-----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, QJTm3IC7agFlSum5iU2bO0i0aS/7z+eQ+9jPLJR5zIBRg3hrW3UU/REVLj85+L8N JNExzNIswMLAvwAdCBKE5w== 0000950123-02-012295.txt : 20021227 0000950123-02-012295.hdr.sgml : 20021227 20021227155101 ACCESSION NUMBER: 0000950123-02-012295 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021031 FILED AS OF DATE: 20021227 EFFECTIVENESS DATE: 20021227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY QUALITY MUNICIPAL INVESTMENT TRUS CENTRAL INDEX KEY: 0000876982 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06346 FILM NUMBER: 02870326 BUSINESS ADDRESS: STREET 1: C/O MORGAN STANLEY TRUST STREET 2: HARBORSIDE FINANCIAL CENTER, PLAZA TWO CITY: JERSEY CITY STATE: NJ ZIP: 07311 BUSINESS PHONE: (212) 869-6397 FORMER COMPANY: FORMER CONFORMED NAME: INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST DATE OF NAME CHANGE: 19920929 FORMER COMPANY: FORMER CONFORMED NAME: MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUS DATE OF NAME CHANGE: 19981221 FORMER COMPANY: FORMER CONFORMED NAME: MORGAN STANLEY QUALITY MUNICIPAL INVESTMENT TRUST DATE OF NAME CHANGE: 20011220 N-30D 1 y65911nv30d.txt MS QUALITY MUNICIPAL INVESTMENT TRUST Morgan Stanley Quality Municipal Investment Trust LETTER TO THE SHAREHOLDERS - OCTOBER 31, 2002 Dear Shareholder: During the 12 months ended October 31, 2002, U.S. economic indicators fluctuated between stronger and weaker growth. The economy continued to recover from recession and the aftermath of September 11. Real gross domestic product (GDP) accelerated to an annual rate of 5.0 percent in the first quarter of 2002. In the spring, the economy began to send mixed signals and the recovery lost momentum. Weakness in manufacturing and capital spending combined with corporate-accounting scandals and geopolitical turmoil to slow GDP to a 1.3 percent annual rate in the second quarter. The strongest consumer spending of the year and the restocking of inventories led to 4.0 percent annual growth in the third quarter. As the economy gained strength in the first few months of 2002, a general consensus developed that the Federal Reserve Board would begin to tighten monetary policy and raise short-term interest rates. The bond market reacted to these concerns in March and yields rose. By late spring, however, the consensus shifted to favoring bonds as labor market and capital-spending indicators remained soft and new disclosures on corporate ethics spurred a flight to quality. Most importantly, the Federal Reserve changed its monetary policy bias from neutral toward one of easing. The market's expectations of eventual rate hikes were scaled back and bonds rallied. A mid-October surge in the equity markets created a downdraft in bond prices. However, renewed concerns about the economy helped bond prices improve by month-end. On November 6, 2002, the Federal Reserve lowered the federal funds rate from 1.75 to 1.25 percent. This marked the first change by the central bank in nearly one year. Municipal Market Conditions The economic environment and unsettled equity markets lowered municipal yields to levels last seen in the 1960s. The yield on the 30-year insured municipal bond index ranged from a high of 5.43 percent in March to a low of 4.74 percent in September. The index yield stood at 4.96 percent at the end of October 2002. Throughout the period the slope of the municipal yield curve remained steep. The yield pickup for extending maturities from 1 to 30 years averaged 350 basis points. The ratio of municipal yields as a percentage of U.S. Treasury yields is used as a gauge of the relative value of municipals. The ratio of 30-year insured municipal bond yields to 30-year Treasuries fell from 98 percent in December 2001 to 94 percent in March. As municipals lagged the summer rally in