<PAGE> 1
MUNICIPAL PREMIUM INCOME TRUST Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS November 30, 1997
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of Municipal
Premium Income Trust (PIA) for the six-month period ended November 30, 1997.
Over the past six months the bond market rallied and the pace of economic growth
moderated. Inflation remained subdued and the Federal Reserve Board favored a
stable monetary policy following its tightening move in March. In addition, the
bond rally was supported by a shrinking federal budget deficit and a stronger
dollar. By August the bond market began to retreat on fears that record-setting
employment conditions might prompt the Federal Reserve Board to tighten interest
rates further. However, yields declined in October and November. The spreading
Asian currency crisis created turmoil in the international markets,
precipitating "flight-to-quality" demand for U.S. Treasuries.
BOND YIELDS 1994-1997
<TABLE>
<CAPTION>
Insured Municipal
30-Year 30-Year Revenue Yields
Insured Municipal U.S. Treasury as a Percentage of
Revenue Yields Yields U.S. Treasury Yields
<S> <C> <C> <C>
Dec '93 5.4 6.34 85.17%
5.4 6.24 86.54%
5.8 6.66 87.09%
6.4 7.09 90.27%
6.35 7.32 86.75%
6.25 7.43 84.12%
Jun '94 6.5 7.61 85.41%
6.25 7.39 84.57%
6.3 7.45 84.56%
6.55 7.81 83.87%
6.75 7.96 84.80%
7 8 87.50%
Dec '94 6.75 7.88 85.66%
6.4 7.7 83.12%
6.15 7.44 82.66%
6.15 7.43 82.77%
6.2 7.34 84.47%
5.8 6.66 87.09%
Jun '95 6.1 6.62 92.15%
6.1 6.86 88.92%
6 6.66 90.08%
5.95 6.48 91.82%
5.75 6.33 90.84%
5.5 6.14 89.56%
Dec '95 5.35 5.94 90.07%
5.4 6.03 89.55%
5.8 6.46 86.69%
5.85 6.66 87.84%
5.95 6.89 86.36%
6.05 6.99 86.55%
Jun '96 5.9 6.89 85.63%
5.85 6.97 83.93%
5.9 7.11 82.98%
5.7 6.93 82.25%
5.65 6.64 85.09%
5.5 6.35 86.61%
Dec '96 5.6 6.63 84.46%
5.7 6.79 83.95%
5.65 6.8 83.08%
5.9 7.1 83.10%
5.75 6.94 82.85%
5.65 6.91 81.77%
Jun '97 5.6 6.78 82.60%
5.3 6.3 84.00%
5.5 6.61 83.00%
5.4 6.4 84.40%
5.35 6.15 86.90%
5.3 6.05 87.60%
</TABLE>
<PAGE> 2
MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS November 30, 1997, continued
MUNICIPAL MARKET CONDITIONS
Municipal yields followed the trend of Treasury yields but with less volatility.
Long-term insured revenue index yields declined from 5.65 percent in May 1997 to
5.30 percent by the end of November. Yields on 1-year notes moved from 3.90
percent to 3.80 percent. Consequently, the yield pickup for extending maturities
from 1 to 30 years narrowed from 175 basis points to 150 basis points over the
past six months.
The ratio of 30-year insured revenue bond yields to 30-year U.S. Treasury yields
rose from 82 percent at the end of May 1997 to 88 percent in November. A rising
ratio means that municipals have underperformed Treasuries and have become
relatively more attractive. Over the past four years, this ratio has annually
ranged from an average low of 83 percent to an average high of 90 percent.
New-issue underwriting volume was slightly ahead of last year's pace in the
first half of 1997. The decline in interest rates led to a surge in refunding
activity in the third quarter. As a result, new-issue municipal volume was up 17
percent during the first 11 months of 1997. Refundings accounted for one-quarter
of total volume.
PERFORMANCE
During the six-month period ended November 30, 1997, the Fund's net asset value
(NAV) increased from $10.08 to $10.32. Based on this NAV change plus
reinvestment of tax-free dividends totaling $0.30 per share, the Fund's total
NAV return was 5.55 percent. PIA's price on the New York Stock Exchange moved
from $9.375 to $9.875 per share. Based on this change in market price plus
reinvestment of dividends, the Fund's total market return was 8.59 percent. On
November 30, 1997, the Fund was trading at a 4 percent discount to NAV.
