increased from $0.047 to $0.086 per share. Net assets totaled almost $350 million. PORTFOLIO STRUCTURE The Fund remained fully invested in long-term municipal bonds during the period. Investments were diversified among 13 long-term sectors and 71 individual credits. The portfolio's average maturity was 19 years. The distribution of call dates in the portfolio produced an average call protection of 5 years. Credit quality has consistently been maintained, with nearly 80 percent of PIA's long-term holdings rated double "A" or better. THE IMPACT OF LEVERAGING As we have discussed previously, 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 amount of ARPS outstanding, and second, the spread between the portfolio's cost yield and ARPS expenses 4 MUNICIPAL PREMIUM INCOME TRUST LETTER TO THE SHAREHOLDERS May 31, 1997, continued (ARPS auction rate and operating expenses). The greater the spread and the amount of ARPS outstanding, the greater the amount of incremental income available for distribution to common shareholders. The level of net investment income available for distribution to common shareholders varies with the level of short-term interest rates. ARPS yields ranged between 3.00 and 4.55 percent during the twelve months ended May 31, 1997. Over the same period, ARPS leverage contributed $0.11 per share to common share earnings. Five ARPS series totaled $100 million and represented 29 percent of net assets. LOOKING AHEAD Since the election year collapse of flat-tax proposals, municipal bonds have improved relative to U.S. Treasury securities. Although tax-free yields are currently somewhat expensive when compared with their historical relationship with Treasury yields, the long-term benefits of tax-exempt income remain intact. 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 common 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 twelve-month period ended May 31, 1997, the Fund purchased and retired 779,500 shares of beneficial interest at a weighted average market discount of 8.30 percent. Acquiring these treasury shares had the antidilutive effect of adding $0.03 per share to net asset value. The Fund may also utilize procedures to reduce or eliminate the amount of outstanding ARPS, including their purchases 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 AND SPECIAL MEETINGS (unaudited) * * * On December 27, 1996, an annual meeting of the Fund's shareholders was held for the purpose of voting on three separate matters, the results of which were as follows: (1) ELECTION OF TRUSTEE BY ALL SHAREHOLDERS: Michael Bozic For................................................................ 18,657,113 Withheld........................................................... 412,815
ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS: Charles A. Fiumefreddo For................................................................ 786 Withheld........................................................... 0
The following Trustees were not standing for reelection at this meeting: Edwin J. Garn, John R. Haire, Dr. Manuel H. Johnson, Michael E. Nugent, Philip J. Purcell and John L. Schroeder. (2) CONTINUANCE OF THE CURRENTLY EFFECTIVE INVESTMENT ADVISORY AGREEMENT WITH DEAN WITTER INTERCAPITAL INC.: For................................................................ 17,972,309 Against............................................................ 274,389 Abstain............................................................ 823,230
(3) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS: For................................................................ 18,428,158 Against............................................................ 120,337 Abstain............................................................ 521,433
On May 20, 1997, a special meeting of the Fund's shareholders was held for the purpose of voting on two separate matters, the results of which were as follows: (1) ELECTION OF TRUSTEE: Wayne E. Hedien For................................................................ 20,102,510 Withheld........................................................... 493,131
(2) APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT BETWEEN THE FUND AND DEAN WITTER INTERCAPITAL INC. IN CONNECTION WITH THE MERGER OF MORGAN STANLEY GROUP INC. WITH DEAN WITTER DISCOVER & CO.: For................................................................ 19,291,994 Against............................................................ 330,113 Abstain............................................................ 973,534
