N-30D 1 y48543n-30d.txt MSDW QUALITY MUNI INVESTMENT TRUST 1 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST Two World Trade Center LETTER TO THE SHAREHOLDERS April 30, 2001 New York, New York 10048 DEAR SHAREHOLDER: During the six-month period ended April 30, 2001, the U.S. economy began to show signs of a slowdown as retail sales flattened, capital spending stalled and unemployment edged upward. The stock market became more volatile and the value of many equities declined. Earlier fears about inflation were replaced with concerns over weakening asset prices. The change in market psychology was reinforced last December when comments by Federal Reserve Board Chairman Alan Greenspan indicated that the central bank was ready to switch to a bias toward easing rates if the economy continued to show weakness. These comments sparked a strong year-end rally in the fixed-income markets that lowered interest rates across the yield curve. Between January and April 2001, the Fed followed through by lowering the federal funds rate in four 50-basis-point moves from 6.50 to 4.50 percent. Subsequent to the end of the reporting period, on May 15, 2001, the Federal Reserve lowered rates an additional 50 basis points. MUNICIPAL MARKET CONDITIONS The yield of the long-term insured municipal bond index stabilized near 5.25 percent during the first three months of 2001. This level was nearly 75 basis points lower than a year ago. However, yields rose in April when economic data proved more favorable than expected. The index closed the month at a yield of 5.45 percent. As the Federal Reserve began to ease monetary policy, the yield pickup for extending tax-exempt maturities from one to 30 years jumped from 150 to 240 basis points. The California electric crisis has adversely affected California municipal bond yields. Whereas yields on California bonds were substantially lower than national levels six months ago, they were at or above national levels by the end of April. Historically, the ratios of municipal yields as a percentage of Treasury yields have been used to track the relationship between the two markets. The ratio of 30-year insured municipals to Treasuries declined slightly, to 2 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST LETTER TO THE SHAREHOLDERS April 30, 2001, continued 95 percent, during the first half of the fiscal year. Over the past three years this ratio has ranged between 86 and 100 percent. Lower interest rates have led to a resurgence in new-issue supply. During the first four months of 2001, new-issue volume increased 36 percent, to $77 million. For all of calendar year 2000, total new-issue volume was $200 billion. 30-YEAR BOND YIELDS 1995 - 2001
Insured U.S. Insured Municipal Yields/ Municipal Yields Treasury Yields U.S. Treasury Yields (Ratio) 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 97.89 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 5.91 6.01 98.34 5.84 5.90 98.98 5.73 5.78 99.13 5.62 5.67 99.12 5.74 5.89 97.45 5.65 5.79 97.58 5.55 5.61 98.93 5.27 5.46 96.52 2001 5.30 5.50 96.36 5.27 5.31 99.25 5.26 5.44 96.69 5.45 5.79 94.13
Source: Municipal Market Data - A Division of Thomson Financial Municipal Group and Bloomberg L.P. PERFORMANCE During the six-month period ended April 30, 2001, the net asset value (NAV) of Morgan Stanley Dean Witter Quality Municipal Investment Trust (IQT) increased from $14.64 to $14.73 per share. Based on this change, plus a reinvestment of tax-free dividends totaling $0.47 per share and capital gains distribution of $0.01 per share, the Trust's total NAV return was 4.00 percent. IQT's value on the New York Stock Exchange (NYSE) increased from $13.6875 to $14.54 per share during this period. Based on this change plus reinvestment of distributions, IQT's total market return was 9.81 percent. As of April 30, 2001, IQT's share price was at a 1.29 percent discount to its NAV. 2 3 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST LETTER TO THE SHAREHOLDERS April 30, 2001, continued Monthly dividends for the second quarter of 2001, declared in March were unchanged at $0.0775 per share. The Trust's level of undistributed net investment income was $0.147 per share on April 30, 2001, versus $0.147 per share six months earlier. PORTFOLIO STRUCTURE The Trust's net assets of $353 million were diversified among 15 long-term sectors and 64 credits. At the end of April, the portfolio's average maturity was 20 years. Average duration, a measure of sensitivity to interest-rate changes, was 5 years. The accompanying charts provide current information on the portfolio's credit quality, maturity distribution and sector concentrations. Optional redemption provisions are also shown by year of the call and their respective cost (book) yields. 