Treasuries, the ratio jumped to 102 percent in September but declined to 99 percent by the end of October. These levels imply that municipals are cheap relative to Treasuries. Morgan Stanley Quality Municipal Investment Trust LETTER TO THE SHAREHOLDERS - OCTOBER 31, 2002 continued State and local governments took advantage of lower interest rates to refinance outstanding debt in a manner similar to homeowners refinancing their mortgages. Refinancing activity contributed to a surge in municipal bond underwriting, and long-term volume increased 27 percent to a record $292 billion in the first ten months of 2002. Refunding issues represented almost one-quarter of the total. California, Florida, New York, and Texas, the largest states in terms of issuance, represented 40 percent of the national volume. Issuance is on track to raise calendar year 2002's volume to more than $325 billion. [30-YEAR BOND PERFORMANCE GRAPH]
Insured U.S. Insured Municipal Municipal Treasury Yields/U.S. Treasury Yields Yields Yields (Ratio) 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 5.25 6.29 83.47 5.48 6.61 82.90 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 5.40 5.75 93.91 5.35 5.76 92.88 5.16 5.52 93.48 5.07 5.37 94.41 5.20 5.42 95.94 5.04 4.87 103.49 5.17 5.29 97.73 5.36 5.47 97.99 2002 5.22 5.43 96.13 5.14 5.42 94.83 5.43 5.80 93.62 5.30 5.59 94.81 5.29 5.62 94.13 5.27 5.51 95.64 5.12 5.30 96.60 5.00 4.93 101.42 4.74 4.67 101.50 4.92 4.99 98.60
Performance The net asset value (NAV) of Morgan Stanley Quality Municipal Investment Trust (IQT) decreased from $15.31 to $15.23 per share for the fiscal year ended October 31, 2002. Based on this change plus the reinvestment of tax-free dividends totaling $0.93 per share, a short-term capital gain distribution of $0.017 per share and a long-term capital gain distribution of $0.12 per share, the Trust's total NAV return was 7.10 percent. IQT's value on the New York Stock Exchange (NYSE) decreased from $15.08 to $14.08 per share during the same period. 2 Morgan Stanley Quality Municipal Investment Trust LETTER TO THE SHAREHOLDERS - OCTOBER 31, 2002 continued Based on this change plus the reinvestment of dividends and distributions, the IQT's total market return was 0.52 percent. On October 31, 2002, IQT's NYSE market price was at a 7.55 percent discount to its NAV. Monthly dividends for the fourth quarter of 2002 were declared in September. Beginning with the October payment, the monthly dividend was increased from $0.0775 to $0.080 per share. The new dividend reflects the level of the Trust's undistributed net investment income and projected earnings. The Trust's level of undistributed net investment income was $0.189 per share on October 31, 2002, versus $0.173 per share last year. Portfolio Structure The Trust's net assets of $360 million, including Auction Rate Preferred Shares (ARPS), were diversified among 13 long-term sectors and 59 credits. At the end of October, the portfolio's average maturity was 19 years. Average duration, a measure of sensitivity to interest-rate changes, was 6.4 years. The accompanying charts provide current information on the portfolio's credit ratings, maturity distribution and sector concentrations. Optional call provisions by year and their respective cost (book) yields are also shown. The Impact of Leveraging As discussed in previous reports, the total income available for distribution to common shareholders includes incremental income provided by the Trust's outstanding 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 the amount of ARPS outstanding, the greater the amount of incremental income available for distribution to common shareholders. The level of net investment income available for distribution to common shareholders varies with the level of short-term interest rates. ARPS leverage also increases the price volatility of common shares and has the effect of extending portfolio duration. During the 12-month period, ARPS leverage contributed approximately $0.20 per share to common share earnings. The Trust's two ARPS series totaled $105 million and represented 29 percent of total net assets. In September 2002, ARPS series A was extended until September 2004 at a yield of 1.90 percent. Yields on weekly ARPS auctions ranged between 1.03 and 2.00 percent, during the 12-month period. 