6 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS May 31, 1997
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------------ MUNICIPAL BONDS (97.3%) General Obligation (5.6%) $ 5,000 Chicago Park District, Illinois, Ser 1995............................... 6.60% 11/15/14 $ 5,449,300 3,500 Massachusetts, 1995 Ser A (AMBAC)....................................... 5.00 07/01/12 3,370,605 4,500 Shelby County, Tennessee, Refg 1995 Ser A............................... 5.625 04/01/11 4,595,400 6,000 Washington, Ser 1993 A.................................................. 5.75 10/01/17 6,031,500 - -------- ------------ 19,000 19,446,805 - -------- ------------ Educational Facilities Revenue (3.5%) 5,500 Oakland University, Michigan, Ser 1995 (MBIA)........................... 5.75 05/15/26 5,508,085 New York State Dormitory Authority, 4,000 State University Refg Ser 1993 A....................................... 5.50 05/15/08 4,016,240 1,350 State University Ser 1990 B............................................ 7.50 05/15/11 1,573,168 1,000 Pennsylvania Higher Educational Facilities Authority, Temple University First Ser (MBIA)....................................................... 6.50 04/01/21 1,071,500 - -------- ------------ 11,850 12,168,993 - -------- ------------ Electric Revenue (12.3%) 5,000 Sacramento Municipal Utility District, California, Refg 1994 Ser I (MBIA)................................................................. 6.00 01/01/24 5,127,700 4,000 Kansas City, Kansas, Utility Refg & Impr Ser 1994 (FGIC)................ 6.375 09/01/23 4,280,680 7,750 South Carolina Public Service Authority, 1995 Refg Ser A (AMBAC)........ 6.25 01/01/22 8,128,820 20,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C...................... 4.70 02/01/06 19,053,800 Intermountain Power Agency, Utah, 1,270 Refg Ser 1988 B........................................................ 7.50 07/01/21 1,334,630 5,000 Refg Ser 1997 B (MBIA)................................................. 5.75 07/01/19 4,987,300 - -------- ------------ 43,020 42,912,930 - -------- ------------ Hospital Revenue (13.6%) 5,000 Alabama Special Care Facilities Financing Authority of Birmingham, Daughters of Charity National Health/St Vincent's & Providence Hospitals Ser 1995..................................................... 5.00 11/01/25 4,484,250 5,000 Birmingham-Carraway Special Care Facilities Financing Authority, Alabama, Carraway Methodist Health Systems Ser 1995 A (Connie Lee)..... 5.875 08/15/15 5,082,000 3,500 Colbert County - Northwest Health Care Authority, Alabama, Helen Keller Hospital Refg Ser 1990................................................. 8.75 06/01/09 3,850,455 1,000 California Health Facilities Financing Authority, Alexian Brothers/San Jose Refg Ser 1990 (MBIA).............................................. 7.125 01/01/16 1,068,240 3,000 Hall County and Gainesville Hospital Authority, Georgia, Northeast Georgia Healthcare Ser 1995 (MBIA)..................................... 6.00 10/01/20 3,064,590 3,750 Evergreen Park, Illinois, Little Company of Mary Hospital Refg Ser 1988 (MBIA)................................................................. 7.25 02/15/11 3,896,925 1,800 Southwestern Illinois Development Authority, Anderson Hospital Ser 1992 A...................................................................... 7.00 08/15/22 1,878,012 3,420 Kentucky Development Finance Authority, Ashland Hospital/King's Daughters Refg Ser 1987................................................ 9.75 08/01/05 3,587,067 9,500 Boston, Massachusetts, Boston City Hospital - FHA Mtg Refg Ser B........ 5.75 02/15/13 9,460,195