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 $0.05 per share to common share earnings. The Trust's two ARPS series totaling $105 million represented 30 percent of net assets. The yields on the Trust's weekly ARPS series ranged between 2.92 and 5.05 percent. The yield on the series with an annual auction maturing in September 2001 was 4.32 percent. In comparison, the yield on 1-year municipal notes has fallen from 4.19 percent in October 2000 to 3.08 percent at the end of April. LOOKING AHEAD The slower pace of economic growth and the Federal Reserve Board's shift to an easing bias in its monetary policy should create a favorable backdrop for fixed-income investments. In this environment, 3 4 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST LETTER TO THE SHAREHOLDERS April 30, 2001, continued tax-free income and relative attractiveness versus Treasuries continue to offer good long-term value to municipal investors. The Trust's procedure for reinvesting all dividends and distributions in 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, whichever 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. 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, 2001, continued [LARGEST SECTORS BAR GRAPH]
WATER & GENERAL RESOURCE MORTGAGE SEWER OBLIGATION IDR/PCR* TRANSPORTATION REFUNDED RECOVERY -------- ------- ---------- -------- -------------- -------- -------- 19% 13.00% 12.00% 9.00% 9.00% 7.00% 6.00
* INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE. PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. [CREDIT RATINGS PIE CHART]
Aaa OR AAA Aa OR AA A OR A Baa OR BBB NR ---------- -------- ------ ---------- -- 55% 25% 10% 7% 3%
AS MEASURED BY MOODY'D INVESTORS SERVICE, INC. OR STANDARD & POOR'S CORP. PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. DISTRIBUTION BY MATURITY (% of NET ASSETS) WEIGHTED AVERAGE MATURITY: 20 YEARS [DISTRIBUTION BY MATURITY BAR GRAPH] Under 1 Year 1.6% 1-5 Years 0.00 5-10 Years 2.30 10-20 Years 42.90 20-30 Years 44.50 30+ Years 7.00
Portfolio structure is subject to change. 5 6 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST LETTER TO THE SHAREHOLDERS April 30, 2001, continued [COST YIELD BAR GRAPH]
BONDS CALLABLE COST (BOOK) YIELD * -------------- ------------------- 2001 40% 7.3% 2002 2% 7% 2003 6% 6.8% 2004 1% 5.3% 2005 10% 6.1% 2006 1% 5.1% 2007 3% 6.1% 2008 8% 5.3% 2009 11% 5.7% 2010 13% 5.5% 2011+ 5% 5.7%
* 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 IS EARNING A BOOK YIELD OF 7.3% ON 40% OF THE LONG-TERM PORTFOLIO THAT IS CALLABLE IN 2001. PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. 6 7 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 2001 (unaudited)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE ---------------------------------------------------------------------------------------------------------- TAX-EXEMPT MUNICIPAL BONDS (96.7%) General Obligation (11.7%) $ 5,000 North Slope Borough, Alaska, Ser 2000 B (MBIA).............. 0.00% 06/30/09 $ 3,367,250 4,000 Florida Board of Education, Capital Outlay Refg 1998 Ser D.......................................................... 4.50 06/01/24 3,432,720 10,000 Chicago School Reform Board, Illinois, Dedicated Tax Ser 1997 (Ambac)............................................... 5.75 12/01/27 10,248,500 10,000 Massachusetts, Ser 2000 C................................... 5.75 10/01/15 10,611,500 5,000 North Carolina, Public School Building Ser 1999............. 4.60 04/01/17 4,644,900 1,700 Oregon, Veterans' Welfare Ser 75............................ 6.00 04/01/27 1,777,010 5,000 Aldine Independent School District, Texas, Bldg & Refg Ser 2001 (PSF)................................................. 5.00 02/15/26 4,649,400 2,500 Mission Consolidated Independent School District, Texas, Building Ser 2000 (PSF).................................... 5.50 02/15/25 2,486,650 -------- ------------ 43,200 41,217,930 -------- ------------ Educational Facilities Revenue (3.0%) 3,480 Indiana University, Student Fee Ser K (MBIA)................ 5.875 08/01/20 3,588,715 2,200 University of North Carolina, Pool Ser 1998 B (MBIA)........ 4.50 10/01/18 1,971,530 5,000 Texas State University, Board of Regents, Ser 2000.......... 5.50 03/15/20 5,024,050 -------- ------------ 10,680 10,584,295 -------- ------------ Electric Revenue (4.5%) 5,000 Long Island Power Authority, New York, Ser 2000 A (FSA)..... 0.00 06/01/16 2,291,250 3,190 North Carolina Municipal Power Agency #1, Catawba Ser 1992....................................................... 