-----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, F8ZWv8lOQivEf8gxDATHweGDGdjWIIOnhLdhY3G8vCsQmyZbeKZK/fUsWn1jCNZs KnerIZ8QAi0DJzC9SFg7OQ== /in/edgar/work/20000622/0000950123-00-005930/0000950123-00-005930.txt : 20000920 0000950123-00-005930.hdr.sgml : 20000920 ACCESSION NUMBER: 0000950123-00-005930 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000622 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUS CENTRAL INDEX KEY: 0000876982 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06346 FILM NUMBER: 658833 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123922550 FORMER COMPANY: FORMER CONFORMED NAME: INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST DATE OF NAME CHANGE: 19920929 N-30D 1 0001.txt QUALITY MUNICIPAL INVESTMENT TRUST 1 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST Two World Trade Center LETTER TO THE SHAREHOLDERS April 30, 2000 New York, New York 10048 DEAR SHAREHOLDER: The U.S. economy continued its unprecedented expansion into the new year. Strong growth pushed the unemployment rate to a 30-year low. Rising commodity prices heightened concern about inflation. The price of oil moved above $30 per barrel prior to ending April at $25 per barrel. Between June 1999 and March 2000, the Federal Reserve Board raised the federal funds rate in five, 25 basis-point moves to reach 6.00 percent. The Fed subsequently demonstrated its resistance to inflation by raising the federal funds rate another 50 basis points to 6.50 percent in May. Economic growth and a less accommodative monetary policy caused long-term interest rates to increase throughout 1999. In February, the U.S. Treasury announced plans to retire debt with the federal budget surplus. This precipitated a 50-75 basis-point rally in longer Treasury maturities. MUNICIPAL MARKET CONDITIONS The long-term insured municipal index began 1999 near a record low yield of 5.05 percent but increased to 5.97 percent by calendar year-end. This index reached a high of 6.18 percent in January 2000 before ending April at 5.93 percent. Because bond prices move inversely to changes in interest rates, higher yields caused bond prices to decline significantly last year and improve modestly in the first four months of 2000. The ratio of municipal yields as a percentage of Treasury yields has been used historically as a measure of relative value. Over the past five years the ratio has ranged between an average high of 93 percent and an average low of 85 percent. The increase in the ratio from 92 percent at the end of 1999 to 99 percent at the end of April 2000 was primarily the result of the magnitude of the rally in long Treasuries. A rising yield ratio indicates weaker relative performance by municipals. Higher interest rates reduced municipal market underwriting in 1999. New-issue volume declined 20 percent last year. Refunding activity, the most interest-rate-sensitive component of supply, was down more than 2 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST LETTER TO THE SHAREHOLDERS April 30, 2000, continued 50 percent. In the first four months of this year, volume was 30 percent lower than in the same period last year. [30-YEAR BOND YIELDS 1994-2000 CHART]
30-Year Insured 30-Year U.S. Insured Municipal Yields as a Municipal Yields Treasury Yields Percentage of U.S. Treasury Yields 1994 5.40 6.34 85.17 5.40 6.24 86.54 5.80 6.66 87.09 6.40 7.09 90.27 6.35 7.32 86.75 6.25 7.43 84.12 6.50 7.61 85.41 6.25 7.39 84.57 6.30 7.45 84.56 6.55 7.81 83.87 6.75 7.96 84.80 7.00 8.00 87.50 6.75 7.88 85.66 1995 6.40 7.70 83.12 6.15 7.44 82.66 6.15 7.43 82.77 6.20 7.34 84.47 5.80 6.66 87.09 6.10 6.62 92.15 6.10 6.86 88.92 6.00 6.66 90.09 5.95 6.48 91.82 5.75 6.33 90.84 5.50 6.14 89.58 5.35 5.94 90.07 1996 5.40 6.03 89.55 5.60 6.46 86.69 5.85 6.66 87.84 5.95 6.89 86.36 6.05 6.99 86.55 5.90 6.89 85.63 5.85 6.97 83.93 5.90 7.11 82.98 5.70 6.93 82.25 5.65 6.64 85.09 5.50 6.35 86.61 5.60 6.63 84.46 1997 5.70 6.79 83.95 5.65 6.80 83.09 5.90 7.10 83.10 5.75 6.94 82.85 5.65 6.91 81.77 5.60 6.78 82.60 5.30 6.30 84.13 5.50 6.61 83.21 5.40 6.40 84.38 5.35 6.15 86.99 5.30 6.05 87.60 5.15 5.92 86.99 1998 5.15 5.80 88.79 5.20 5.92 87.84 5.25 5.93 88.53 5.35 5.95 89.92 5.20 5.80 89.66 5.20 5.65 92.04 5.18 5.71 90.72 5.03 5.27 95.45 4.95 5.00 99.00 5.05 5.16 97.87 5.00 5.06 98.81 5.05 5.10 99.02 1999 5.00 5.09 98.23 5.10 5.58 91.40 5.15 5.63 91.47 5.20 5.66 91.87 5.30 5.83 90.91 5.47 5.96 91.78 5.55 6.10 90.98 5.75 6.06 94.88 5.85 6.05 96.69 6.03 6.16 97.90 6.00 6.29 95.39 5.97 6.48 92.13 2000 6.18 6.49 95.22 6.04 6.14 98.37 5.82 5.83 99.83 5.91 5.96 99.16