SEE NOTES TO FINANCIAL STATEMENTS 7 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS May 31, 1997, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - --------------------------------------------------------------------------------------------------------------------------------- $ 2,985 Lehigh County General Purpose Authority, Pennsylvania, St Lukes Hospital Ser 1992 (AMBAC)....................................................... 6.25% 07/01/22 $ 3,111,206 2,375 Montgomery County Higher Educational & Health Authority, Pennsylvania, Holy Redeemer Hospital 1990 Ser A (AMBAC).............................. 7.625 02/01/20 2,528,140 2,750 Jefferson County Health Facilities Development Corporation, Texas, Baptist Health Care Ser 1989........................................... 8.30 10/01/14 2,838,192 2,400 Peninsula Ports Authority, Virginia, Mary Immaculate Hospital Ser 1989................................................................... 8.375 08/01/04 2,584,752 - -------- ------------ 46,480 47,434,024 - -------- ------------ Industrial Development/Pollution Control Revenue (14.2%) 12,045 Pima County Industrial Development Authority, Arizona, Tucson Electric Power Co Refg Ser 1988 A (FSA Surety).................................. 7.25 07/15/10 13,316,711 10,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA)............ 7.00 06/01/31 10,847,400 1,000 Ohio Water Development Authority, Toledo Edison Co Ser 1990 A (Secondary FSA)................................................................... 7.75 05/15/19 1,093,450 9,500 Montgomery County Industrial Development Authority, Pennsylvania, Philadelphia Electric Co Refg 1991 Ser B (MBIA)........................ 6.70 12/01/21 10,288,120 13,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990 (AMT).............. 7.50 12/01/29 13,921,440 - -------- ------------ 45,545 49,467,121 - -------- ------------ Mortgage Revenue - Multi-Family (3.0%) 1,250 Lake Charles Non-Profit Housing Development Corporation, Louisiana, Ser 1990 A (FSA)........................................................... 7.875 02/15/25 1,274,375 Massachusetts Housing Finance Agency, 2,000 Rental 1994 Ser A (AMT) (AMBAC)........................................ 6.60 07/01/14 2,073,060 4,000 Rental 1994 Ser A (AMT) (AMBAC)........................................ 6.65 07/01/19 4,145,800 2,880 Minnesota Housing Finance Agency, Rental 1995 Ser D (MBIA).............. 6.00 02/01/22 2,909,174 - -------- ------------ 10,130 10,402,409 - -------- ------------ Mortgage Revenue - Single Family (10.9%) Colorado Housing & Finance Authority, 405 Ser 1990 B-2........................................................... 8.00 02/01/18 424,080 2,500 Ser 1997 A-2 (AMT)..................................................... 7.25 05/01/27 2,739,025 9,710 Pinellas County Housing Finance Authority, Florida, Ser 1983............ 0.00 01/01/15 1,628,464 510 Idaho Housing Agency, 1988 Ser D-2 (AMT)................................ 8.25 01/01/20 537,841 2,050 Illinois Housing Development Authority, 1988 Ser C (AMT)................ 8.10 02/01/22 2,117,076 130 Indiana Housing Finance Authority, GNMA Collateralized Ser 1990 A-2 (AMT).................................................................. 8.10 01/01/22 133,427 1,110 Kansas City Leavenworth & Lenexa, Kansas, GNMA-Backed Ser 1988 C (AMT).................................................................. 8.00 11/01/20 1,144,477 Olathe, Kansas, 180 GNMA Collateralized Ser 1990 B......................................... 7.50 09/01/10 190,591 550 GNMA Collateralized Ser 1989 A (AMT) (MBIA)............................ 8.00 11/01/20 575,586 1,550 New Orleans Home Mortgage Authority, Louisiana, 1989 Ser B-1 (AMT)...... 8.25 12/01/21 1,616,991
SEE NOTES TO FINANCIAL STATEMENTS 8 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS May 31, 1997, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- Maine Housing Authority, $ 3,540 Purchase Ser 1988 D4 (AMT)............................................. 7.55% 11/15/19 $ 3,721,071 1,000 Purchase Ser 1988 D5 (AMT)............................................. 7.55 11/15/19 1,050,140 Massachusetts Housing Finance Agency, 1,660 Residential Ser 1989 A (AMT)........................................... 8.20 08/01/15 1,743,880 4,960 1989 Ser 7 (AMT)....................................................... 8.10 06/01/20 5,120,704 715 Mississippi Housing Finance Corporation, GNMA-Backed Ser 1989 (AMT) (FGIC)................................................................. 8.25 10/15/18 750,414 3,000 Missouri Housing Development Commission, Homeownership 1996 Ser D (AMT).................................................................. 7.10 09/01/27 3,230,880 350 Muskogee County Home Finance Authority, Oklahoma, 1990 Ser A (FGIC)..... 7.60 12/01/10 367,689 2,560 Rhode Island Housing & Mortgage Finance Corporation, Homeownership 1988 Ser 1-D (AMT)....................................... 7.875 10/01/22 2,690,074 South Carolina Housing Finance & Development Authority, 3,000 Homeownership 1988 Ser C-1 (AMT)....................................... 