-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, UWKC3lXbXcCa2pDRJ2kO4UjmpBgYDsCu+Zxp4TTzol48AT7Qy9J4Wg92jfdpIcC8 t5FSC6j9lrwnIgHfGl4d+Q== 0000912057-94-002132.txt : 19940702 0000912057-94-002132.hdr.sgml : 19940702 ACCESSION NUMBER: 0000912057-94-002132 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940624 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST CENTRAL INDEX KEY: 0000876982 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06346 FILM NUMBER: 94535494 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123922550 N-30D 1 N-30D INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST Two World Trade Center New York, New York 10048 DEAR SHAREHOLDER: - - - - - -------------------------------------------------------------------------------- When InterCapital Quality Municipal Investment Trust (NYSE Symbol: IQT) began its new fiscal year November 1993, municipal yields had reached record lows in a trend that began six years ago. Strong economic growth in the fourth quarter of 1993 prompted concern about inflation and caused interest rates to rise. This induced the Federal Reserve Board to tighten monetary policy by raising the federal-funds rate -- the interest rate that banks charge each other for overnight loans -- from 3.00 percent to 3.75 percent in three separate moves between early February and April. This action was presented as a preemptive strike against inflation. However, the fixed-income markets interpreted the change in Fed policy as the beginning of a trend toward higher interest rates. In mid-May the Federal Reserve Board initiated another round of tightening with a 50 basis point increase in both the federal-funds rate and the discount rate - - - - - -- the interest rate the Federal Reserve charges member banks for loans. By the end of April the bond market was battered. Interest rates were at levels not seen in over a year. Long-term municipal bond yields as measured by THE BOND BUYER Revenue Bond Index* increased by 86 basis points from 5.56 percent to 6.42 percent between November and April. This corresponded to a price decline of more than 12 percent. New-issue underwriting totaled $290 billion in 1993, a 23 percent increase over the previous high of $235 billion set in 1992. Refunding issues, which are used by state and local governments to refinance higher-coupon debt, represented 66 percent of total volume last year. It is estimated that 1994's underwriting volume will decline by 30 percent to about $200 billion and that approximately $260 billion in bonds will either mature or be called. Thus, the amount of municipal debt outstanding will be reduced. In line with these projections, new-issue volume for the first four months of 1994 declined by 34 percent and totaled $59 billion. Refunding activity, the catalyst of last year's record underwriting, dropped even more sharply. PERFORMANCE For the six-month period ended April 30, 1994, the Trust paid shareholders tax-free income dividends totaling $0.69 per share, including an extra income dividend of $0.15 per share distributed in December. IQT's total return for this period was -8.14 percent. This calculation is based on a change in the Trust's New York Stock Exchange market price from $16.625 on October 31, 1993 to $14.625 per share on April 30, 1994 and includes the reinvestment of all dividends and distributions. Over the same period, the Trust's net asset value (NAV) fell by 10.3 percent from $16.53 to $14.82 per share. Although IQT is leveraged with Auction Rate Preferred Shares (as discussed below), its NAV decline was in line with the unleveraged Revenue Bond Index. The defensive nature of the high-coupon bonds in the portfolio aided performance. As of April 30, 1994, the Trust was trading at 1.32 percent discount to NAV. PORTFOLIO STRUCTURE The portfolio's long-term investments were diversified among 14 municipal sectors and 56 credits. The three largest sectors were hospital, single-family mortgage and electric revenue bonds, representing 41 percent of net assets. The average maturity and call protection of the Trust's long-term holdings were 22 years and 8 years, respectively. Bonds subject to the alternative minimum tax (AMT) represented - - - - - --------------- * THE BOND BUYER Revenue Bond Index is an arithmetic average of the yields of 25 selected municipal revenue bonds with 30-year maturities. Ratings of these bonds range from Aaa to Baa1 by Moody's and AAA to A- by S&P. approximately 26 percent of net assets. At the end of the period, the Trust's net assets exceeded $415 million. The credit quality ratings of the long-term portfolio are summarized below:
MOODY'S OR STANDARD & POOR'S RATING: PERCENT: - - - - - ------------------------------------------------------------ ----------- Aaa or AAA.................................................. 35.8% Aa or AA.................................................... 32.0 A1 or A+.................................................... 12.2 A or A...................................................... 18.7 Baa or BBB.................................................. 1.3 ----------- 100.0% ----------- -----------