6.25 01/01/17 3,221,836 5,000 South Carolina Public Service Authority, 1997 Refg Ser A (MBIA)..................................................... 5.00 01/01/29 4,680,050 4,965 San Antonio, Texas, Electric & Gas Refg Ser 1994-A.......... 5.00 02/01/14 4,927,663 1,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary FSA)....................................................... 5.00 07/01/21 946,440 -------- ------------ 19,155 16,067,239 -------- ------------ Hospital Revenue (5.3%) 5,000 Massachusetts Health & Educational Facilities Authority, St Elizabeth's Hospital of Boston Ser D (FSA)................. 9.27++ 08/15/21 5,268,750 3,000 Missouri Health & Educational Facilities Authority, SSM Healthcare Ser 1998 A (MBIA)............................... 5.00 06/01/22 2,853,510 5,000 New Jersey Health Care Authority, St Barnabas Medical Center Ser 1998 B (MBIA).......................................... 4.75 07/01/28 4,589,250 3,750 New York State Dormitory Authority, Long Island Jewish Medical Center Ser 1998 (MBIA)............................. 5.00 07/01/18 3,623,925 2,180 Charlotte-Mecklenburg Hospital Authority, North Carolina, Ser 1992................................................... 6.25 01/01/20 2,226,914 -------- ------------ 18,930 18,562,349 -------- ------------ Industrial Development/Pollution Control Revenue (8.6%) 9,000 Hawaii Department Budget & Finance, Citizens Utilities Co 1991 Ser A & B (AMT)....................................... 6.66 11/01/21 8,427,600
SEE NOTES TO FINANCIAL STATEMENTS 7 8 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 2001 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE ---------------------------------------------------------------------------------------------------------- Chicago, Illinois, $ 5,000 Chicago-O'Hare Int'l Airport/Lufthansa German Airlines Inc Ser 1990 (AMT)............................................. 7.125% 05/01/18 $ 5,109,950 2,000 Peoples Gas Light & Coke Co Refg 1995 Ser A................ 6.10 06/01/25 2,068,120 2,000 New York State Energy Research & Development Authority, Brooklyn Union Gas Co 1991 Ser A & B (AMT) (MBIA).......... 10.081++ 07/01/26 2,327,500 12,000 Richland County, South Carolina, Union Camp Corp Ser 1991 B (AMT)...................................................... 7.125 09/01/21 12,319,080 -------- ------------ 30,000 30,252,250 -------- ------------ Mortgage Revenue - Multi-Family (7.3%) 10,000 Illinois Housing Development Authority, 1991 Ser A.......... 8.25 07/01/16 10,248,700 15,000 New Jersey Housing & Mortgage Finance Agency, Presidential Plaza at Newport - FHA Insured Mtgs Refg 1991 Ser 1........ 7.00 05/01/30 15,456,450 -------- ------------ 25,000 25,705,150 -------- ------------ Mortgage Revenue - Single Family (12.1%) 3,365 California Housing Finance Agency, Home 1991 Ser G (AMT).... 7.05 08/01/27 3,436,573 Colorado Housing & Finance Authority, 1,550 2000 Ser D-2 Refg 1991 (AMT)............................... 6.90 04/01/29 1,723,166 5,360 Refg 1991 Ser A............................................ 7.25 11/01/31 5,492,446 10,000 Connecticut Housing Finance Authority, Housing Mortgage 2000 Ser B-2 (AMT).............................................. 5.85 05/15/31 10,133,700 1,420 District of Columbia Housing Finance Agency, GNMA Collateralized Ser 1990 B (AMT)............................ 7.10 12/01/24 1,457,105 4,635 Maine Housing Authority, Purchase 1988 Ser D-6 (AMT)........ 7.25 11/15/19 4,740,029 860 Michigan Housing Development Authority, 1991 Ser B.......... 6.95 12/01/20 887,537 2,600 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser A & B (AMT)................................................ 10.116++ 09/15/23 2,723,500 2,615 New Hampshire Housing Finance Authority, Residential 1991 Ser D (AMT)................................................ 7.25 07/01/15 2,714,501 1,600 Ohio Housing Finance Agency, GNMA-Backed Ser A 1&2 (AMT).... 9.872++ 03/24/31 1,672,000 3,185 Tennessee Housing Development Agency, Homeownership Issue T (AMT)...................................................... 7.375 07/01/23 3,234,113 3,820 Virginia Housing Development Authority, 1992 Ser A.......... 7.15 01/01/33 3,925,967 520 Wyoming Community Development Authority, Federally Insured/Gtd Loans 1988 Ser G (AMT)......................... 7.25 06/01/21 537,727 -------- ------------ 41,530 42,678,364 -------- ------------ Nursing & Health Related Facilities Revenue (0.3%) 940 New York State Medical Care Facilities Finance Agency, 7.30 02/15/21 969,149 -------- Mental Health 1991 Ser C................................... ------------ Recreational Facilities Revenue (1.2%) 4,000 Houston, Texas, Sr Lien Hotel Occupancy Tax Refg Ser 1995 (FSA)...................................................... 5.50 07/01/15 4,287,480 -------- ------------