Monthly dividends for the fourth quarter of 1997 were declared in September and
remained unchanged at $0.05 per share. Over the past six months the level of
undistributed net investment income increased from $0.086 to $0.099 per share.
PORTFOLIO STRUCTURE
The Fund remained fully invested in long-term municipal bonds. Investments were
diversified among 13 long-term sectors and 71 credits. The Fund's weighted
average maturity was 19 years. The distribution of call dates in the portfolio
produced 5 years of weighted average call protection. High credit quality was
maintained with 80 percent of long-term holdings rated double or triple "A".
<PAGE> 3
MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS November 30, 1997, continued
LARGEST SECTORS AS OF NOVEMBER 30, 1997
(% OF NET ASSETS)
<TABLE>
<S> <C>
REFUNDED 17%
IDR/PCR* 14%
ELECTRIC 13%
MORTGAGE 13%
HOSPITAL 12%
TRANSPORTATION 9%
GENERAL OBLIGATION 6%
WATER & SEWER 6%
ALL OTHERS 10%
</TABLE>
* INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CREDIT RATINGS AS OF NOVEMBER 30, 1997
(% OF TOTAL LONG-TERM PORTFOLIO)
<TABLE>
<S> <C>
Aaa OR AAA 58%
Aa OR AA 22%
Baa OR BBB 9%
A OR A 8%
N/R 3%
</TABLE>
AS MEASURED BY MOODY'S INVESTORS SERVICE, INC.
OR STANDARD & POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CALL STRUCTURE AS OF NOVEMBER 30, 1997
(% OF TOTAL LONG-TERM PORTFOLIO)
PERCENT CALLABLE
WEIGHTED AVERAGE
CALL PROTECTION: 5 YEARS
YEARS BONDS CALLABLE
<TABLE>
<S> <C>
1998 12%
1999 12%
2000 6%
2001 4%
2002 1%
2003 12%
2004 7%
2005 12%
2006 11%
2007 4%
2008+ 19%
</TABLE>
<PAGE> 4
MUNICIPAL PREMIUM INCOME TRUST
LETTER TO THE SHAREHOLDERS November 30, 1997, continued
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 shareholders depends on two factors. The first
factor is the amount of ARPS outstanding. Five ARPS series totaling $100 million
are outstanding and represent 28 percent of net assets. The second factor is the
spread between the portfolio's book yield and the cost of ARPS (ARPS auction
rate and 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. Weekly ARPS yields ranged between 3.34 and 5.75 percent.
LOOKING AHEAD
So far this year, long-term municipal bonds have followed the trend of
Treasuries toward lower yields. The recent enactment of the Taxpayer Relief Act
of 1997 preserved the traditional tax-exempt benefits of municipal bond income.
The Fund's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps to
support the market value of the Fund's shares. In addition, we would like to
remind you that the Trustees have approved a procedure whereby the Fund, when
appropriate, may purchase shares in the open market or in privately negotiated
transactions at a price not above market value or net asset value, whichever is
lower at the time of purchase. During the six-month period ended November 30,
1997, the Fund purchased and retired 204,000 shares of common stock at a
weighted average market discount of 4.837 percent. The Fund may also utilize
procedures to reduce or eliminate the amount of outstanding ARPS, including
their purchase in the open market or in privately negotiated transactions.
We appreciate your ongoing support of Municipal Premium Income Trust and look
forward to continuing to serve your investment needs.