PREFERRED SHARE LEVERAGE In addition to common shares, the Trust has also issued two $70 million series of Auction Rate Preferred Shares (ARPS). Dividend and distribution payments for these shares rank ahead of the common shares. ARPS are short-term securities with maturities normally ranging from one week to one year. The dividend rates on tax-free ARPS are established by an auction process, when the maturity is rolled over. The Trust uses the proceeds from ARPS issuance to purchase long-term municipal bonds. The common shares are impacted by the preferred shares in two ways. First, following the payment of the dividend on the ARPS, common shares receive any extra incremental income when the long-term portfolio yield is higher than the cost of the ARPS (yield plus expenses). Second, the preferred shares leverage the common shares by a factor of approximately 1.5 times, thus multiplying any market change in NAV. Over the past six months, incremental tax-free income from the ARPS leverage maintained common share dividends and increased the level or cushion of undistributed net investment income. As of April 30, 1994, an amount equivalent to $0.125 per share had been accumulated in this cushion to help sustain the Trust's current dividend. The average ARPS rate on the Trust's two outstanding series as of April 30, 1994 was 2.77 percent, with all resets scheduled to occur within the next nine months. Higher yields in future ARPS auctions may begin to erode the Trust's cushion of undistributed net investment income available for distribution to common shareholders. If the cushion were to erode significantly over time, the Trust would take appropriate action, which could include an adjustment in the common dividend and/or a reduction in the amount of ARPS. Leverage was a positive influence on the overall value of the portfolio for the first two years of the Trust's existence. However, the increase in interest rates over the past few months has adversely impacted NAV. LOOKING AHEAD A continuation of low new-issue supply, coupled with significant bond calls and maturities should sustain investor demand for municipals. However, the overall direction of interest rates will primarily be determined by the strength of the economy, the trend of inflation and the Federal Reserve Board's response to economic conditions. The Trust's procedure for reinvestment of all dividends and distributions on common shares is by purchase in the open market. This method helps to support the market value of the Trust's shares. In addition, the Trustees have approved a procedure whereby the Trust may attempt to reduce or eliminate a market value discount from net asset value by repurchasing common shares in the open market or in privately negotiated transactions. The Trust may also utilize procedures to reduce or eliminate the amount of outstanding ARPS, including their repurchase in the open market or in privately negotiated transactions. We appreciate your support of InterCapital Quality Municipal Investment Trust and look forward to continuing to serve your investment needs. Very truly yours, Charles A. Fiumefreddo CHAIRMAN OF THE BOARD INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS APRIL 30, 1994 (UNAUDITED) - - - - - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT (IN COUPON MATURITY THOUSANDS) RATE DATE VALUE - - - - - ----------- ----------- --------- ------------- MUNICIPAL BONDS (93.7%) GENERAL OBLIGATION (2.1%) $ 5,000 New York City, New York, 1991 Ser D Group C (Prerefunded)............. 8.00 % 8/ 1/18 $ 5,898,200 3,195 Seattle, Washington, Refg Ser 1993.................................... 5.65 1/ 1/20 2,890,803 - - - - - ----------- ------------- 8,195 8,789,003 - - - - - ----------- ------------- EDUCATIONAL FACILITIES REVENUE (0.5%) 2,500 Auburn University, Alabama, Ser 1993 (MBIA Insured)................... 5.25 6/ 1/13 2,223,400 - - - - - ----------- ------------- ELECTRIC REVENUE (10.9%) 6,000 Indiana Municipal Power Agency, 1990 Ser A (Prerefunded).............. 7.10 1/ 1/15 6,630,360 7,600 North Carolina Municipal Power Agency #1, Catawba Ser 1992............ 6.25 1/ 1/15 7,454,764 2,500 South Carolina Public Service Authority, 1991 Refg & Impr Ser B (Prerefunded)....................................................... 7.10 7/ 1/21 2,802,875 12,000 San Antonio, Texas, Electric & Gas Refg Ser 1994...................... 5.00 2/ 1/14 10,298,040 4,500 Intermountain Power Agency, Utah, Refg Fifth Crossover Ser............ 7.20 7/ 1/19 4,788,360 13,000 Washington Public Power Supply System, Proj #1 Refg Ser 1991 A........ 6.875 7/ 1/17 13,286,130 - - - - - ----------- ------------- 45,600 45,260,529 - - - - - ----------- ------------- HOSPITAL REVENUE (16.0%) 10,000 Wichita, Kansas, CSJ Health System of Wichita Inc Ser 1991............ 