SEE NOTES TO FINANCIAL STATEMENTS 8 9 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 2001 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE ---------------------------------------------------------------------------------------------------------- Resource Recovery Revenue (5.7%) $ 5,000 Northeast Maryland Waste Disposal Authority, Montgomery County Ser 1993 A (AMT).................................... 6.30% 07/01/16 $ 5,162,550 4,610 Detroit Economic Development Corporation, Michigan, Ser 1991 A (AMT) (FSA).............................................. 6.875 05/01/09 4,709,438 10,000 Montgomery County Industrial Development Authority, Pennsylvania, Ser 1989..................................... 7.50 01/01/12 10,196,400 -------- ------------ 19,610 20,068,388 -------- ------------ Student Loan Revenue (2.1%) 6,500 Pennsylvania Higher Education Assistance Agency, 1991 Ser A -------- & B (AMT) (Ambac).......................................... 9.693++ 09/03/26 7,377,500 ------------ Transportation Facilities Revenue (8.6%) 10,000 Hillsborough County Port District, Florida, Tampa Port Authority Spl & Refg Ser 1995 (AMT) (FSA).................. 6.00 06/01/20 10,391,100 2,000 Lee County, Florida, Ser 1995 (MBIA)........................ 5.75 10/01/22 2,057,100 7,000 Hawaii, Airports Second Ser of 1991 (AMT)................... 6.90 07/01/12 8,011,080 5,000 Massachusetts Bay Transportation Authority, Assessment 2000 Ser A...................................................... 5.25 07/01/30 4,865,050 5,000 Houston, Texas, Airport Sub Lien Ser 1991 A (AMT) (FGIC).... 6.75 07/01/21 5,122,600 -------- ------------ 29,000 30,446,930 -------- ------------ Water & Sewer Revenue (12.6%) 2,000 Birmingham, Alabama, Water & Sewer Ser 1998 A............... 4.75 01/01/21 1,804,900 5,470 California Department Water Resources, Central Valley Ser U.......................................................... 5.00 12/01/29 5,114,450 5,000 Louisville & Jefferson County Metropolitan Sewer District, Kentucky, Ser 1999 A (FGIC)................................ 5.75 05/15/33 5,159,400 1,585 Massachusetts Water Resources Authority, 2000 Ser A (FGIC)..................................................... 6.00 08/01/13 1,749,602 5,000 New York City Water Finance Authority, New York 1998 Ser D (MBIA)..................................................... 4.75 06/15/25 4,540,500 7,500 Portland, Oregon Sewer 2000 Ser A (FGIC).................... 5.75 08/01/19 7,793,700 7,000 Charleston, South Carolina, Refg Cap Impr Ser 1998 (FGIC)... 4.50 01/01/24 6,045,900 10,000 Houston, Texas, Water & Sewer Jr Lien Refg Ser 2000 B (FGIC)..................................................... 5.25 12/01/30 9,594,000 3,000 Loudoun County Sanitation Authority, Virginia, Ser 1998 (MBIA)..................................................... 4.75 01/01/30 2,671,500 -------- ------------ 46,555 44,473,952 -------- ------------ Other Revenue (7.2%) 10,000 New York Local Government Assistance Corporation, Ser 1995 A.......................................................... 6.00 04/01/24 10,413,000 15,000 Emmaus General Authority, Pennsylvania, Local Government Ser 1988 H (FGIC).............................................. 7.00 05/15/18 15,169,950 -------- ------------ 25,000 25,582,950 -------- ------------
SEE NOTES TO FINANCIAL STATEMENTS 9 10 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 2001 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE ---------------------------------------------------------------------------------------------------------- Refunded (6.5%) $ 10,000 Wichita, Kansas, CSJ Health System of Wichita Inc Ser 1991 (ETM)...................................................... 7.00% 11/15/18 $ 10,400,500 9,000 Lorain County, Ohio, Humility of Mary Health Care Corp Ser 1991 B (ETM)............................................... 7.20 12/15/11 9,396,990 3,000 Salt Lake City, Utah, IHC Hospitals Inc Refg Ser 1991 (Ambac) (ETM).............................................. 9.52++ 05/15/20 3,123,750 -------- ------------ 22,000 22,921,240 -------- ------------ 342,100 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Cost $331,394,937)........................... 341,195,166 -------- ------------ SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (1.6%) 1,600 Hapeville Development Authority, Georgia, Hapeville Hotel Ltd Ser 1995 (Demand 05/01/01)............................. 4.30* 11/01/15 1,600,000 4,200 Harris County Health Facilities Development Corporation, -------- Texas, Methodist Hospital Ser 1994 (Demand 05/01/01)....... 4.35* 12/01/25 4,200,000 ------------ 5,800 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Cost $5,800,000)............ 5,800,000 -------- ------------ $347,900 TOTAL INVESTMENTS (Cost $337,194,937) (a) ........................... 98.3% 346,995,166 ======== OTHER ASSETS IN EXCESS OF LIABILITIES.................................. 1.7 6,056,454 ---- ------------ NET ASSETS............................................................ 100.0% $353,051,620 ===== ============