3 Morgan Stanley Quality Municipal Investment Trust LETTER TO THE SHAREHOLDERS - OCTOBER 31, 2002 continued Looking Ahead The Federal Reserve Board's cautious approach toward an eventual rate tightening earlier this year helped stabilize the fixed-income markets. In fact, the Fed's current willingness to be accommodative resulted in a major bond rally during the second and third calendar quarters. We believe that the yields on tax-exempt securities continue to favor municipal bonds as an attractive choice for tax-conscious investors. For many investors, the taxable equivalent yields available on municipal bonds offer a significant advantage. 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, 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 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 and CEO
4 Morgan Stanley Quality Municipal Investment Trust LETTER TO THE SHAREHOLDERS - OCTOBER 31, 2002 continued [LARGEST SECTORS BAR CHART] LARGEST SECTORS AS OF OCTOBER 31, 2002 (% OF LONG-TERM PORTFOLIO) WATER & SEWER 19% TRANSPORTATION 15% GENERAL OBLIGATION 14% MORTGAGE 12% IDR/PCR* 10% ELECTRIC 9% REFUNDED 8%
* INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. [CREDIT RATINGS PIE CHART] CREDIT RATINGS AS OF OCTOBER 31, 2002 (% OF LONG-TERM PORTFOLIO) Aaa OR AAA 64% Aa OR AA 19% A OR A 11% Baa OR BBB 6%
AS MEASURED BY MOODY'S INVESTORS SERVICE, INC. OR STANDARD & POOR'S CORP. PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. [DISTRIBUTION BY MATURITY BAR CHART] DISTRIBUTION BY MATURITY (% OF LONG-TERM PORTFOLIO)
WEIGHTED AVERAGE MATURITY: 19 YEARS 1-5 YEARS 3.0% 5-10 YEARS 9.1% 10-15 YEARS 15.2% 15-20 YEARS 31.1% 20-30 YEARS 37.8% 30+ YEARS 3.8%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. 5 Morgan Stanley Quality Municipal Investment Trust LETTER TO THE SHAREHOLDERS - OCTOBER 31, 2002 continued CALL AND COST (BOOK) YIELD STRUCTURE (BASED ON LONG-TERM PORTFOLIO) OCTOBER 31, 2002 WEIGHTED AVERAGE CALL PROTECTION: 6 YEARS PERCENT CALLABLE 2002 0.0% 2003 20.0% 2004 2.0% 2005 8.0% 2006 1.0% 2007 3.0% 2008 3.0% 2009 10.0% 2010 16.0% 2011 16.0% 2012+ 21.0%
WEIGHTED AVERAGE BOOK YIELD: 6% COST (BOOK) YIELD* 2002 6.9% 2003 5.7% 2004 6.1% 2005 6.6% 2006 6.1% 2007 5.7% 2008 5.7% 2009 5.5% 2010 5.2% 2011 5.1% 2012+
* COST OR "BOOK" YIELD IS THE ANNUAL INCOME EARNED ON A PORTFOLIO INVESTMENT BASED ON ITS ORIGINAL PURCHASE PRICE BEFORE FUND OPERATING EXPENSES. FOR EXAMPLE, THE FUND IS EARNING A BOOK YIELD OF 6.9% ON 20% OF THE LONG-TERM PORTFOLIO THAT IS CALLABLE IN 2003. PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. 6 Morgan Stanley Quality Municipal Investment Trust LETTER TO THE SHAREHOLDERS - OCTOBER 31, 2002 continued Geographic Summary of Investments Based on Market Value as a Percent of Total Investments Alabama................ 0.6% Alaska................. 2.0 Arizona................ 1.5 Colorado............... 1.8 District of Columbia... 0.4 Connecticut............ 2.8 Florida................ 10.0 Georgia................ 6.2 Hawaii................. 4.8 Illinois............... 6.5 Indiana................ 1.0 Kentucky............... 3.3 Maryland............... 2.8 Massachusetts.......... 8.0 Michigan............... 1.0 Minnesota.............. 1.6 New Hampshire.......... 0.4 New Jersey............. 7.5 New York............... 11.2 North Carolina......... 2.4 Ohio................... 0.9% Oregon................. 2.7 Pennsylvania........... 2.8 South Carolina......... 6.6 Texas.................. 9.2 Utah................... 1.2 Wyoming................ 0.8 ----- Total.................. 100.0% =====