7.00 11/15/18 10,250,900 Massachusetts Health & Educational Facilities Authority, 10,000 Brigham & Women's Hospital Ser D.................................... 6.75 7/ 1/24 10,203,900 5,000 St Elizabeth's Hospital of Boston Ser E LevRRS (FSA Insured).......... 10.63 + 8/15/21 5,337,500 7,000 Charlotte-Mecklenburg Hospital Authority, North Carolina, Ser 1992.... 6.25 1/ 1/20 6,850,410 9,000 Lorain County, Ohio, Humility of Mary Health Care Corp Ser 1991 B..... 7.20 12/15/11 9,457,650 11,000 Middleburg Heights, Ohio, Southwest General Hospital Ser 1991......... 7.20 8/15/19 11,815,100 2,300 Tulsa Industrial Development Authority, Oklahoma, St Francis Hospital Ser 1991 (Prerefunded).............................................. 6.75 12/15/18 2,527,332 6,000 Salt Lake City, Utah, IHC Hospitals Inc Refg Ser 1991 Special Linked INFLOS & PARS (AMBAC Insured)....................................... 6.61 5/15/20 6,084,420 3,500 Arlington County, Virginia, The Arlington Hospital Ser 1991-A (Prerefunded)....................................................... 7.125 9/ 1/21 3,931,515 - - - - - ----------- ------------- 63,800 66,458,727 - - - - - ----------- ------------- INDUSTRIAL DEVELOPMENT / POLLUTION CONTROL REVENUE (7.8%) 5,000 Valdez, Alaska, BP Pipelines Inc Refg Ser 1993 B...................... 5.50 10/ 1/28 4,309,400 1,000 St Lucie County, Florida, Florida Power & Light Co Ser 1991 (AMT)..... 7.15 2/ 1/23 1,044,080 4,500 Hawaii Department of Budget & Finance, Citizen Utilities Co 1991 Ser B RIBS (AMT).......................................................... 10.308+ 11/ 1/21 4,550,625 5,000 Chicago, Illinois, Chicago-O'Hare Int'l Airport/Lufthansa German Airlines Inc Ser 1990 (AMT)......................................... 7.125 5/ 1/18 5,193,150 2,650 Ashland, Kentucky, Ashland Oil Inc Ser 1991 (AMT)..................... 7.20 10/ 1/20 2,741,266 2,000 New York State Energy Research & Development Authority, Brooklyn Union Gas Co 1991 Ser B RIBS (AMT)........................................ 11.034+ 7/15/26 2,155,000 12,000 Richland County, South Carolina, Union Camp Corp Ser 1991 B (AMT)..... 7.125 9/ 1/21 12,637,560 - - - - - ----------- ------------- 32,150 32,631,081 - - - - - ----------- ------------- MORTGAGE REVENUE--MULTI-FAMILY (6.4%) 10,000 Illinois Housing Development Authority, 1991 Ser A.................... 8.25 7/ 1/16 10,889,900 15,000 New Jersey Housing & Mortgage Finance Agency, Presidential Plaza at Newport -- FHA Insured Mortgages Refg 1991 Ser 1.................... 7.00 5/ 1/30 15,590,100 - - - - - ----------- ------------- 25,000 26,480,000 - - - - - ----------- -------------
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS APRIL 30, 1994 (UNAUDITED) (CONTINUED) - - - - - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT (IN COUPON MATURITY THOUSANDS) RATE DATE VALUE - - - - - ----------- ----------- --------- ------------- MORTGAGE REVENUE--SINGLE FAMILY (14.4%) $ 6,685 California Housing Finance Agency, Home 1991 Ser G (AMT)...... 7.05% 8/ 1/27 $ 6,829,529 12,775 Colorado Housing Finance Authority, Refg 1991 Ser A........... 7.25 11/ 1/31 13,029,223 1,125 District of Columbia Housing Finance Agency, GNMA Collateralized Ser 1990 B (AMT)............................. 7.10 12/ 1/24 1,156,354 4,635 Maine Housing Authority, Purchase 1988 Series D-6 (AMT)....... 7.25 11/15/19 4,740,307 3,000 Michigan Housing Development Authority, 1991 Ser B............ 6.95 12/ 1/20 3,071,340 10,200 Nebraska Investment Finance Authority, GNMA-Backed Ser A & B Special Linked RIBS & SAVRS (AMT)........................... 6.88 9/19/23 10,404,714 5,000 New Hampshire Housing Finance Authority, Residential 1991 Ser D (AMT)..................................................... 7.25 7/ 1/15 5,133,850 2,950 Ohio Housing Finance Agency, GNMA-Backed 1991 Ser A-2 RIBS (AMT)....................................................... 10.855+ 3/24/31 3,012,688 4,000 Tennessee Housing Development Agency, Homeownership Issue T (AMT)....................................................... 7.375 7/ 1/23 4,118,720 5,000 Virginia Housing Development Authority, 1992 Ser A............ 7.15 1/ 1/33 5,164,800 3,000 Wyoming Community Development Authority, Federally Insured/Guaranteed Loans 1988 Ser G (AMT)................... 7.25 6/ 1/21 3,082,200 - - - - - ----------- ------------ 58,370 59,743,725 - - - - - ----------- ------------ NURSING & LIFE CARE REVENUE (7.1%) New York State Medical Care Facilities Finance Agency, 2,700 Mental Health 1991 Ser C.................................... 7.30 2/15/21 2,913,003 9,300 Mental Health 1991 Ser C (Prerefunded)........................ 7.30 2/15/21 10,605,906 15,000 Emmaus General Authority, Pennsylvania, Local Government Ser 1988 H (FGIC Insured)....................................... 