--------------------- AMT Alternative Minimum Tax. ETM Escrowed to maturity. ++ Current coupon rate for residual interest bonds. This rate resets periodically as the auction rate on the related short-term security changes. * Current coupon of variable rate demand obligation. (a) The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $12,104,706 and the aggregate gross unrealized depreciation is $2,304,477, resulting in net unrealized appreciation of $9,800,229. Bond Insurance: ------------------------------------------------------------------- Ambac Ambac Assurance Corporation. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation. PSF Texas Permanent School Fund Guarantee Program.
SEE NOTES TO FINANCIAL STATEMENTS 10 11 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 2001 (unaudited) continued Geographic Summary of Investments Based on Market Value as a Percent of Net Assets Alabama..................... 0.5% Alaska...................... 1.0 California.................. 2.4 Colorado.................... 2.0 Connecticut................. 2.9 District of Columbia........ 0.4 Florida..................... 4.5 Georgia..................... 0.5 Hawaii...................... 4.7 Illinois.................... 7.8 Indiana..................... 1.0 Kansas...................... 2.9 Kentucky.................... 1.4 Maine....................... 1.3 Maryland.................... 1.5 Massachusetts............... 6.4 Michigan.................... 1.6 Missouri.................... 0.8 Nebraska.................... 0.8 New Hampshire............... 0.8 New Jersey.................. 5.7 New York.................... 6.8 North Carolina.............. 3.4 Ohio........................ 3.1 Oregon...................... 2.7 Pennsylvania................ 9.3 South Carolina.............. 6.5 Tennessee................... 0.9 Texas....................... 11.4 Utah........................ 1.2 Virginia.................... 1.9 Wyoming..................... 0.2 ---- Total....................... 98.3% ====
SEE NOTES TO FINANCIAL STATEMENTS 11 12 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES April 30, 2001 (unaudited) ASSETS: Investments in securities, at value (cost $337,194,937)........................................ $346,995,166 Cash........................................................ 34,591 Receivable for: Interest................................................ 6,168,924 Investments sold........................................ 92,610 Prepaid expenses............................................ 67,639 ------------ TOTAL ASSETS............................................ 353,358,930 ------------ LIABILITIES: Payable for: Dividends to preferred shareholders..................... 126,000 Investment management fee............................... 106,033 Accrued expenses............................................ 75,277 ------------ TOTAL LIABILITIES....................................... 307,310 ------------ NET ASSETS.............................................. $353,051,620 ============ 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, 16,844,513 shares outstanding)............................................... 235,218,613 Net unrealized appreciation................................. 9,800,229 Accumulated undistributed net investment income............. 2,482,686 Accumulated undistributed net realized gain................. 550,092 ------------ NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS............ 248,051,620 ------------ TOTAL NET ASSETS........................................ $353,051,620 ============ NET ASSET VALUE PER COMMON SHARE ($248,051,620 divided by 16,844,513 common shares outstanding)............................................... $14.73 ============