PERFORMANCE During the six-month period ended April 30, 2000, the net asset value (NAV) of Morgan Stanley Dean Witter Quality Municipal Investment Trust (IQT) decreased from $14.35 to $14.34 per share. Based on this change, plus a reinvestment of tax-free dividends totaling $0.47 per share, the Trust's total NAV return was 3.55 percent. IQT's value on the New York Stock Exchange (NYSE) was unchanged at $13.00 per share during this period. IQT's total market return which includes the reinvestment of tax-free dividends, was 3.62 percent. On April 30, 2000, IQT's share price was at a 9.34 percent discount to its NAV. Monthly dividends for the second quarter of 2000, declared in March, were unchanged at $0.0775 per share. The Trust's level of undistributed net investment income was $0.153 per share on April 30, 2000, versus $0.143 per share six months earlier. 2 3 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST LETTER TO THE SHAREHOLDERS April 30, 2000, continued PORTFOLIO STRUCTURE The Trust's investments were diversified among 15 long-term sectors and 62 credits. At the end of April, the portfolio's average maturity was 19 years. Average duration, a measure of sensitivity to interest rate changes, was 5.3 years. Issues in the refunded bond category comprised 17 percent of net assets. These bonds have been refinanced and will be redeemed on the dates shown in the portfolio. Current information on the portfolio's credit ratings, sector distribution and geographic diversification is provided in the accompanying charts and tables. Optional call provisions and their respective cost (book) yields are also shown. THE IMPACT OF LEVERAGING As discussed in previous shareholder reports, the total income available for distribution to common shareholders includes incremental income provided by the Trust'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, while the second is the spread between the portfolio's cost yield and ARPS expenses (ARPS auction rate and expenses). The greater the spread and 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 leverage also increases the price volatility of common shares and has the effect of extending portfolio duration. During the six month period, ARPS leverage contributed approximately $0.06 per share to common share earnings. Weekly ARPS yields ranged between 3.30 percent and 5.50 percent. In comparison, the yield on 1-year municipal notes increased from 3.77 percent at the end of October 1999 to 4.23 percent at the end of April. The Trust's two ARPS series totaling $105 million represented 30 percent of net assets. LOOKING AHEAD The Federal Reserve Board has expressed concern about consumer wealth and rising prices. We anticipate that the central bank will continue to increase short-term interest rates in an effort to slow the economy. We believe municipal bonds continue to offer tax-conscious investors good long-term value. 3 4 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST LETTER TO THE SHAREHOLDERS April 30, 2000, continued The Trust's procedure for reinvestment of all dividends and distributions on common shares is through purchases in the open market. This method helps support the market value of the Trust's shares. In addition, we would like to remind you that the Trustees have approved a procedure whereby the Trust may, when appropriate, purchase shares in the open market or in privately negotiated transactions at a price not above market value or net asset value, which ever is lower at the time of purchase. The Trust 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. During the six-month period ended April 30, 2000, the Trust purchased and retired 3.68 percent of its common stock (650,500 shares) at a weighted average market discount of 9.39 percent. The anti-dilutive effect of acquiring treasury shares is reported in the table of Financial Highlights on page 18. We appreciate your ongoing support of Morgan Stanley Dean Witter Quality Municipal Investment Trust and look forward to continuing to serve your investment needs. Very truly yours, /s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN CHARLES A. FIUMEFREDDO MITCHELL M. MERIN Chairman of the Board President
4 5 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST LETTER TO THE SHAREHOLDERS April 30, 2000, continued [LARGEST TERM SECTORS PIE CHART] Mortgage 20 Refunded 17 IDR/PCR* 9 Transportation 8 Hospital 7 Water & Sewer 7 General Obligation 6 Resource Recovery 6
[CREDIT RATINGS PIE CHART]
AAA/AAA AA/AA A/A BAA/BBB - ------- ----- --- ------- 59% 16% 24% 1%
[GEOGRAPHIC SUMMARY OF INVESTMENTS TABLE] GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percent of Net Assets 30-Apr-00 Alabama 0.50% California 2.5 Colorado 1.7 District of Columbia 0.4 Florida 4.7 Hawaii 4.9 Illinois 7.8 Indiana 1 Kansas 3 Kentucky 1.4 Maine 1.4 Maryland 1.40 Massachusetts 6.8 Michigan 2 Missouri 1.3 Nebraska 1.7 New Hampshire 0.8 New Jersey 6.4 New York 7.9 North Carolina 3.3 Ohio 7.3 Oregon 0.6 Pennsylvania 11.40 South Carolina 5.9 Tennessee 1.3 Texas 4.3 Utah 2 Virginia 1.8 Washington 3 Wyoming 0.3 Total 98.80%