Very truly yours,
/S/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE> 5
MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (97.4%)
General Obligation (5.7%)
$ 5,000 Chicago Park District, Illinois, Ser 1995............................... 6.60% 11/15/14 $ 5,542,450
3,500 Massachusetts, 1995 Ser A (AMBAC)....................................... 5.00 07/01/12 3,510,640
4,500 Shelby County, Tennessee, Refg 1995 Ser A............................... 5.625 04/01/11 4,705,200
6,000 Washington, Ser 1993 A.................................................. 5.75 10/01/17 6,204,900
- -------- ------------
19,000 19,963,190
- -------- ------------
Educational Facilities Revenue (3.6%)
5,500 Oakland University, Michigan, Ser 1995 (MBIA)........................... 5.75 05/15/26 5,707,075
New York State Dormitory Authority,
4,000 State University Refg Ser 1993 A........................................ 5.50 05/15/08 4,218,040
1,350 State University Ser 1990 B............................................. 7.50 05/15/11 1,636,173
1,000 Pennsylvania Higher Educational Facilities Authority, Temple University
First Ser (MBIA)....................................................... 6.50 04/01/21 1,078,570
- -------- ------------
11,850 12,639,858
- -------- ------------
Electric Revenue (12.6%)
5,000 Sacramento Municipal Utility District, California, Refg 1994 Ser I
(MBIA)................................................................. 6.00 01/01/24 5,305,250
4,000 Kansas City, Kansas, Utility Refg & Impr Ser 1994 (FGIC)................ 6.375 09/01/23 4,427,440
7,750 South Carolina Public Service Authority, 1995 Refg Ser A (AMBAC)........ 6.25 01/01/22 8,448,353
20,000 San Antonio, Texas, Electric & Gas Refg Ser 1994 C...................... 4.70 02/01/06 19,745,399
Intermountain Power Agency, Utah,
5,000 Refg 1997 Ser B (MBIA)................................................. 5.75 07/01/19 5,223,600
1,270 Refg Ser 1988 B........................................................ 7.50 07/01/21 1,319,327
- -------- ------------
43,020 44,469,369
- -------- ------------
Hospital Revenue (12.2%)
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 4,665,350
5,000 Birmingham-Carraway Special Care Facilities Financing Authority,
Alabama, Carraway Methodist Health Systems Ser 1995 A (Connie Lee)..... 5.875 08/15/15 5,225,299
3,500 Colbert County - Northwest Health Care Authority, Alabama, Hellen Keller
Hospital Refg Ser 1990................................................. 8.75 06/01/09 3,843,385
1,000 California Health Facilities Financing Authority, Alexian Brothers/San
Jose Refg Ser 1990 (MBIA).............................................. 7.125 01/01/16 1,071,670
3,000 Hall County & Gainesville Hospital Authority, Georgia, Northeast Georgia
Healthcare Ser 1995 (MBIA)............................................. 6.00 10/01/20 3,187,560
3,750 Evergreen Park, Illinois, Little Company of Mary Hospital Refg Ser 1988
(MBIA)................................................................. 7.25 02/15/11 3,848,100
1,800 Southwestern Illinois Development Authority, Anderson Hospital Ser 1992
A...................................................................... 7.00 08/15/22 1,943,136
3,420 Kentucky Development Finance Authority, Ashland Hospital/King's
Daughters Refg Ser 1987................................................ 9.75 08/01/05 3,519,283
9,500 Boston, Massachussetts, Boston City Hospital - FHA Mtg Refg Ser B....... 5.75 02/15/13 9,655,610
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS November 30, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 2,985 Lehigh County General Purpose Authority, Pennsylvania, St Lukes Hospital
Ser 1992 (AMBAC)....................................................... 6.25% 07/01/22 $ 3,176,219
2,750 Jefferson County Health Facilities Development Corporation, Texas,
Baptist Health Care Ser 1989........................................... 8.30 10/01/14 2,908,208
- -------- ------------
41,705 43,043,820
- -------- ------------
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 13,434,993
10,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA)............ 7.00 06/01/31 10,905,800
1,000 Ohio Water Development Authority, Toledo Edison Co Ser 1990 A (Secondary
FSA)................................................................... 7.75 05/15/19 1,092,900
9,500 Montgomery County Industrial Development Authority, Pennsylvania,
Philadelphia Electric Co Refg 1991 Ser B (MBIA)........................ 6.70 12/01/21 10,362,695