7.00 5/15/18 15,845,700 - - - - - ----------- ------------ 27,000 29,364,609 - - - - - ----------- ------------ PUBLIC FACILITIES REVENUE (2.9%) Regional Convention & Sports Complex Authority, Missouri, 6,000 St Louis County Ser 1991 B (Prerefunded).................... 7.00 8/15/21 6,670,500 5,000 State Ser 1991 A (Prerefunded)................................ 6.90 8/15/21 5,503,500 - - - - - ----------- ------------ 11,000 12,174,000 - - - - - ----------- ------------ RESOURCE RECOVERY REVENUE (6.0%) 3,750 Broward County, Florida, SES Broward Co South Ser 1984........ 7.95 12/ 1/08 4,145,063 Detroit Economic Development Corporation, Michigan, 5,000 Ser 1991 A (AMT) (FSA Insured)................................ 6.60 5/ 1/02 5,259,750 5,000 Ser 1991 A (AMT) (FSA Insured)................................ 6.875 5/ 1/09 5,244,200 10,000 Montgomery County Industrial Development Authority, Pennsylvania, Ser 1989...................................... 7.50 1/ 1/12 10,518,400 - - - - - ----------- ------------ 23,750 25,167,413 - - - - - ----------- ------------ STUDENT LOAN REVENUE (1.7%) 6,500 Pennsylvania Higher Education Assistance Agency, 1991 Ser B RIBS (AMT) (AMBAC Insured).................................. 10.586+ 9/ 3/26 6,881,875 ------------ TRANSPORTATION FACILITIES REVENUE (9.8%) 4,500 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales Tax Ser I (Prerefunded)..................................... 7.00 7/ 1/16 4,749,345 12,000 Hawaii, Airport Second Ser of 1991 (AMT)...................... 6.90 7/ 1/12 12,690,600 6,000 Chicago, Illinois, Chicago-O'Hare Int'l Airport Refg 1993 Ser A........................................................... 5.00 1/ 1/16 4,997,460 10,000 Port Authority of New York & New Jersey, Cons Ser 60 (AMT)**..................................................... 8.25 4/ 1/23 10,502,000 3,000 Puerto Rico Highway & Transportation Authority, Refg Ser X.... 5.25 7/ 1/21 2,537,610 5,000 Houston, Texas, Airport Sub Lien Ser 1991 A (AMT) (FGIC Insured).................................................... 6.75 7/ 1/21 5,108,950 - - - - - ----------- ------------ 40,500 40,585,965 - - - - - ----------- ------------
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS APRIL 30, 1994 (UNAUDITED) (CONTINUED) - - - - - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT (IN COUPON MATURITY THOUSANDS) RATE DATE VALUE - - - - - ----------- ----------- --------- ------------- WATER AND SEWER REVENUE (6.8%) Massachusetts Water Resources Authority, $ 7,000 1991 Ser A (Prerefunded)...................................... 6.875% 12/ 1/11 $ 7,784,490 3,500 1990 Ser A (Prerefunded)...................................... 7.00 4/ 1/18 3,867,150 5,000 New York City Municipal Water Finance Authority, New York, 1991 Ser C (Prerefunded)............................................... 7.375 6/15/14 5,702,050 10,000 Seattle, Washington, Drainage & Wastewater Utility 1990....... 7.125 12/ 1/20 10,774,200 - - - - - ----------- ------------ 25,500 28,127,890 - - - - - ----------- ------------ OTHER REVENUE (1.3%) 5,000 New York Local Government Assistance Corporation, Ser 1991 C (Prerefunded)............................................... 7.00 4/ 1/21 5,590,450 - - - - - ----------- ------------ 374,865 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $375,449,571)............................ 389,478,667 ------------ SHORT-TERM MUNICIPAL OBLIGATIONS (4.1%) 5,000 Dade County, Florida, Water & Sewer Ser 1994 (FGIC Insured) (Tender 5/4/94)............................................. 2.80* 10/ 5/22 5,000,000 12,000 Gulf Coast Waste Disposal Authority, Texas, Amoco Oil Co Ser 1992 (Tender 5/2/94)........................................ 2.90* 10/ 1/17 12,000,000 - - - - - ----------- ------------
TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS (IDENTIFIED COST $17,000,000)......................................... 17,000,000 17,000 ------------- $ 391,865 TOTAL INVESTMENTS (IDENTIFIED COST $392,449,571) (A)...................... 97.8% 406,478,667 - - - - - ----------- - - - - - ----------- CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................ 2.2 9,301,052 ---------- ------------- NET ASSETS................................................................ 100.0 % $ 415,779,719 ---------- ------------- ---------- ------------- - - - - - --------------- + CURRENT COUPON RATE FOR RESIDUAL INTEREST BONDS. THIS RATE RESETS PERIODICALLY AS THE AUCTION RATE ON THE RELATED SHORT-TERM SECURITIES FLUCTUATES. * VARIABLE OR FLOATING RATE SECURITIES. COUPON RATE SHOWN REFLECTS CURRENT RATE. ** JOINTLY ISSUED BY NEW YORK AND NEW JERSEY. (A) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $392,449,571; THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $17,454,438 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $3,425,342, RESULTING IN NET UNREALIZED APPRECIATION OF $14,029,096.