7 Morgan Stanley Quality Municipal Investment Trust RESULTS OF ANNUAL MEETING * * * On October 23, 2002, an annual meeting of the Trust's shareholders was held for the purpose of voting on two separate matters, the results of which were as follows: (1) Election of Trustees by all shareholders: Michael Bozic For.................................................. 13,674,388 Withheld............................................. 714,389 James F. Higgins For.................................................. 13,602,944 Withheld............................................. 785,833
(2) Election of Trustee by preferred shareholders: Charles A. Fiumefreddo For.................................................. 1,541 Withheld............................................. 0
The following Trustees were not standing for reelection at this meeting: Edwin J. Garn, Wayne E. Hedien, Manuel H. Johnson, Michael E. Nugent and Philip J. Purcell. 8 Morgan Stanley Quality Municipal Investment Trust PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2002
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------- TAX-EXEMPT MUNICIPAL BONDS (131.4%) General Obligation (18.4%) $ 5,000 North Slope Borough, Alaska, Ser 2000 B (MBIA)........... 0.00% 06/30/09 $ 3,885,200 Florida Board of Education, Capital Outlay 6,890 Refg Ser 2001 D........................................ 5.375 06/01/18 7,427,144 3,000 Refg 2002 Ser C (MBIA)................................. 5.00 06/01/20 3,099,540 10,000 Chicago School Reform Board, Illinois, Dedicated Tax Ser 1997 (Ambac)........................................... 5.75 12/01/27 10,740,400 7,000 New Jersey, 2001 Ser H................................... 5.25 07/01/19 7,601,930 5,000 North Carolina, Public School Building Ser 1999.......... 4.60 04/01/17 5,138,050 1,340 Oregon, Veterans' Welfare Ser 75......................... 6.00 04/01/27 1,390,612 5,000 Aldine Independent School District, Texas, Bldg & Refg Ser 2001 (PSF)......................................... 5.00 02/15/26 4,992,800 2,500 Mission Consolidated Independent School District, Texas, Building Ser 2000 (PSF)................................ 5.50 02/15/25 2,595,475 - -------- ------------- 45,730 46,871,151 - -------- ------------- Educational Facilities Revenue (2.7%) 1,480 Indiana University, Student Fee Ser K (MBIA)............. 5.875 08/01/20 1,609,115 5,000 Texas State University, Ser 2000 (FSA)................... 5.50 03/15/20 5,268,800 - -------- ------------- 6,480 6,877,915 - -------- ------------- Electric Revenue (11.8%) 5,000 Colorado Springs, Colorado, Utilities Rev Ser 2001 A..... 5.00 11/15/29 5,014,300 Municipal Electric Authority of Georgia, Combustion Turbine 2,000 Ser 2002 A (MBIA)...................................... 5.25 11/01/21 2,074,040 1,500 Ser 2002 A (MBIA)...................................... 5.25 11/01/22 1,545,900 5,000 Southern Minnesota Municipal Power Agency, Ser 2002 A (Ambac)................................................ 5.25 01/01/16 5,515,850 3,500 Long Island Power Authority, New York, Ser 2000 A (FSA).................................................. 0.00 06/01/16 1,899,590 3,190 North Carolina Municipal Power Agency #1, Catawba Ser 1992................................................... 6.25 01/01/17 3,270,133 South Carolina Public Service Authority, 1,500 2002 Refg Ser A (FSA).................................. 5.125 01/01/20 1,549,335 1,000 2002 Refg Ser A (FSA).................................. 5.125 01/01/21 1,024,470 2,000 1997 Refg Ser A (MBIA)................................. 5.00 01/01/29 1,996,960 4,965 San Antonio, Texas, Electric & Gas Refg Ser 1994 A....... 5.00 02/01/14 5,105,460 1,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary FSA)........................................ 5.00 07/01/21 1,005,320 - -------- ------------- 30,655 30,001,358 - -------- -------------