8.125 07/01/21 3,135,030 1,220 Homeownership 1991 Ser A (AMT)......................................... 7.40 07/01/23 1,273,131 2,870 El Paso Housing Finance Corporation, Texas, GNMA Collateralized Ser 1989 (AMT).................................................................. 8.20 03/01/21 3,005,005 Utah Housing Finance Agency, 350 Ser 1991 B-1........................................................... 7.50 07/01/16 366,915 340 Ser 1989 B (AMT)....................................................... 8.25 07/01/21 348,582 - -------- ------------ 44,260 37,911,073 - -------- ------------ Nursing & Health Related Facilities Revenue (0.7%) New York State Medical Care Facilities Finance Agency, 825 Mental Health Ser 1987................................................. 8.875 08/15/07 849,552 1,030 Mental Health Ser 1990 A (Secondary MBIA).............................. 7.75 02/15/20 1,118,549 405 Mental Health Ser 1991 A............................................... 7.50 02/15/21 446,747 - -------- ------------ 2,260 2,414,848 - -------- ------------ Public Facilities (1.0%) Saint Paul Independent School District #625, Minnesota, 1,700 Ser 1995 C COPs........................................................ 5.45 02/01/11 1,711,509 1,800 Ser 1995 C COPs........................................................ 5.50 02/01/12 1,812,150 - -------- ------------ 3,500 3,523,659 - -------- ------------ 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 11,797,390 ------------ Transportation Facilities Revenue (8.3%) 3,500 Atlanta, Georgia, Airport Ser 1994 B (AMT) (AMBAC)...................... 6.00 01/01/21 3,541,895 Chicago, Illinois, 5,000 Chicago-O'Hare International Airport Ser 1996 A (AMBAC)................ 5.625 01/01/12 5,029,450 7,000 Midway Airport 1994 Ser A (AMT) (MBIA)................................. 6.25 01/01/24 7,200,690
SEE NOTES TO FINANCIAL STATEMENTS 9 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS May 31, 1997, continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - -------------------------------------------------------------------------------------------------------------------------------- $ 5,000 Regional Transportation Authority, Illinois, Ser 1994 A (AMBAC)......... 6.25% 06/01/24 $ 5,209,450 8,000 Austin, Texas, Airport Prior Lien Ser 1995 A (AMT) (MBIA)............... 6.125 11/15/25 8,176,320 - -------- ------------ 28,500 29,157,805 - -------- ------------ Water & Sewer Revenue (4.9%) 2,500 Coachella, California, Ser 1992 COPs (FSA).............................. 6.10 03/01/22 2,567,800 4,000 Santa Rosa, California, Wastewater Refg 1996 Ser A (FGIC)............... 4.75 09/01/16 3,558,920 3,500 Chicago, Illinois, Wastewater Ser 1994 (MBIA)........................... 6.375 01/01/24 3,685,640 3,600 Rio Rancho, New Mexico, Water & Wastewater Ser 1995 A (FSA)............. 6.00 05/15/22 3,692,592 3,490 Texas Water Resource Finance Authority, Ser 1989 (AMBAC)................ 7.50 08/15/13 3,706,659 - -------- ------------ 17,090 17,211,611 - -------- ------------ Refunded (16.0%) 3,000 Central Coast Water Authority, California, Ser 1992 (AMBAC)............. 6.60 10/01/02++ 3,339,960 5,000 District of Columbia, Ser 1990 A (AMBAC)................................ 7.50 06/01/00++ 5,499,950 3,800 Metropolitan Pier & Exposition Authority, Illinois, Ser 1992 A (FGIC)... 0.00 06/15/03++ 4,115,666 4,000 Indiana Health Facility Financing Authority, Hancock Memorial Hospital Ser 1990............................................................... 8.30 08/15/00++ 4,502,160 3,965 Massachusetts, 1994 Ser C (FGIC)........................................ 6.75 11/01/04++ 4,473,194 11,000 Western Townships Utilities Authority, Michigan, Sewerage Disposal Ser 1989 (Crossover 01/01/99).............................................. 8.20 01/01/18 11,787,270 1,340 Missouri Health & Educational Facilities Authority, Missouri Baptist Medical Center Refg Ser 1989 (ETM)..................................... 7.625 07/01/18 1,661,721 4,650 New York Local Government Assistance Corporation, Ser 1991 A............ 7.25 04/01/01++ 5,177,450 New York State Medical Care Facilities Finance Agency, 515 Mental Health Ser 1990 (MBIA).......................................... 