SEE NOTES TO FINANCIAL STATEMENTS - - - - - -------------------------------------------------------------------------------- GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percent of Net Assets APRIL 30, 1994 (UNAUDITED) - - - - - -------------------------------------------------------------------------------- Alabama........... 0.5 % Arkansas.......... 1.1 California........ 1.7 Colorado.......... 3.1 District of Columbia......... 0.3 Florida........... 2.5 Georgia........... 1.1 Hawaii............ 4.2 Illinois.......... 5.1 Indiana........... 1.6 % Kansas............ 2.5 Kentucky.......... 0.7 Maine............. 6.5 Massachusetts..... 1.1 Michigan.......... 3.3 Missouri.......... 2.9 North Carolina.... 3.4 Nebraska.......... 2.5 New Hampshire..... 1.2 % New Jersey........ 3.8 New York.......... 7.9 Ohio.............. 5.8 Oklahoma.......... 0.6 Pennsylvania...... 8.0 Puerto Rico....... 0.6 South Carolina.... 3.7 Tennessee......... 1.0 Texas............. 6.6 % Utah.............. 2.6 Virginia.......... 2.2 Washington........ 6.5 Wyoming........... 0.7 Joint Issuers..... 2.5 --- Total........... 97.8 % --- ---
- - - - - -------------------------------------------------------------------------------- INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL STATEMENTS - - - - - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1994 (UNAUDITED) - - - - - -------------------------------------------------------------------------------- ASSETS: Investments in securities, at value (identified cost $392,449,571) (Note 1).................................... $ 406,478,667 Cash.................................... 1,683,265 Interest receivable..................... 7,591,651 Deferred organizational expenses (Note 1).................................... 21,675 Prepaid expenses and other assets....... 215,814 ------------- TOTAL ASSETS.................... 415,991,072 ------------- LIABILITIES: Investment management fee payable (Note 2).................................... 144,529 Accrued expenses (Note 3)............... 66,824 ------------- TOTAL LIABILITIES............... 211,353 ------------- NET ASSETS: Preferred shares of beneficial interest (1,000,000 shares authorized of non- participating $.01 par value, 2,800 shares outstanding (Note 4)).... 140,000,000 ------------- Common shares of beneficial interest (unlimited shares authorized of $.01 par value, 18,607,113 shares outstanding (Note 5))................. 258,438,695 Accumulated undistributed net realized gain on investments................... 984,263 Net unrealized appreciation on investments........................... 14,029,096 Accumulated undistributed net investment income................................ 2,327,665 ------------- NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS................ 275,779,719 ------------- TOTAL NET ASSETS................ $ 415,779,719 ------------- ------------- NET ASSET VALUE PER COMMON SHARE, ($275,779,719 divided by 18,607,113 common shares outstanding)............ $14.82 ------------- -------------
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 1994 (UNAUDITED) INVESTMENT INCOME: INTEREST INCOME....................... $ 13,973,975 ------------- EXPENSES Investment management fee (Note 2).. 759,114 Auction commission fees............. 265,919 Transfer agent fees and expenses.... 60,440 Professional fees................... 47,180 Auction agent fees.................. 16,593 Registration fees................... 14,660 Trustees' fees and expenses (Note 3)................................ 13,921 Shareholder reports and notices (Note 3).......................... 5,420 Organizational expenses (Note 1).... 4,458 Other............................... 12,735 ------------- TOTAL EXPENSES.................. 1,200,440 ------------- NET INVESTMENT INCOME......... 12,773,535 ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (Note 1): Net realized gain on investments.... 1,448,627 Net change in unrealized appreciation on investments....... (31,246,514) ------------- NET LOSS ON INVESTMENTS......... (29,797,887) ------------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS... $ (17,024,352) ------------- -------------
STATEMENT OF CHANGES IN NET ASSETS - - - - - --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED FOR THE YEAR APRIL 30, 1994 ENDED (UNAUDITED) OCTOBER 31, 1993 --------------- ----------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income..... $ 12,773,535 $ 26,504,768 Net realized gain on investments............. 1,448,627 (371,367) Net change in unrealized appreciation on investments............. (31,246,514) 38,463,827 --------------- ----------------- Net increase (decrease) in net assets resulting from operations........... (17,024,352) 64,597,228 --------------- ----------------- Dividends to preferred shareholders from net investment income.......... (1,934,645) (4,049,024) Dividends to common shareholders from net investment income.......... (12,838,864) (22,886,316) --------------- ----------------- Total dividends....... (14,773,509) (26,935,340) --------------- ----------------- Total increase (decrease)............ (31,797,861) 37,661,888 NET ASSETS: Beginning of period......... 447,577,580 409,915,692 --------------- ----------------- END OF PERIOD (including undistributed net investment income of $2,327,665 and $4,327,639, respectively).............. $415,779,719 $447,577,580 --------------- ----------------- --------------- -----------------