- ----------------------------- Portfolio structure is subject to change. 5 6 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST LETTER TO THE SHAREHOLDERS April 30, 2000, continued [GRAPH]
YEARS BONDS CALLABLE PERCENT CALLABLE* - -------------------- ----------------- 2001 53.00 2002 2.00 2003 6.00 2004 1.00 2005 10.00 2006 2.00 2007 3.00 2008 8.00 2009 6.00 2010+ 9.00 Weighted Average Call Protection: 4 Years Weighted Average Book Yield: 6.5% YEARS BONDS CALLABLE COST (BOOK) YIELD ** - -------------------- -------------------- 2001 6.90 2002 7.00 2003 6.80 2004 5.30 2005 6.10 2006 6.50 2007 6.10 2008 5.10 2009 5.70 2010+ 6.60
* % Based on Long-Term Portfolio. ** Cost or "book" yield is the annual income earned on a portfolio investment based on its original purchase price before Trust operating expenses. For example, the Trust earned a book yield of 6.8% on 6% of the bonds in the long-term portfolio that are callable in 2003. Portfolio structure is subject to change. 6 7 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 2000 (unaudited)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- TAX-EXEMPT MUNICIPAL BONDS (97.7%) General Obligation (5.8%) $ 4,000 Florida Board of Education, Capital Outlay Refg 1998 Ser D.......................................................... 4.50% 06/01/24 $ 3,193,040 10,000 Chicago School Reform Board, Illinois, Dedicated Tax Ser 1997 (AMBAC)............................................... 5.75 12/01/27 9,652,500 1,000 Michigan Municipal Bond Authority, School Ser 1998.......... 5.25 12/01/13 971,580 5,000 North Carolina, Public School Building Ser 1999............. 4.60 04/01/17 4,333,050 2,000 Oregon, Veterans' Welfare Ser 75............................ 6.00 04/01/27 2,013,920 - -------- ----------- 22,000 20,164,090 - -------- ----------- Educational Facilities Revenue (1.5%) 3,480 Indiana University, Student Fee Ser K (MBIA)................ 5.875 08/01/20 3,473,491 2,200 University of North Carolina, Pool Ser 1998 B (MBIA)........ 4.50 10/01/18 1,824,240 - -------- ----------- 5,680 5,297,731 - -------- ----------- Electric Revenue (4.2%) 5,000 Long Island Power Authority, New York, Ser 2000 A (FSA) (WI)....................................................... 0.00 06/01/16 1,973,900 3,190 North Carolina Municipal Power Agency #1, Catawba Ser 1992....................................................... 6.25 01/01/17 3,102,849 5,000 South Carolina Public Service Authority, 1997 Refg Ser A (MBIA)..................................................... 5.00 01/01/29 4,223,300 4,965 San Antonio, Texas, Electric & Gas Refg Ser 1994-A.......... 5.00 02/01/14 4,627,231 1,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary FSA)....................................................... 5.00 07/01/21 870,110 - -------- ----------- 19,155 14,797,390 - -------- ----------- Hospital Revenue (6.8%) 10,000 Massachusetts Health & Educational Facilities Authority, St Elizabeth's Hospital of Boston Ser D & E (FSA)............. 6.70 08/15/21 10,332,300 3,000 Missouri Health & Educational Facilities Authority, SSM Healthcare Ser 1998 A (MBIA)............................... 5.00 06/01/22 2,622,030 5,000 New Jersey Health Care Authority, St Barnabas Medical Center Ser 1998 B (MBIA).......................................... 4.75 07/01/28 4,059,400 5,000 New York State Dormitory Authority, Long Island Jewish Medical Center Ser 1998 (MBIA)............................. 5.00 07/01/18 4,455,900 2,180 Charlotte-Mecklenburg Hospital Authority, North Carolina, Ser 1992................................................... 6.25 01/01/20 2,198,944 - -------- ----------- 25,180 23,668,574 - -------- ----------- Industrial Development/Pollution Control Revenue (9.4%) 9,000 Hawaii Department Budget & Finance, Citizens Utilities Co 1991 Ser A & B (AMT)....................................... 6.66 11/01/21 9,210,690 Chicago, Illinois, 5,000 Chicago-O'Hare Int'l Airport/Lufthansa German Airlines Inc Ser 1990 (AMT)............................................. 7.125 05/01/18 5,177,000 2,000 Peoples Gas Light & Coke Co Refg 1995 Ser A................ 6.10 06/01/25 1,993,240 4,000 New York State Energy Research & Development Authority, Brooklyn Union Gas Co 1991 Ser A & B (AMT)................. 6.952 07/01/26 4,171,680 12,000 Richland County, South Carolina, Union Camp Corp Ser 1991 B (AMT)...................................................... 7.125 09/01/21 12,321,720 - -------- ----------- 32,000 32,874,330 - -------- -----------