SEE NOTES TO FINANCIAL STATEMENTS 12 13 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL STATEMENTS, continued STATEMENT OF OPERATIONS For the six months ended April 30, 2001 (unaudited) NET INVESTMENT INCOME: INTEREST INCOME............................................. $10,783,021 ----------- EXPENSES Investment management fee................................... 620,450 Auction commission fees..................................... 152,842 Professional fees........................................... 35,516 Transfer agent fees and expenses............................ 31,806 Shareholder reports and notices............................. 18,827 Registration fees........................................... 13,013 Auction agent fees.......................................... 8,653 Trustees' fees and expenses................................. 8,268 Custodian fees.............................................. 8,107 Other....................................................... 10,918 ----------- TOTAL EXPENSES.......................................... 908,400 Less: expense offset........................................ (8,091) ----------- NET EXPENSES............................................ 900,309 ----------- NET INVESTMENT INCOME................................... 9,882,712 ----------- NET REALIZED AND UNREALIZED GAIN:........................... Net realized gain........................................... 550,106 Net change in unrealized appreciation....................... 1,162,638 ----------- NET GAIN................................................ 1,712,744 ----------- NET INCREASE................................................ $11,595,456 ===========
SEE NOTES TO FINANCIAL STATEMENTS 13 14 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED FOR THE YEAR APRIL 30, ENDED 2001 OCTOBER 31, 2000 -------------------------------------------------------------------------------------- (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................ $ 9,882,712 $ 20,208,777 Net realized gain.................................... 550,106 730,570 Net change in unrealized appreciation................ 1,162,638 3,145,492 ------------ ------------ NET INCREASE..................................... 11,595,456 24,084,839 ------------ ------------ Dividends to preferred shareholders from net investment income................................... (2,076,306) (4,289,019) ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income................................ (7,841,525) (15,929,765) Net realized gain.................................... (237,896) -- ------------ ------------ TOTAL DIVIDENDS AND DISTRIBUTIONS................ (8,079,421) (15,929,765) ------------ ------------ Decrease from transactions in common shares of beneficial interest................................. (776,881) (10,110,685) ------------ ------------ NET INCREASE (DECREASE).......................... 662,848 (6,244,630) NET ASSETS: Beginning of period.................................. 352,388,772 358,633,402 ------------ ------------ END OF PERIOD (Including undistributed net investment income of $2,482,686 and $2,517,805, respectively)......... $353,051,620 $352,388,772 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 14 15 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 2001 (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 15 16 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 2001 (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 tax purposes are reported as distributions of paid-in-capital. 2. INVESTMENT MANAGEMENT AGREEMENT Pursuant to an Investment Management Agreement with Morgan Stanley Investment Advisors Inc. ("the Investment Manager"), formerly Morgan Stanley Dean Witter Advisors Inc., the Trust pays the Investment Manager 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, 2001 aggregated $9,334,000 and $12,714,201, respectively. Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is the Trust's transfer agent. 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, 2001 included in Trustees' fees and expenses in the Statement of Operations amounted to $2,527. At April 30, 2001, the Trust had an accrued pension liability of $43,862 which is included in accrued expenses in the Statement of Assets and Liabilities. 16 17 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 2001 (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 IN RESET RANGE OF SERIES SHARES* THOUSANDS* RATE* DATE DIVIDEND RATES** ------ ------- ---------- ----- -------- ---------------- A 1,400 $70,000 3.80% 05/02/01 2.92% - 5.05% B 700 35,000 4.32 09/07/01 4.32
--------------------- * As of April 30, 2001. ** For the six months ended April 30, 2001. Subsequent to April 30, 2001 and up through June 8, 2001 the Trust paid dividends to Series A and B at rates ranging from 3.00% to 4.32% in the aggregate amount of $391,818. 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. 17 18 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 2001 (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, 1999................................... 17,676,713 $176,767 $245,929,412 Treasury shares purchased and retired (weighted average discount 8.95%)*........................................... (776,800) (7,768) (10,102,917) ---------- -------- ------------ Balance, October 31, 2000................................... 16,899,913 168,999 235,826,495 Treasury shares purchased and retired (weighted average discount 6.20%)*........................................... (55,400) (554) (776,327) ---------- -------- ------------ Balance, April 30, 2001..................................... 16,844,513 $168,445 $235,050,168 ========== ======== ============