7.75 02/15/00++ 567,561 580 Mental Health Ser 1991 A............................................... 7.50 02/15/01++ 648,388 12,550 Washington Public Power Supply System, Nuclear Proj #2 Refg Ser 1990 C.. 7.625 01/01/01++ 14,035,418 - -------- ------------ 50,400 55,808,738 - -------- ------------ 333,535 TOTAL MUNICIPAL BONDS (Identified Cost $322,233,399)........................................... 339,657,406 - -------- ------------ SHORT-TERM MUNICIPAL OBLIGATIONS (0.6%) 1,000 East Baton Rouge Parish, Louisiana, Exxon Corp Ser 1993................. 4.00* 03/01/22 1,000,000 800 New York State Medical Care Facilities Finance Agency, Mental Health Ser 1987................................................................... 8.875 08/15/97++ 824,224 400 Harris County Industrial Development Corporation, Texas, Exxon Corp Ser 1984................................................................... 4.00* 03/01/24 400,000 - -------- ------------ 2,200 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS (Identified Cost $2,224,224)............................ 2,224,224 - -------- ------------
SEE NOTES TO FINANCIAL STATEMENTS 10 MUNICIPAL PREMIUM INCOME TRUST PORTFOLIO OF INVESTMENTS May 31, 1997, continued
PRINCIPAL AMOUNT IN THOUSANDS VALUE - ------------------------------------------------------------------------------------------------------------------------------ $335,735 TOTAL INVESTMENTS (Identified Cost $324,457,623) (a).................................. 97.9% ======== $341,881,630 CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................................ 2.1 7,412,689 ----- ------------ NET ASSETS............................................................................ 100.0% $349,294,319 ===== ============
- --------------------- AMT Alternative Minimum Tax. COPs Certificates of Participation. ETM Escrowed to Maturity. ++ Prerefunded to call date shown. * Current coupon of variable rate demand obligation. (a) The aggregate cost for federal income tax purposes approximates identified cost. The aggregate gross unrealized appreciation is $18,899,025 and the aggregate gross unrealized depreciation is $1,475,018, resulting in net unrealized appreciation of $17,424,007.
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, 1997 Alabama.................. 3.8% Arizona.................. 3.8 California............... 4.5 Colorado................. 0.9 District of Columbia..... 1.6 Florida.................. 0.5 Georgia.................. 1.9 Idaho.................... 0.2 Illinois................. 11.1 Indiana.................. 1.3 Kansas................... 4.9 Kentucky................. 1.0% Louisiana................ 1.1 Maine.................... 1.4 Massachusetts............ 8.7 Michigan................. 5.0 Minnesota................ 1.8 Mississippi.............. 0.2 Missouri................. 1.4 New Mexico............... 1.1 New York................. 4.4 Ohio..................... 0.3 Oklahoma................. 0.1% Pennsylvania............. 8.2 Rhode Island............. 0.8 South Carolina........... 3.6 Tennessee................ 1.3 Texas.................... 14.6 Utah..................... 2.0 Virginia................. 0.7 Washington............... 5.7 ---- Total.................... 97.9% ====
SEE NOTES TO FINANCIAL STATEMENTS 11 MUNICIPAL PREMIUM INCOME TRUSTFINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES May 31, 1997 ASSETS: Investments in securities, at value (identified cost $324,457,623).......... $341,881,630 Cash..................................... 163,466 Receivable for: Interest............................. 6,969,413 Investments sold..................... 650,450 Prepaid expenses and other assets........ 106,833 ------------ TOTAL ASSETS......................... 349,771,792 ------------ LIABILITIES: Payable for: Investment advisory fee.............. 137,507 Dividends to preferred shareholders........................ 129,664 Administration fee................... 85,942 Accrued expenses and other payables...... 124,360 ------------ TOTAL LIABILITIES.................... 477,473 ------------ 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, 24,721,924 shares outstanding)... 229,843,731 Net unrealized appreciation.............. 17,424,007 Accumulated undistributed net investment income.................................. 2,119,833 Accumulated net realized loss............ (93,252) ------------ NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS......................... 249,294,319 ------------ TOTAL NET ASSETS..................... $349,294,319 ============ NET ASSET VALUE PER COMMON SHARE ($249,294,319 divided by 24,721,924 common shares outstanding).............. $10.08 ====== STATEMENT OF OPERATIONS For the year ended May 31, 1997 NET INVESTMENT INCOME: INTEREST INCOME.......................... $ 22,458,918 ------------ EXPENSES Investment advisory fee.................. 1,417,354 Administration fee....................... 885,846 Auction commission fees.................. 231,267 Professional fees........................ 103,979 Transfer agent fees and expenses......... 95,800 Shareholder reports and notices.......... 40,452 Auction agent fees....................... 35,796 Registration fees........................ 32,045 Custodian fees........................... 17,883 Trustees' fees and expenses.............. 14,692 Other.................................... 32,992 ------------ TOTAL EXPENSES....................... 2,908,106 LESS: EXPENSE OFFSET................. (17,709) ------------ NET EXPENSES......................... 2,890,397 ------------ NET INVESTMENT INCOME................ 19,568,521 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized loss........................ (93,251) Net change in unrealized appreciation.... 5,092,960 ------------ NET GAIN............................. 4,999,709 ------------ NET INCREASE............................. $ 24,568,230 ============
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, 1997 MAY 31, 1996 - ---------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income.................................. $ 19,568,521 $ 20,385,122 Net realized gain (loss)............................... (93,251) 6,527,149 Net change in unrealized appreciation.................. 5,092,960 (12,300,038) ------------ ------------ NET INCREASE....................................... 24,568,230 14,612,233 ------------ ------------ Dividends to preferred shareholders from net investment income................................................ (3,571,216) (3,811,460) ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income.................................. (15,071,283) (16,766,322) Net realized gain...................................... (5,000,795) (3,013,608) ------------ ------------ TOTAL.............................................. (20,072,078) (19,779,930) ------------ ------------ Decrease from transactions in common shares of beneficial interest................................... (7,218,048) (3,658,013) ------------ ------------ NET DECREASE....................................... (6,293,112) (12,637,170) NET ASSETS: Beginning of period.................................... 355,587,431 368,224,601 ------------ ------------ END OF PERIOD (Including undistributed net investment income of $2,119,833 and $1,193,811, respectively)........... $349,294,319 $355,587,431 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 13 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS May 31, 1997 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 14 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS May 31, 1997, continued income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized capital gains. To the extent they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in-capital. 2. INVESTMENT ADVISORY AGREEMENT Pursuant to an Investment Advisory Agreement with Dean Witter InterCapital Inc. (the "Investment Adviser"), an affiliate of Dean Witter Services Company Inc. (the "Administrator"), the Fund pays the Investment Adviser an advisory fee, calculated weekly and payable monthly, by applying the annual rate of 0.40% to the Fund's 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 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. 15 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS May 31, 1997, continued 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, 1997 aggregated $15,605,950 and $26,178,665, respectively. Dean Witter Trust Company, an affiliate of the Investment Adviser and Administrator, is the Fund's transfer agent. At May 31, 1997, the Fund had transfer agent fees and expenses payable of approximately $7,700. 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, 1997 included in Trustees' fees and expenses in the Statement of Operations amounted to $1,422. At May 31, 1997, the Fund had an accrued pension liability of $47,933 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. The Fund has issued Series A through E Auction Rate Preferred Shares ("Preferred Shares") which 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.