SEE NOTES TO FINANCIAL STATEMENTS 7 8 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 2000 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- Mortgage Revenue - Multi-Family (8.1%) $ 10,000 Illinois Housing Development Authority, 1991 Ser A.......... 8.25% 07/01/16 $10,506,900 15,000 New Jersey Housing & Mortgage Finance Agency, Presidential Plaza at Newport - FHA Insured Refg 1991 Ser 1............. 7.00 05/01/30 15,642,150 1,970 New York State Housing Finance Agency, 1996 Ser A Refg (FSA)...................................................... 6.10 11/01/15 2,011,213 - -------- ----------- 26,970 28,160,263 - -------- ----------- Mortgage Revenue - Single Family (11.8%) 4,110 California Housing Finance Agency, Home 1991 Ser G (AMT).... 7.05 08/01/27 4,192,940 5,635 Colorado Housing Finance Authority, Refg 1991 Ser A......... 7.25 11/01/31 5,767,423 1,420 District of Columbia Housing Finance Agency, GNMA Collateralized Ser 1990 B (AMT)............................ 7.10 12/01/24 1,449,053 4,635 Maine Housing Authority, Purchase 1988 Ser D-6 (AMT)........ 7.25 11/15/19 4,728,673 1,080 Michigan Housing Development Authority, 1991 Ser B.......... 6.95 12/01/20 1,099,051 5,800 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser A & B (AMT)................................................ 7.025 09/15/23 5,966,460 2,850 New Hampshire Housing Finance Authority, Residential 1991 Ser D (AMT)................................................ 7.25 07/01/15 2,909,195 Ohio Housing Finance Agency, 1,990 Residential 1996 Ser B-2 (AMT)............................. 6.10 09/01/28 1,919,713 3,550 GNMA-Backed Ser A 1 & 2 (AMT).............................. 6.903 03/01/31 3,639,993 4,500 Tennessee Housing Development Agency, Homeownership Issue T (AMT)...................................................... 7.375 07/01/23 4,556,340 3,820 Virginia Housing Development Authority, 1992 Ser A.......... 7.15 01/01/33 3,896,171 865 Wyoming Community Development Authority, Federally Insured/Gtd Loans 1988 Ser G (AMT)......................... 7.25 06/01/21 890,267 - -------- ----------- 40,255 41,015,279 - -------- ----------- Nursing & Health Related Facilities Revenue (0.3%) 940 New York State Medical Care Facilities Finance Agency, - -------- Mental Health 1991 Ser C................................... 7.30 02/15/21 983,014 ----------- Recreational Facilities Revenue (1.1%) 4,000 Houston, Texas, Sr Lien Hotel Occupancy Tax Refg Ser 1995 (FSA)...................................................... 5.50 07/01/15 3,923,080 - -------- ----------- Resource Recovery Revenue (5.8%) 5,000 Northeast Maryland Waste Disposal Authority, Montgomery County Ser 1993 A (AMT).................................... 6.30 07/01/16 5,068,450 4,610 Detroit Economic Development Corporation, Michigan, Ser 1991 A (AMT) (FSA).............................................. 6.875 05/01/09 4,782,921 10,000 Montgomery County Industrial Development Authority, Pennsylvania, Ser 1989..................................... 7.50 01/01/12 10,256,600 - -------- ----------- 19,610 20,107,971 - -------- -----------
SEE NOTES TO FINANCIAL STATEMENTS 8 9 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 2000 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- Student Loan Revenue (4.0%) $ 13,000 Pennsylvania Higher Education Assistance Agency, 1991 Ser A - -------- & B (AMT) (AMBAC)**........................................ 6.854% 09/01/26 $14,031,550 ----------- Transportation Facilities Revenue (8.2%) 10,000 Hillsborough County Port District, Florida, Tampa Port Authority Spl & Refg Ser 1995 (AMT) (FSA).................. 6.00 06/01/20 10,073,900 3,000 Lee County, Florida, Ser 1995 (MBIA)........................ 5.75 10/01/22 2,977,440 7,000 Hawaii, Airports Second Ser of 1991 (AMT)................... 6.90 07/01/12 7,780,010 2,480 New Jersey Transportation Trust Authority, New Jersey, 1999 Ser........................................................ 5.625 06/15/14 2,538,181 5,000 Houston, Texas, Airport Sub Lien Ser 1991 A (AMT) (FGIC).... 6.75 07/01/21 5,187,600 - -------- ----------- 27,480 28,557,131 - -------- ----------- Water & Sewer Revenue (6.9%) 2,000 Birmingham, Alabama, Water & Sewer Ser 1998 A............... 4.75 01/01/21 1,685,000 5,470 California Department Water Resources, Central Valley Ser U.......................................................... 5.00 12/01/29 4,723,290 5,000 Louisville & Jefferson County Metropolitan Sewer District, Kentucky, Ser 1999 A (FGIC)................................ 5.75 05/15/33 4,884,200 Massachusetts Water Resources Authority, 1,585 2000 Ser A (FGIC).......................................... 6.00 08/01/13 1,666,897 700 2000 Ser A (FGIC).......................................... 6.00 08/01/14 732,753 5,000 New York City Municipal Water Finance Authority, New York, 1999 Ser A (FGIC).......................................... 4.75 06/15/31 4,060,600 5,000 Charleston, South Carolina, Refg Cap Impr Ser 1998 (Secondary FGIC)........................................... 