SEE NOTES TO FINANCIAL STATEMENTS INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - - - - - -------------------------------------------------------------------------------- 1. ORGANIZATION AND ACCOUNTING POLICIES -- InterCapital Quality Municipal Investment Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended, as a diversified closed-end management investment company. It was organized on July 2, 1991 as a Massachusetts business trust and commenced operations on September 27, 1991. The following is a summary of significant accounting policies: A. VALUATION OF INVESTMENTS -- Portfolio securities are valued for the Trust by an outside independent pricing service approved by the Trustees. The pricing service has informed the Trust that in valuing the Trust's portfolio securities, it uses both a computerized grid 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 Trust's portfolio securities are thus valued by reference to a combination of transactions and quotations for the same or other securities believed to be comparable in quality, coupon, maturity, type of issue, call provisions, trading characteristics and other features deemed to be relevant. B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). In computing net investment income, the Trust amortizes premiums and original issue discounts on fixed income securities. Additionally, with respect to market discount on bonds purchased after April 30, 1993, a portion of any capital gain realized upon disposition is recharacterized as taxable investment income. Realized gains and losses on security transactions are determined on the identified cost method. Interest income is accrued daily. C. FEDERAL INCOME TAX STATUS -- It is the Trust'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 Trust records dividends and distributions to its shareholders on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent that 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 reclassifications. 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 that they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in-capital. INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) - - - - - -------------------------------------------------------------------------------- E. ORGANIZATIONAL EXPENSES -- The Trust's Investment Manager paid the organizational expenses of the Trust's common shares in the amount of $45,000 and are being amortized by the straight-line method over a period not to exceed five years from the commencement of operations. 2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management Agreement (the "Agreement") with Dean Witter InterCapital Inc., the Trust pays its Investment Manager a management fee, calculated weekly and payable monthly, by applying the annual rate of 0.35% to the Trust's average weekly net assets. Under the terms of the Agreement, in addition to managing the Trust's investments, the Investment Manager maintains certain of the Trust's books and records and furnishes office space and facilities, equipment, clerical, bookkeeping and certain legal services, and pays the salaries of all personnel, including officers of the Trust who are employees of the Investment Manager. The Investment Manager also bears the cost of telephone services, heat, light, power and other utilities provided to the Trust. 3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of purchases and the proceeds from sales of portfolio securities for the six months ended April 30, 1994, excluding short-term investments, aggregated $22,893,195 and $43,194,113, respectively. Effective January 1, 1994, the Trust adopted an unfunded noncontributory defined pension plan covering all independent Trustees of the Trust who will have served as an independent Trustee 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 cost for the six months ended April 30, 1994, included in Trustees' fees and expenses in the Statement of Operations, amounted to $3,945. At April 30, 1994, the Trust had an accrued pension liability of $3,889 which is included in accrued expenses and other payables in the Statement of Assets and Liabilities. Dean Witter Trust Company, an affiliate of the Investment Manager, is the Trust's transfer agent. At April 30, 1994, the Trust had transfer agent fees and expenses payable of approximately $12,000. Bowne & Co., Inc. is an affiliate of the Trust by virtue of a common Trustee and Director of Bowne & Co., Inc. During the six months ended April 30, 1994, the Trust paid Bowne & Co., Inc. $8,318 for printing of shareholders reports. 4. PREFERRED SHARES OF BENEFICIAL INTEREST -- The Trust is authorized to issue up to 1,000,000 non-participating preferred shares of beneficial interest having a par value of $.01 per share, in one or more series, with rights as determined by the Trustees, without the approval of the common shareholders. On November 5, 1991, the Trust issued 2,800 shares of Auction Rate Preferred Shares ("Preferred Shares") consisting of 1,400 shares each of Series A and Series B for gross total proceeds of $140,000,000. The preferred shares have a liquidation value of $50,000 per share plus any accumulated but unpaid dividends plus the redemption premium, if any, and are redeemable (in whole or in part) on any dividend payment date. INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) - - - - - -------------------------------------------------------------------------------- Dividends, which are cumulative, are reset through auction procedures:
RANGE OF SHARES SERIES RATE* RESET DATE DIVIDEND RATE** - - - - - ------ ------ ------- ---------- --------------- 1,400 "A" 2.92 % 1/31/95 2.92% to 3.42 % 1,400 "B" 3.125% 5/ 5/94 2.08% to 3.125% - - - - - ------------ * AS OF APRIL 30, 1994. ** FOR THE PERIOD ENDED APRIL 30, 1994.