AMOUNT NEXT RANGE OF SERIES SHARES* IN THOUSANDS* RATE* RESET DATE DIVIDEND RATES** - ------- -------- ------------- ----- ---------- ---------------- A 200 $14,768 3.85% 06/04/97 3.00% - 4.20% B 200 14,768 3.85 06/04/97 3.15 - 4.15 C 200 14,728 3.84 06/04/97 3.00 - 4.55 D 200 61,258 3.55 07/02/97 3.50 - 3.75 E 200 67,506 3.85 07/09/97 3.25 - 3.85
- --------------------- * As of May 31, 1997. ** For the year ended May 31, 1997. 16 MUNICIPAL PREMIUM INCOME TRUST NOTES TO FINANCIAL STATEMENTS May 31, 1997, continued Subsequent to May 31, 1997 and up through July 10, 1997, the Fund paid dividends to each of the Series A through E at rates ranging from 3.55% to 3.85% in the aggregate amount of $397,174. 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 PAR VALUE EXCESS OF SHARES OF SHARES PAR VALUE ---------- --------- ------------ 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 Treasury shares purchased and retired (weighted average discount 8.30%)*........ (779,500) (7,795) (7,210,253) ---------- -------- ------------ Balance, May 31, 1997........................................................... 24,721,924 $247,219 $229,596,512 ========== ======== ============
- --------------------- * 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 27, 1997 $0.05 June 6, 1997 June 20, 1997 July 1, 1997 $0.05 July 11, 1997 July 25, 1997
8. FEDERAL INCOME TAX STATUS At May 31, 1997, the Fund had a net capital loss carryover of approximately $93,000 which will be available through May 31, 2005 to offset future capital gains to the extent provided by regulations. 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* ------------------------------------------------------------- 1997 1996++ 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period............................ $ 10.02 $ 10.36 $ 10.24 $ 10.67 $ 10.02 -------- -------- -------- -------- -------- Net investment income........................................... 0.78 0.79 0.84 0.90 0.91 Net realized and unrealized gain (loss)......................... 0.19 (0.22) 0.26 (0.45) 0.64 -------- -------- -------- -------- -------- Total from investment operations................................ 0.97 0.57 1.10 0.45 1.55 -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income........................................ (0.60) (0.65) (0.72) (0.76) (0.77) Common share equivalent of dividends paid to preferred shareholders................................................ (0.14) (0.15) (0.16) (0.12) (0.12) Net realized gain............................................ (0.20) (0.12) (0.10) -- (0.01) -------- -------- -------- -------- -------- Total dividends and distributions............................... (0.94) (0.92) (0.98) (0.88) (0.90) -------- -------- -------- -------- -------- Anti-dilutive effect of acquiring treasury shares............... 0.03 0.01 -- -- -- -------- -------- -------- -------- -------- Net asset value, end of period.................................. $ 10.08 $ 10.02 $ 10.36 $ 10.24 $ 10.67 ======== ======== ======== ======== ======== Market value, end of period..................................... $ 9.375 $ 9.00 $ 9.6875 $ 9.75 $ 10.75 ======== ======== ======== ======== ======== TOTAL INVESTMENT RETURN+........................................ 13.52% 0.67% 8.15% (2.72)% 11.30% RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS: Expenses........................................................ 1.14%(1) 1.16%(1) 1.21% 1.23% 1.38% Net investment income before preferred stock dividends.......... 7.70% 7.68% 8.37% 8.31% 8.73% Preferred stock dividends....................................... 1.41% 1.44% 1.55% 1.11% 1.21% Net investment income available to common shareholders.......... 6.29% 6.24% 6.82% 7.20% 7.52% SUPPLEMENTAL DATA: Net assets, end of period, in thousands......................... $349,294 $355,587 $368,225 $393,532 $404,979 Asset coverage on preferred shares at end of period............. 349% 355% 368% 314% 324% Portfolio turnover rate......................................... 5% 14% 16% 23% 7%
- --------------------- * The per share amounts were computed using an average number of shares outstanding during the period. + Total investment return is based upon the current market value on the last day of each period reported. Dividends and distributions are assumed to be reinvested at the prices obtained under the Fund's dividend reinvestment plan. Total investment return does not reflect brokerage commissions. ++ Restated for comparative purposes. (1) Does not reflect the effect of expense offset of 0.01%. 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, 1997, 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, 1997 by correspondence with the custodian, provided a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, New York 10036 July 10, 1997 - -------------------------------------------------------------------------------- 1997 FEDERAL TAX NOTICE (unaudited) During the year ended May 31, 1997, the Fund paid the following per share amounts from tax-exempt income: $0.60 to common shareholders, $3,439 to Series A preferred shareholders, $3,494 to Series B preferred shareholders, $3,480 to Series C preferred shareholders, $3,600 to Series D preferred shareholders and $3,843 to Series E preferred shareholders. For the year ended May 31, 1997, the Fund paid to common shareholders $0.20 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 Barry Fink 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, 1997 -----END PRIVACY-ENHANCED MESSAGE-----