13,000 Alliance Airport Authority, Texas, AMR Corp Ser 1990 (AMT).............. 7.50 12/01/29 14,155,700
- -------- ------------
45,545 49,952,088
- -------- ------------
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 1,262,500
Massachusetts Housing Finance Agency,
2,000 Rental 1994 Ser A (AMT) (AMBAC)........................................ 6.60 07/01/14 2,141,280
4,000 Rental 1994 Ser A (AMT) (AMBAC)........................................ 6.65 07/01/19 4,282,520
2,750 Minnesota Housing Finance Agency, Rental 1995 Ser D (MBIA).............. 6.00 02/01/22 2,835,800
- -------- ------------
10,000 10,522,100
- -------- ------------
Mortgage Revenue - Single Family (9.7%)
Colorado Housing & Finance Authority,
380 Ser 1990 B-2........................................................... 8.00 02/01/18 398,327
2,500 Ser 1997 A-2 (AMT)..................................................... 7.25 05/01/27 2,794,125
490 Idaho Housing Agency, 1988 Ser D-2 (AMT)................................ 8.25 01/01/20 524,555
460 Illinois Housing Development Authority, 1988 Ser C (AMT)................ 8.10 02/01/22 473,506
130 Indiana Housing Finance Authority, GNMA Collateralized Ser 1990 A-2
(AMT).................................................................. 8.10 01/01/22 133,465
1,045 Kansas City Leavenworth & Lenexa, Kansas, GNMA-Backed Ser 1988 C (AMT).. 8.00 11/01/20 1,077,677
Olathe, Kansas,
155 GNMA Collateralized Ser 1990 B.......................................... 7.50 09/01/10 164,388
485 GNMA Collateralized Ser 1989 A (AMT) (MBIA)............................. 8.00 11/01/20 506,956
1,490 New Orleans Home Mortgage Authority, Louisiana, 1989 Ser B-1 (AMT)...... 8.25 12/01/21 1,548,691
Maine Housing Authority,
3,540 Purchase Ser 1988 D4 (AMT)............................................. 7.55 11/15/19 3,736,187
1,000 Purchase Ser 1988 D5 (AMT)............................................. 7.55 11/15/19 1,055,420
Massachusetts Housing Finance Agency,
1,660 Residential Ser 1989 A (AMT)........................................... 8.20 08/01/15 1,731,264
4,960 1989 Ser 7 (AMT)....................................................... 8.10 06/01/20 5,094,018
665 Mississippi Housing Finance Corporation, GNMA-Backed Ser 1989 (AMT)
(FGIC)................................................................. 8.25 10/15/18 701,143
2,885 Missouri Housing Development Commission, Homeownership 1996 Ser D
(AMT).................................................................. 7.10 09/01/27 3,158,440
280 Muskogee County Home Finance Authority, Oklahoma, 1990 Ser A (FGIC)..... 7.60 12/01/10 294,188
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS November 30, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 2,560 Rhode Island Housing & Mortgage Finance Corporation,
Homeownership 1988 Ser 1-D (AMT)....................................... 7.875% 10/01/22 $ 2,690,099
South Carolina Housing Finance & Development Authority,
3,000 Homeownership 1998 Ser C-1 (AMT)....................................... 8.125 07/01/21 3,124,980
1,220 Homeownership 1991 Ser A (AMT)......................................... 7.40 07/01/23 1,287,198
2,870 El Paso Housing Finance Corporation, Texas, GNMA Collateralized Ser 1989
(AMT).................................................................. 8.20 03/01/21 2,999,982
Utah Housing Finance Agency,
300 Ser 1991 B-1........................................................... 7.50 07/01/16 316,692
300 Ser 1989 B (AMT)....................................................... 8.25 07/01/21 308,658
- -------- ------------
32,375 34,119,959
- -------- ------------
Nursing & Health Related Facilities Revenue (0.5%)
New York State Medical Care Facilities Finance Agency,
825 Mental Health Ser 1987................................................. 8.875 08/15/07 845,056
560 Mental Health Ser 1990 A (Secondary MBIA).............................. 7.75 02/15/20 609,028
405 Mental Health Ser 1991 A............................................... 7.50 02/15/21 448,732
- -------- ------------
1,790 1,902,816
- -------- ------------
Public Facilities Revenue (1.0%)
Saint Paul Independent School District #625, Minnesota,
1,700 Ser 1995 C COPs........................................................ 5.45 02/01/11 1,744,489
1,800 Ser 1995 C COPs........................................................ 5.50 02/01/12 1,845,936
- -------- ------------
3,500 3,590,425
- -------- ------------
Resource Recovery Revenue (3.3%)
11,500 Cambria County Industrial Development Authority, Pennsylvania, Cambria