The Trust is subject to certain restrictions relating to the preferred shares. Failure to comply with these restrictions could preclude the Trust from declaring any distributions to common shareholders or repurchasing 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. 5. COMMON SHARES OF BENEFICIAL INTEREST -- Transactions in common shares of beneficial interest were as follows:
PAR VALUE CAPITAL PAID OF IN EXCESS OF SHARES SHARES PAR VALUE ---------- --------- ------------ Balance, October 31, 1992, October 31, 1993 and April 30, 1994............... 18,607,113 $ 186,071 $258,252,624 ---------- --------- ------------ ---------- --------- ------------
6. FEDERAL INCOME TAX STATUS -- At October 31, 1993, the Trust had net capital loss carryovers of approximately $464,000 of which $4,000 will be available through October 31, 1999, $89,000 will be available through October 31, 2000 and $371,000 will be available through October 31, 2001, to offset future capital gains, to the extent provided by regulations. To the extent that these carryover losses are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders since any such distributions may be taxable to shareholders as ordinary income. For the six months ended April 30, 1994 the Trust had approximately $1,449,000 in net realized gains. 7. DIVIDENDS TO COMMON SHAREHOLDERS -- The Trust has declared the following dividends from net investment income:
DECLARATION AMOUNT RECORD PAYABLE DATE PER SHARE DATE DATE - - - - - -------------- ------------ ------------- ------------- April 26, 1994 $ 0.09 May 6, 1994 May 20, 1994 May 31, 1994 $ 0.09 June 10, 1994 June 24, 1994
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) - - - - - -------------------------------------------------------------------------------- 8. SELECTED QUARTERLY FINANCIAL DATA --
QUARTERS ENDED* ------------------------------------- 4/30/94 1/31/94 ----------------- ----------------- PER PER TOTAL SHARE TOTAL SHARE ------- -------- ------- -------- Total investment income.............. $ 7,198 $ 0.39 $ 6,776 $ 0.36 Net investment income................ 6,579 0.35 6,195 0.33 Net realized and unrealized gain (loss) on investments............... 3,555 0.19 (33,353) (1.79)
QUARTERS ENDED* ----------------------------------------------------------------------------- 10/31/93 7/31/93 4/30/93 1/31/93 ----------------- ----------------- ----------------- ----------------- PER PER PER PER TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE ------- -------- ------- -------- ------- -------- ------- -------- Total investment income.................. $ 7,320 $ 0.39 $ 7,186 $ 0.39 $ 7,276 $ 0.39 $ 7,093 $ 0.38 Net investment income.... 6,686 0.36 6,591 0.35 6,674 0.36 6,554 0.35 Net realized and unrealized gain on investments............. 8,711 0.47 5,165 0.28 11,117 0.60 13,099 0.70 QUARTERS ENDED* ----------------------------------------------------------------------------- 10/31/92 7/31/92 4/30/92 1/31/92 ----------------- ----------------- ----------------- ----------------- PER PER PER PER TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE ------- -------- ------- -------- ------- -------- ------- -------- Net total investment income.................. $ 7,285 $ 0.39 $ 7,201 $ 0.39 $ 7,081 $ 0.38 $ 6,728 $ 0.36 Net investment income.... 6,723 0.36 6,659 0.36 6,556 0.35 6,206 0.34 Net realized and unrealized gain (loss) on investments.......... (19,667) (1.05) 22,654 1.22 224 0.01 3,729 0.20 - - - - - ------------ * TOTALS EXPRESSED IN THOUSANDS OF DOLLARS.