4.50 01/01/24 3,993,700 3,000 Loudoun County Sanitation Authority, Virginia, Ser 1998 (MBIA)..................................................... 4.75 01/01/30 2,450,940 - -------- ----------- 27,755 24,197,380 - -------- ----------- Other Revenue (7.3%) 10,000 New York Local Government Assistance Corporation, Ser 1995 A.......................................................... 6.00 04/01/24 10,016,300 15,000 Emmaus General Authority, Pennsylvania, Local Government Ser 1988 H (FGIC).............................................. 7.00 05/15/18 15,425,550 - -------- ----------- 25,000 25,441,850 - -------- ----------- Refunded (16.5%) 10,000 Wichita, Kansas, CSJ Health System of Wichita Inc Ser 1991....................................................... 7.00 11/15/01+ 10,522,300 10,000 Massachusetts Health & Educational Facilities Authority, Brigham & Women's Hospital Ser D........................... 6.75 07/01/01+ 10,446,000 9,000 Lorain County, Ohio, Humility of Mary Health Care Corp Ser 1991 B (ETM)............................................... 7.20 12/15/11 9,524,160 10,000 Middleburg Heights, Ohio, Southwest General Hospital Ser 1991....................................................... 7.20 08/15/01+ 10,506,300 6,000 Salt Lake City, Utah, IHC Hospitals Inc Refg Ser 1991 (AMBAC) (ETM).............................................. 6.75 05/15/20 6,252,840 10,000 Washington Public Power Supply System, Proj #1 Refg Ser 1991....................................................... 6.875 07/01/01+ 10,444,900 - -------- ----------- 55,000 57,696,500 - -------- ----------- 344,025 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $336,466,303)................. 340,916,133 - -------- -----------
SEE NOTES TO FINANCIAL STATEMENTS 9 10 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 2000 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (1.1%) $ 600 Massachusetts Health & Educational Facilities Authority, Capital Asset Ser D (MBIA) (Demand 05/01/00)............... 6.05*% 01/01/35 $ 600,000 2,000 Missouri Health & Educational Facilities Authority, Washington University Ser 1996 D (Demand 05/01/00)......... 5.80* 09/01/30 2,000,000 1,400 Harris County Health Facilities Development Corporation, Texas, Methodist Hospital Ser 1994 (Demand 05/01/00)....... 5.80* 12/01/25 1,400,000 - -------- ----------- 4,000 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost $4,000,000).................................................................... 4,000,000 - -------- ----------- $348,025 TOTAL INVESTMENTS (Identified Cost $340,466,303)(a)................... 98.8% 344,916,133 ======== OTHER ASSETS IN EXCESS OF LIABILITIES................................... 1.2 4,156,784 ------ ----------- NET ASSETS............................................................. 100.0% $349,072,917 ====== ===========
- --------------------- AMT Alternative Minimum Tax. COPs Certificates of Participation. ETM Escrowed to maturity. WI Security purchased on a "when-issued" basis. + Prerefunded to call date shown. * Current coupon of variable rate demand obligation. ** This security is segregated in connection with the purchase of a "when-issued" security. (a) The aggregate cost for federal income tax purposes approximates identified cost. The aggregate gross unrealized appreciation is $9,693,080 and the aggregate gross unrealized depreciation is $5,243,250, resulting in net unrealized appreciation of $4,449,830. Bond Insurance: - --------------- AMBAC AMBAC Assurance Corporation. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS 10 11 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES April 30, 2000 (unaudited) ASSETS: Investments in securities, at value (identified cost $340,466,303)............................. $344,916,133 Cash........................................................ 95,985 Receivable for: Interest................................................ 6,175,501 Investments sold........................................ 185,000 Prepaid expenses............................................ 59,245 ------------ TOTAL ASSETS............................................ 351,431,864 ------------ LIABILITIES: Payable for: Investments purchased................................... 2,019,150 Dividends to preferred shareholders..................... 102,025 Investment management fee............................... 101,306 Shares of beneficial interest repurchased............... 44,371 Accrued expenses............................................ 92,095 ------------ TOTAL LIABILITIES....................................... 2,358,947 ------------ NET ASSETS.............................................. $349,072,917 ============ COMPOSITION OF NET ASSETS: Preferred shares of beneficial interest (1,000,000 shares authorized of non-participating $.01 par value, 2,100 shares outstanding)........................................ $105,000,000 ------------ Common shares of beneficial interest (unlimited shares authorized of $.01 par value, 17,026,213 shares outstanding)............................................... 237,681,419 Net unrealized appreciation................................. 4,449,830 Accumulated undistributed net investment income............. 2,599,290 Accumulated net realized loss............................... (657,622) ------------ NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS............ 244,072,917 ------------ TOTAL NET ASSETS........................................ $349,072,917 ============ NET ASSET VALUE PER COMMON SHARE ($244,072,917 divided by 17,026,213 common shares outstanding)............................................... $14.34 ============
SEE NOTES TO FINANCIAL STATEMENTS 11 12 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL STATEMENTS, continued STATEMENT OF OPERATIONS For the six months ended April 30, 2000 (unaudited) NET INVESTMENT INCOME: INTEREST INCOME............................................. $11,069,584 ----------- EXPENSES Investment management fee................................... 615,746 Auction commission fees..................................... 152,880 Professional fees........................................... 54,419 Transfer agent fees and expenses............................ 31,339 Shareholder reports and notices............................. 23,738 Registration fees........................................... 12,389 Custodian fees.............................................. 9,392 Auction agent fees.......................................... 8,798 Trustees' fees and expenses................................. 8,464 Other....................................................... 10,164 ----------- TOTAL EXPENSES.......................................... 927,329 Less: expense offset........................................ (9,372) ----------- NET EXPENSES............................................ 917,957 ----------- NET INVESTMENT INCOME................................... 10,151,627 ----------- NET REALIZED AND UNREALIZED LOSS: Net realized loss........................................... (164,934) Net change in unrealized appreciation....................... (1,042,269) ----------- NET LOSS................................................ (1,207,203) ----------- NET INCREASE................................................ $ 8,944,424 ===========
SEE NOTES TO FINANCIAL STATEMENTS 12 13 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED APRIL 30, 2000 OCTOBER 31, 1999 - ------------------------------------------------------------------------------------------ (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................ $10,151,627 $20,944,882 Net realized loss.................................... (164,934) (492,688) Net change in unrealized appreciation................ (1,042,269) (22,589,745) ------------ ------------ NET INCREASE (DECREASE).......................... 8,944,424 (2,137,551) ------------ ------------ Dividends to preferred shareholders from net investment income................................... (2,032,023) (3,671,318) ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income................................ (8,048,126) (16,262,280) Net realized gain.................................... -- (2,019,364) ------------ ------------ TOTAL DIVIDENDS AND DISTRIBUTIONS................ (8,048,126) (18,281,644) ------------ ------------ Decrease from transactions in common shares of beneficial interest................................. (8,424,760) (4,888,397) ------------ ------------ NET DECREASE..................................... (9,560,485) (28,978,910) NET ASSETS: Beginning of period.................................. 358,633,402 387,612,312 ------------ ------------ END OF PERIOD (Including undistributed net investment income of $2,599,290 and $2,527,812, respectively)......... $349,072,917 $358,633,402 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 13 14 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 2000 (unaudited) 1. ORGANIZATION AND ACCOUNTING POLICIES Morgan Stanley Dean Witter 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. The Trust's investment objective is to provide current income which is exempt from federal income tax. The Trust was organized as a Massachusetts business trust on July 2, 1991 and commenced operations on September 27, 1991. 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 Trust 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. The Trust amortizes premiums and accretes discounts over the life of the respective securities. 