- -------- Cogen Co Ser 1989 F-2 (MBIA)........................................... 7.75 09/01/19 11,736,785
------------
Transportation Facilities Revenue (8.5%)
3,500 Atlanta, Georgia, Airport Ser 1994 B (AMT) (AMBAC)...................... 6.00 01/01/21 3,666,355
Chicago, Illinois,
5,000 Chicago-O'Hare International Airport Ser 1996 A (AMBAC)................ 5.625 01/01/12 5,204,800
7,000 Midway Airport 1994 Ser A (AMT) (MBIA)................................. 6.25 01/01/24 7,427,840
5,000 Regional Transportation Authority, Illinois, Ser 1994 A (AMBAC)......... 6.25 06/01/24 5,398,650
8,000 Austin, Texas, Airport Prior Lien Ser 1995 A (AMT) (MBIA)............... 6.125 11/15/25 8,480,160
- -------- ------------
28,500 30,177,805
- -------- ------------
Water & Sewer Revenue (5.8%)
2,500 Coachella, California, Ser 1992 COPs (FSA).............................. 6.10 03/01/22 2,628,175
4,000 Santa Rosa, California, Wastewater Refg 1996 Ser A (FGIC)............... 4.75 09/01/16 3,781,120
3,500 Chicago, Illinois, Wastewater Ser 1994 (MBIA)........................... 6.375 01/01/24 3,811,990
3,000 Detroit, Michigan, Water Supply 1997 Ser A (MBIA)....................... 5.00 07/01/21 2,879,460
3,600 Rio Rancho, New Mexico, Water & Wastewater Ser 1995 A (FSA)............. 6.00 05/15/22 3,828,024
3,490 Texas Water Resource Finance Authority, Ser 1989 (AMBAC)................ 7.50 08/15/13 3,672,283
- -------- ------------
20,090 20,601,052
- -------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS November 30, 1997 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Refunded (17.3%)
$ 3,000 Central Coast Water Authority, California, Ser 1992 (AMBAC)............. 6.60% 10/01/02++ $ 3,362,730
5,000 District of Columbia, Ser 1990 A (AMBAC)................................ 7.50 06/01/00++ 5,482,800
3,800 Metropolitan Pier & Exposition Authority, Illinois, Ser 1992 A (FGIC)... 6.50 06/15/03++ 4,248,590
4,000 Indiana Health Facility Financing Authority, Hancock Memorial Hospital
Ser 1990............................................................... 8.30 08/15/00++ 4,482,200
3,965 Massachusetts, 1994 Ser C (FGIC)........................................ 6.75 11/01/04++ 4,532,431
11,000 Western Townships Utilities Authority, Michigan, Sewerage Disposal Ser
1989 (Crossover 01/01/99).............................................. 8.20 01/01/18 11,649,880
1,340 Missouri Health & Educational Facilities Authority, Missouri Baptist
Medical Center Refg Ser 1989 (ETM)..................................... 7.625 07/01/18 1,463,146
4,650 New York Local Government Assistance Corporation, Ser 1991 A............ 7.25 04/01/01++ 5,179,309
New York State Medical Care Facilities Finance Agency,
985 Mental Health Ser 1990 (Secondary MBIA)................................ 7.75 02/15/00++ 1,078,930
580 Mental Health Ser 1991 A............................................... 7.50 02/15/01++ 647,640
2,375 Montgomery County Higher Educational & Health Authority, Pennsylvania,
Holy Redeemer Hospital 1990 Ser A (AMBAC).............................. 7.625 02/01/00++ 2,548,328
2,400 Peninsula Ports Authority, Virginia, Mary Immaculate Hospital Ser
1989................................................................... 8.375 08/01/99++ 2,605,752
12,550 Washington Public Power Supply System, Nuclear Proj #2 Refg Ser 1990
C...................................................................... 7.625 01/01/01++ 13,976,935
- -------- ------------
55,645 61,258,671
- -------- ------------
324,520 TOTAL MUNICIPAL BONDS (Identified Cost $321,062,671)............................................ 343,977,938
- -------- ------------
SHORT-TERM MUNICIPAL OBLIGATION (0.5%)
1,800 East Baton Rouge Parish, Louisiana, Exxon Corp Ser 1993
- -------- (Demand 12/01/97) (Identified Cost $1,800,000)......................... 3.80* 03/01/22 1,800,000
------------
$326,320 TOTAL INVESTMENTS (Identified Cost $322,862,671) (a)................................... 97.9% 345,777,938
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.......................................... 2.1 7,343,256
----- ------------
NET ASSETS.............................................................................. 100.0% $353,121,194
===== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
MUNICIPAL PREMIUM INCOME TRUST
PORTFOLIO OF INVESTMENTS November 30, 1997 (unaudited) continued
- ---------------------
<TABLE>
<C> <S>
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 $23,203,162 and the aggregate gross unrealized depreciation is $287,895,
resulting in net unrealized appreciation of $22,915,267.