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL HIGHLIGHTS - - - - - -------------------------------------------------------------------------------- Selected ratios and per share data for a common share of beneficial interest outstanding throughout each period:
FOR THE PERIOD FOR THE SIX SEPTEMBER 27, MONTHS ENDED FOR THE YEAR ENDED OCTOBER 31, 1991* APRIL 30, THROUGH 1994 --------------------------------- OCTOBER 31, (UNAUDITED) 1993 1992 1991 ------------- ------------- ------------- ------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period.... $16.53 $14.51 $14.09 $14.06 ------------- ------------- ------------- ------------- Net investment income................. 0.68 1.42 1.41 0.06 Net realized and unrealized gain (loss) on investments................ (1.60) 2.05 0.38 (0.01) ------------- ------------- ------------- ------------- Total from investment operations........ (0.92) 3.47 1.79 0.05 ------------- ------------- ------------- ------------- Less dividends and other charges: Dividends from net investment income............................... (0.69) (1.23) (0.97) -0- Common share equivalent of dividends paid to preferred shareholders....... (0.10) (0.22) (0.25) -0- Offering costs charged against capital.............................. -0- -0- (0.15) (0.02) ------------- ------------- ------------- ------------- Total dividends and other charges....... (0.79) (1.45) (1.37) (0.02) ------------- ------------- ------------- ------------- Net asset value, end of period.......... $14.82 $16.53 $14.51 $14.09 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Market value, end of period............. $14.625 $16.625 $15.00 $15.25 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- TOTAL INVESTMENT RETURN+.................. (8.14)%(1) 19.68% 4.83% 1.67%(1) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands)............................. $415,780 $447,578 $409,916 $262,146 Ratio to average net assets of common shareholders: Total expenses........................ 0.82%(2) 0.81% 0.79% 0.49%(2) Net investment income before preferred stock dividends...................... 8.67%(2) 9.05% 9.64% 5.01%(2) Preferred stock dividends............. 1.31%(2) 1.38% 1.70% N/A Net investment income available to common shareholders.................. 7.36%(2) 7.67% 7.94% 5.01%(2) Asset coverage on preferred shares at end of period.......................... 297%(2) 320% 293% N/A Portfolio turnover rate................. 5% 3% 9% 0% - - - - - ------------- * COMMENCEMENT OF OPERATIONS. + TOTAL INVESTMENT RETURN IS BASED UPON THE CURRENT MARKET VALUE ON THE FIRST AND LAST DAY OF EACH PERIOD REPORTED. DIVIDENDS AND DISTRIBUTIONS ARE ASSUMED TO BE REINVESTED AT THE PRICES OBTAINED UNDER THE TRUST'S DIVIDEND REINVESTMENT PLAN. TOTAL INVESTMENT RETURN DOES NOT REFLECT SALES CHARGES OR BROKERAGE COMMISSIONS. (1) NOT ANNUALIZED. (2) ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS - - - - - -------------------------------------------------------------------------------- THE FINANCIAL STATEMENTS INCLUDED HEREIN HAVE BEEN TAKEN FROM THE RECORDS OF THE TRUST WITHOUT EXAMINATION BY THE INDEPENDENT ACCOUNTANTS AND ACCORDINGLY THEY DO NOT EXPRESS AN OPINION THEREON. TRUSTEES - - - - - --------------------------------------- Jack F. Bennett Michael Bozic Charles A. Fiumefreddo Edwin J. Garn John R. Haire Dr. John E. Jeuck Dr. Manuel H. Johnson Paul Kolton Michael E. Nugent Philip J. Purcell John L. Schroeder Edward R. Telling OFFICERS - - - - - --------------------------------------- Charles A. Fiumefreddo CHAIRMAN AND CHIEF EXECUTIVE OFFICER Sheldon Curtis VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL James F. Willison VICE PRESIDENT Thomas F. Caloia TREASURER TRANSFER AGENT - - - - - --------------------------------------- Dean Witter Trust Company Harborside Financial Center - Plaza Two Jersey City, New Jersey 07311 LEGAL COUNSEL - - - - - --------------------------------------- Sheldon Curtis Two World Trade Center New York, New York 10048 INDEPENDENT ACCOUNTANTS - - - - - --------------------------------------- Price Waterhouse 1177 Avenue of the Americas New York, New York 10036 INVESTMENT MANAGER - - - - - --------------------------------------- Dean Witter InterCapital Inc. Two World Trade Center New York, New York 10048 INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST SEMIANNUAL REPORT APRIL 30, 1994 -----END PRIVACY-ENHANCED MESSAGE-----