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 14 15 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 2000 (unaudited) continued investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis 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 MANAGEMENT AGREEMENT Pursuant to an Investment Management Agreement with Morgan Stanley Dean Witter Advisors Inc. (the "Investment Manager"), the Trust pays a management fee, calculated weekly and payable monthly, by applying the annual rate of 0.35% to the Trust's weekly net assets. 3. 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 April 30, 2000 aggregated $9,201,589 and $15,502,335, respectively. Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is the Trust's transfer agent. At April 30, 2000, the Trust had transfer agent fees and expenses payable of approximately $1,900. The Trust has an unfunded noncontributory defined benefit pension plan covering all independent Trustees of the Trust 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 April 30, 2000 included in Trustees' fees and expenses in the Statement of Operations amounted to $2,541. At April 30, 2000, the Trust had an accrued pension liability of $42,726 which is included in accrued expenses in the Statement of Assets and Liabilities. 15 16 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 2000 (unaudited) continued 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 approval of the common shareholders. The Trust has issued Series A and Series B Auction Rate Preferred Shares ("Preferred Shares") which have a liquidation value of $50,000 per share plus the redemption premium, if any, plus accumulated but unpaid dividends, whether or not declared, thereon to the date of distribution. The Trust may redeem such shares, in whole or in part, at the original purchase price of $50,000 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 RESET RANGE OF SERIES SHARES* IN THOUSANDS* RATE* DATE DIVIDEND RATES** - ------ ------- ------------- ----- -------- ---------------- A 1,400 $70,000 4.50% 05/03/00 3.30% - 5.50% B 700 35,000 3.80 09/01/00 3.80
- --------------------- * As of April 30, 2000. ** For the six months ended April 30, 2000. Subsequent to April 30, 2000 and up through June 2, 2000 the Trust paid dividends to Series A and B at rates ranging from 3.80% to 5.05% in the aggregate amount of $430,283. 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 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. 16 17 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 2000 (unaudited) continued 5. COMMON SHARES OF BENEFICIAL INTEREST Transactions in common shares of beneficial interest were as follows:
CAPITAL PAID IN EXCESS OF SHARES PAR VALUE PAR VALUE ---------- --------- ------------ Balance, October 31, 1998................................... 18,047,013 $180,470 $250,814,643 Treasury shares purchased and retired (weighted average discount 8.80%)*........................................... (370,300) (3,703) (4,885,231) ---------- -------- ------------ Balance, October 31, 1999................................... 17,676,713 176,767 245,929,412 Treasury shares purchased and retired (weighted average discount 9.39%)*........................................... (650,500) (6,505) (8,418,255) ---------- -------- ------------ Balance, April 30, 2000..................................... 17,026,213 $170,262 $237,511,157 ========== ======== ============
- --------------------- * The Trustees have voted to retire the shares purchased. 6. FEDERAL INCOME TAX STATUS At October 31, 1999, the Trust had a net capital loss carryover of approximately $493,000 which will be available through October 31, 2007 to offset future capital gains to the extent provided by regulations. 7. DIVIDENDS TO COMMON SHAREHOLDERS On March 28, 2000, the Trust declared the following dividends from net investment income:
AMOUNT RECORD PAYABLE PER SHARE DATE DATE - --------- ------------ ------------- $0.0775 May 5, 2000 May 19, 2000 $0.0775 June 9, 2000 June 23, 2000
17 18 MORGAN STANLEY DEAN WITTER 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 SIX FOR THE YEAR ENDED OCTOBER 31,* MONTHS ENDED ---------------------------------------------------- APRIL 30, 2000* 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------ (unaudited) SELECTED PER SHARE DATA: Net asset value, beginning of period.............. $14.35 $15.66 $15.50 $ 15.18 $ 15.31 $ 14.09 ------ ------ ------ ------- ------- ------- Income (loss) from investment operations: Net investment income............................ 0.59 1.16 1.19 1.20 1.21 1.22 Net realized and unrealized gain (loss).......... (0.06) (1.28) 0.15 0.34 0.06 1.30 ------ ------ ------ ------- ------- ------- Total income (loss) from investment operations.... 0.53 (0.12) 1.34 1.54 1.27 2.52 ------ ------ ------ ------- ------- ------- Less dividends and distributions from: Net investment income............................ (0.47) (0.90) (0.96) (0.96) (1.02) (1.08) Common share equivalent of dividends paid to preferred shareholders......................... (0.12) (0.20) (0.21) (0.22) (0.22) (0.22) Net realized gain................................ -- (0.11) (0.01) (0.05) (0.16) -- ------ ------ ------ ------- ------- ------- Total dividends and distributions................. (0.59) (1.21) (1.18) (1.23) (1.40) (1.30) ------ ------ ------ ------- ------- ------- Anti-dilutive effect of acquiring treasury shares........................................... 0.05 0.02 -- 0.01 -- -- ------ ------ ------ ------- ------- ------- Net asset value, end of period.................... $14.34 $14.35 $15.66 $ 15.50 $ 15.18 $ 15.31 ====== ====== ====== ======= ======= ======= Market value, end of period....................... $13.00 $13.00 $15.50 $15.313 $14.625 $14.625 ====== ====== ====== ======= ======= ======= TOTAL RETURN+..................................... 3.62%(1) (10.12)% 7.71% 12.16% 8.44% 23.76% RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS: Total expenses.................................... 0.75%(2)(3) 0.71% 0.71%(3) 0.71% 0.72% 0.74% Net investment income before preferred stock dividends........................................ 8.22%(2) 7.66% 7.65% 7.93% 8.02% 8.31% Preferred stock dividends......................... 1.64%(2) 1.34% 1.37% 1.44% 1.45% 1.50% Net investment income available to common shareholders..................................... 6.58%(2) 6.32% 6.28% 6.49% 6.57% 6.81% SUPPLEMENTAL DATA: Net assets, end of period, in thousands........... $349,073 $358,633 $387,612 $384,773 $380,488 $383,920 Asset coverage on preferred shares at end of period........................................... 332% 341% 369% 366% 362% 365% Portfolio turnover rate........................... 3%(1) 8% 9% 5% 7% 12%
- --------------------- * The per share amounts were computed using an average number of shares outstanding during the period. + Total 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 Trust's dividend reinvestment plan. Total return does not reflect brokerage commissions. (1) Not annualized. (2) Annualized. (3) Does not reflect the effect of expense offset of 0.01%. SEE NOTES TO FINANCIAL STATEMENTS 18 19 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST REVISED INVESTMENT POLICY (unaudited) On January 26, 2000, the Trustees of Morgan Stanley Dean Witter Quality Municipal Investment Trust (the "Trust") approved an investment policy whereby the Trust would be permitted to invest up to 10% of its assets in inverse floating rate municipal obligations. The inverse floating rate municipal obligations in which the Trust will invest are typically created through a division of a fixed rate municipal obligation into two separate instruments, a short-term obligation and a long-term obligation. The interest rate on the short-term obligation is set at periodic auctions. The interest rate on the long-term obligation is the rate the issuer would have paid on the fixed income obligation: (i) plus the difference between such fixed rate and the rate on the short-term obligation, if the short-term rate is lower than the fixed rate; or (ii) minus such difference if the interest rate on the short-term obligation is higher than the fixed rate. The interest rates on these obligations generally move in the reverse direction of market interest rates. If market interest rates fall, the interest rate on the obligation will increase and if market interest rates increase, the interest rate on the obligation will fall. Inverse floating rate municipal obligations offer the potential for higher income than is available from fixed rate obligations of comparable maturity and credit rating. They also carry greater risks. In particular, the prices of inverse floating rate municipal obligations are more volatile, i.e., they increase and decrease in response to changes in interest rates to a greater extent than comparable fixed rate obligations. 19 20 TRUSTEES - ---------------------------------- Michael Bozic Charles A. Fiumefreddo Edwin J. Garn 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 Mitchell M. Merin President Barry Fink Vice President, Secretary and General Counsel James F. Willison Vice President Thomas F. Caloia Treasurer TRANSFER AGENT - ---------------------------------- Morgan Stanley Dean Witter Trust FSB Harborside Financial Center -- Plaza Two Jersey City, New Jersey 07311 INDEPENDENT ACCOUNTANTS - ---------------------------------- PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York 10036 INVESTMENT MANAGER - ---------------------------------- Morgan Stanley Dean Witter Advisors Inc. Two World Trade Center New York, New York 10048 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. MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST Semiannual Report April 30, 2000 -----END PRIVACY-ENHANCED MESSAGE-----