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.
</TABLE>
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
November 30, 1997
<TABLE>
<S> <C>
Alabama.................. 3.9%
Arizona.................. 3.8
California............... 4.6
Colorado................. 0.9
District of Columbia..... 1.6
Georgia.................. 1.9
Idaho.................... 0.2
Illinois................. 10.7
Indiana.................. 1.3
Kansas................... 4.8
Kentucky................. 1.0
Louisiana................ 1.3
Maine.................... 1.4
Massachusetts............ 8.8
Michigan................. 5.7
Minnesota................ 1.8
Mississippi.............. 0.2
Missouri................. 1.3
New Mexico............... 1.1
New York................. 4.2
Ohio..................... 0.3
Oklahoma................. 0.1
Pennsylvania............. 8.2
Rhode Island............. 0.8
South Carolina........... 3.6
Tennessee................ 1.3
Texas.................... 14.7
Utah..................... 2.0
Virginia................. 0.7
Washington............... 5.7
----
Total.................... 97.9%
====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
MUNICIPAL PREMIUM INCOME TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1997 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $322,862,671)....................................... $345,777,938
Cash.................................................................. 409,364
Receivable for:
Interest.......................................................... 7,072,244
Investments sold.................................................. 130,000
Prepaid expenses and other assets..................................... 200,892
------------
TOTAL ASSETS...................................................... 353,590,438
------------
LIABILITIES:
Payable for:
Dividends to preferred shareholders............................... 172,894
Investment advisory fee........................................... 116,152
Administration fee................................................ 72,595
Accrued expenses and other payables................................... 107,603
------------
TOTAL LIABILITIES................................................. 469,244
------------
NET ASSETS........................................................ $353,121,194
============
COMPOSITION OF 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, 24,517,924 shares outstanding)....................... 227,852,622
Net unrealized appreciation........................................... 22,915,267
Accumulated undistributed net investment income....................... 2,418,464
Accumulated net realized loss......................................... (65,159)
------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS...................... 253,121,194
------------
TOTAL NET ASSETS.................................................. $353,121,194
============
NET ASSET VALUE PER COMMON SHARE
($253,121,194 divided by 24,517,924 common shares outstanding)....... $10.32
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11
MUNICIPAL PREMIUM INCOME TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended November 30, 1997 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME........................................................ $11,001,619
-----------
EXPENSES
Investment advisory fee................................................ 708,287
Administration fee..................................................... 442,679
Auction commission fees................................................ 134,796
Professional fees...................................................... 45,195
Transfer agent fees and expenses....................................... 38,950
Auction agent fees..................................................... 30,504
Shareholder reports and notices........................................ 25,636
Registration fees...................................................... 16,214
Custodian fees......................................................... 8,342
Trustees' fees and expenses............................................ 6,767
Other.................................................................. 18,822
-----------
TOTAL EXPENSES..................................................... 1,476,192
Less: expense offset................................................... (8,278)
-----------
NET EXPENSES....................................................... 1,467,914
-----------
NET INVESTMENT INCOME.............................................. 9,533,705
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain...................................................... 28,093
Net change in unrealized appreciation.................................. 5,491,260
-----------
NET GAIN........................................................... 5,519,353
-----------