--------------------- * The Trustees have voted to retire the shares purchased. 6. DIVIDENDS TO COMMON SHAREHOLDERS On March 27, 2001, the Trust declared the following dividends from net investment income:
AMOUNT RECORD PAYABLE PER SHARE DATE DATE --------- ------------ ------------- $0.0775 May 4, 2001 May 18, 2001 $0.0775 June 8, 2001 June 22, 2001
7. EXPENSE OFFSET The expense offset represents a reduction of the custodian fees for earnings on cash balances maintained by the Trust. 8. RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS The Trust may invest a portion of its assets in residual interest bonds, which are inverse floating rate municipal obligations. The prices of these securities are subject to greater market fluctuations during periods of changing prevailing interest rates than are comparable fixed rate obligations. At April 30, 2001, the Trust held positions in residual interest bonds having a total value of $22,493,000, which represents 6.4% of the Trust's net assets. 18 19 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, 2001* 2000 1999 1998 1997 1996 --------------------------------------------------------------------------------------------------------------------------------- (unaudited) SELECTED PER SHARE DATA: Net asset value, beginning of period......... $14.64 $ 14.35 $ 15.66 $ 15.50 $ 15.18 $ 15.31 ------ -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income....................... 0.58 1.18 1.16 1.19 1.20 1.21 Net realized and unrealized gain (loss)..... 0.11 0.23 (1.28) 0.15 0.34 0.06 ------ -------- -------- -------- -------- -------- Total income (loss) from investment operations.................................. 0.69 1.41 (0.12) 1.34 1.54 1.27 ------ -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income....................... (0.47) (0.93) (0.90) (0.96) (0.96) (1.02) Common share equivalent of dividends paid to preferred shareholders.................... (0.12) (0.25) (0.20) (0.21) (0.22) (0.22) Net realized gain........................... (0.01) -- (0.11) (0.01) (0.05) (0.16) ------ -------- -------- -------- -------- -------- Total dividends and distributions............ (0.60) (1.18) (1.21) (1.18) (1.23) (1.40) ------ -------- -------- -------- -------- -------- Anti-dilutive effect of acquiring treasury shares...................................... -- 0.06 0.02 -- 0.01 -- ------ -------- -------- -------- -------- -------- Net asset value, end of period............... $14.73 $ 14.64 $ 14.35 $ 15.66 $ 15.50 $ 15.18 ====== ======== ======== ======== ======== ======== Market value, end of period.................. $14.54 $ 13.688 $ 13.00 $ 15.50 $ 15.313 $ 14.625 ====== ======== ======== ======== ======== ======== TOTAL RETURN+................................ 9.81%(1) 12.84% (10.12)% 7.71% 12.16% 8.44% RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS: Total expenses............................... 0.73%(2)(3) 0.75% 0.71% 0.71%(3) 0.71% 0.72% Net investment income before preferred stock dividends................................... 7.90%(2) 8.18% 7.66% 7.65% 7.93% 8.02% Preferred stock dividends.................... 1.66%(2) 1.74% 1.34% 1.37% 1.44% 1.45% Net investment income available to common shareholders................................ 6.24%(2) 6.44% 6.32% 6.28% 6.49% 6.57% SUPPLEMENTAL DATA: Net assets, end of period, in thousands...... $353,052 $352,389 $358,633 $387,612 $384,773 $380,488 Asset coverage on preferred shares at end of period...................................... 336% 335% 341% 369% 366% 362% Portfolio turnover rate...................... 3%(1) 20% 8% 9% 5% 7%
--------------------- * 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 19 20 TRUSTEES ---------------------------------- Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien James F. Higgins 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 AUDITORS ---------------------------------- Deloitte & Touche LLP Two World Financial Center New York, New York 10281 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 auditors and accordingly they do not express an opinion thereon. MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST Semiannual Report April 30, 2001