NET INCREASE........................................................... $15,053,058
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 12
MUNICIPAL PREMIUM INCOME TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
NOVEMBER 30, 1997 MAY 31, 1997
- --------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.............................. $ 9,533,705 $ 19,568,521
Net realized gain (loss)........................... 28,093 (93,251)
Net change in unrealized appreciation.............. 5,491,260 5,092,960
------------ ------------
NET INCREASE................................... 15,053,058 24,568,230
------------ ------------
Dividends to preferred shareholders from net
investment income................................. (1,850,160) (3,571,216)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS
FROM:
Net investment income.............................. (7,384,914) (15,071,283)
Net realized gain.................................. -- (5,000,795)
------------ ------------
TOTAL.......................................... (7,384,914) (20,072,078)
------------ ------------
Decrease from transactions in common shares of
beneficial interest............................... (1,991,109) (7,218,048)
------------ ------------
NET INCREASE (DECREASE)........................ 3,826,875 (6,293,112)
NET ASSETS:
Beginning of period................................ 349,294,319 355,587,431
------------ ------------
END OF PERIOD
(Including undistributed net investment income
of $2,418,464 and $2,119,833, respectively).... $353,121,194 $349,294,319
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 13
MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1997 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Municipal Premium Income Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as a diversified, closed-end management
investment company. The Fund'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
<PAGE> 14
MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1997 (unaudited) 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.
<PAGE> 15
MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1997 (unaudited) 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 six months ended November 30, 1997 aggregated
$2,832,150 and $4,889,348, respectively.
Dean Witter Trust FSB, an affiliate of the Investment Adviser and Administrator,
is the Fund's transfer agent. At November 30, 1997, the Fund had transfer agent
fees and expenses payable of approximately $2,800.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended November 30, 1997
included in Trustees' fees and expenses in the Statement of Operations amounted
to $1,545. At November 30, 1997, the Fund had an accrued pension liability of
$47,928 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. COMMON SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL
PAID IN
PAR VALUE EXCESS OF
SHARES OF SHARES PAR VALUE
---------- --------- ------------
<S> <C> <C> <C>
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
Treasury shares purchased and retired (weighted average discount 4.837%)*....... (204,000) (2,040) (1,989,069)
---------- -------- ------------
Balance, November 30, 1997...................................................... 24,517,924 $245,179 $227,607,443
========== ======== ============
</TABLE>
- ---------------------
* The Trustees have voted to retire the shares purchased.
6. 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,
<PAGE> 16
MUNICIPAL PREMIUM INCOME TRUST
NOTES TO FINANCIAL STATEMENTS November 30, 1997 (unaudited) continued
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.
<TABLE>
<CAPTION>
AMOUNT NEXT RANGE OF
SERIES SHARES* IN THOUSANDS* RATE* RESET DATE DIVIDEND RATES**
- ------ ------- ------------- ----- ---------- ----------------
<S> <C> <C> <C> <C> <C>
A 200 $14,768 3.85% 12/03/97 3.34% - 3.99%
B 200 14,000 3.65 12/03/97 3.35 - 3.99
C 200 57,534 3.75 09/02/98 3.62 - 3.87
D 200 56,306 3.67 01/07/98 3.55 - 5.75
E 200 59,054 3.85 07/08/98 3.849
</TABLE>
- ---------------------
* As of November 30, 1997.
** For the six months ended November 30, 1997.
Subsequent to November 30, 1997 and up through December 5, 1997, the Fund paid
dividends to each of the Series A through E at rates ranging from 3.65% to 3.85%
in the aggregate amount of $28,768.
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.
7. DIVIDENDS TO COMMON SHAREHOLDERS
The Fund declared the following dividends from net investment income:
<TABLE>
<CAPTION>
DECLARATION AMOUNT RECORD PAYABLE
DATE PER SHARE DATE DATE
- ------------------- --------- ------------------ -------------------
<S> <C> <C> <C>
September 23, 1997 $0.05 December 5, 1997 December 19, 1997
December 30, 1997 $0.05 January 9, 1998 January 23, 1998
</TABLE>
8. FEDERAL INCOME TAX STATUS
At May, 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.
<PAGE> 17
MUNICIPAL PREMIUM INCOME TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a common share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED MAY 31*
MONTHS ENDED --------------------------------------------------
NOVEMBER 30, 1997* 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........... $10.08 $10.02 $10.36 $10.24
------ ------ ------ ------
Net investment income.......................... 0.39 0.78 0.79 0.84
Net realized and unrealized gain (loss)........ 0.23 0.19 (0.22) 0.26
------ ------ ------ ------
Total from investment operations............... 0.62 0.97 0.57 1.10
------ ------ ------ ------
Less dividends and distributions from:
Net investment income....................... (0.30) (0.60) (0.65) (0.72)
Common share equivalent of dividends paid to
preferred shareholders.................... (0.08) (0.14) (0.15) (0.16)
Net realized gain........................... -- (0.20) (0.12) (0.10)
------ ------ ------ ------
Total dividends and distributions.............. (0.38) (0.94) (0.92) (0.98)
------ ------ ------ ------
Anti-dilutive effect of acquiring treasury
shares........................................ -- 0.03 0.01 --
------ ------ ------ ------
Net asset value, end of period................. $10.32 $10.08 $10.02 $10.36
====== ====== ====== ======
Market value, end of period.................... $9.875 $9.375 $ 9.00 $9.688
====== ====== ====== ======
TOTAL INVESTMENT RETURN+....................... 8.59%(3) 13.52% 0.67% 8.15%
RATIOS TO AVERAGE NET ASSETS
OF COMMON SHAREHOLDERS:
Expenses....................................... 1.16%(2) 1.14%(1) 1.16%(1) 1.21%
Net investment income before preferred stock
dividends..................................... 7.56%(2) 7.70% 7.68% 8.37%
Preferred stock dividends...................... 1.47%(2) 1.41% 1.44% 1.55%
Net investment income available to common
shareholders.................................. 6.09%(2) 6.29% 6.24% 6.82%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........ $353,121 $349,294 $355,587 $368,225
Asset coverage on preferred shares at end of
period........................................ 352% 349% 355% 368%
Portfolio turnover rate........................ 1%(3) 5% 14% 16%
<CAPTION>
FOR THE YEAR ENDED MAY 31*
-----------------------------
1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........... $10.67 $10.02
------ ------
Net investment income.......................... 0.90 0.91
Net realized and unrealized gain (loss)........ (0.45) 0.64
------ ------
Total from investment operations............... 0.45 1.55
------ ------
Less dividends and distributions from:
Net investment income....................... (0.76) (0.77)
Common share equivalent of dividends paid to
preferred shareholders.................... (0.12) (0.12)
Net realized gain........................... -- (0.01)
------ ------
Total dividends and distributions.............. (0.88) (0.90)
------ ------
Anti-dilutive effect of acquiring treasury
shares........................................ -- --
------ ------
Net asset value, end of period................. $10.24 $10.67
====== ======
Market value, end of period.................... $ 9.75 $10.75
====== ======
TOTAL INVESTMENT RETURN+....................... (2.72)% 11.30%
RATIOS TO AVERAGE NET ASSETS
OF COMMON SHAREHOLDERS:
Expenses....................................... 1.23% 1.38%
Net investment income before preferred stock
dividends..................................... 8.31% 8.73%
Preferred stock dividends...................... 1.11% 1.21%
Net investment income available to common
shareholders.................................. 7.20% 7.52%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........ $393,532 $404,979
Asset coverage on preferred shares at end of
period........................................ 314% 324%
Portfolio turnover rate........................ 23% 7%
</TABLE>
- ---------------------
* 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.
(1) Does not reflect the effect of expense offset of 0.01%.
(2) Annualized.
(3) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 18
(This Page Intentionally Left Blank)
<PAGE> 19
(This Page Intentionally Left Blank)
<PAGE> 20
TRUSTEES
- -------------------------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
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 FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- -------------------------------------------------
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT ADVISER
- -------------------------------------------------
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of the
Fund without examination by the independent accountants and accordingly they do
not express an opinion thereon.
MUNICIPAL
PREMIUM
INCOME
TRUST
Semiannual Report
November 30, 1997