See Notes to Financial Statements 9 Morgan Stanley Quality Municipal Investment Trust PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2002 continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------- Hospital Revenue (5.4%) $ 2,000 Indiana Health Facilities Authority Methodist Hospital Ser 2001............................................... 5.50% 09/15/31 $ 1,982,700 Maryland Health & Higher Educational Facilities Authority, 2,000 University of Maryland Medical Ser 2002................ 5.75 07/01/17 2,142,240 2,500 University of Maryland Medical Ser 2001................ 5.25 07/01/34 2,487,575 4,000 New Jersey Health Care Authority, St Barnabas Medical Center Ser 1998 B (MBIA)............................... 4.75 07/01/28 3,894,400 3,000 Lorain County, Ohio, Catholic Healthcare Partners Ser 2001 A................................................. 5.75 10/01/18 3,188,370 - -------- ------------- 13,500 13,695,285 - -------- ------------- Industrial Development/Pollution Control Revenue (13.1%) 9,000 Hawaii Dept Budget & Finance, Citizens Utilities Co 1991 Ser A & B (AMT)................................... 6.66 11/01/21 8,719,650 2,000 Chicago, Illinois, Peoples Gas Light & Coke Co Refg 1995 Ser A.................................................. 6.10 06/02/25 2,173,760 3,500 Michigan Strategic Fund, Detroit Edison Co. Ser 2001C.... 5.45 09/01/29 3,511,900 2,000 New York State Energy Research & Development Authority, Brooklyn Union Gas 1991 Ser D (AMT).................... 11.896++ 07/01/26 2,480,760 12,000 Richland County, South Carolina, Union Camp Corp Ser 1991 B (AMT)................................................ 7.125 09/01/21 12,136,920 5,000 Sabine River Authority, Texas, TXU Electric Co Refg Ser 2001 B (AMT)........................................... 5.75 05/01/30 4,300,000 - -------- ------------- 33,500 33,322,990 - -------- ------------- Mortgage Revenue - Multi-Family (9.9%) 10,000 Illinois Housing Development Authority, 1991 Ser A....... 8.25 07/01/16 10,121,400 15,000 New Jersey Housing & Mortgage Finance Agency, Presidential Plaza at Newport - FHA Insured Mtgs Refg 1991 Ser 1............................................. 7.00 05/01/30 15,123,750 - -------- ------------- 25,000 25,245,150 - -------- ------------- Mortgage Revenue - Single Family (5.6%) 1,390 Colorado Housing & Finance Authority, 2000 Ser D-2 (AMT).................................................. 6.90 04/01/29 1,522,495 9,475 Connecticut Housing Finance Authority, 2000 Ser B-2 (AMT).................................................. 5.85 05/15/31 9,854,284 1,340 District of Columbia Housing Finance Agency, GNMA Collateralized Ser 1990 B (AMT)........................ 7.10 12/01/24 1,354,847 1,405 New Hampshire Housing Finance Authority, Residential 1991 Ser D (AMT)............................................ 7.25 07/01/15 1,432,426 - -------- ------------- 13,610 14,164,052 - -------- ------------- Public Facilities Revenue (2.8%) 5,000 Arizona School Facilities Board, School Improvement Ser 2001................................................... 5.00 07/01/19 5,173,850 1,900 Jacksonville, Florida, Sales Tax Ser 2001 (Ambac)........ 5.50 10/01/18 2,061,462 - -------- ------------- 6,900 7,235,312 - -------- -------------
See Notes to Financial Statements 10 Morgan Stanley Quality Municipal Investment Trust PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2002 continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------- Resource Recovery Revenue (2.0%) $ 5,000 Northeast Maryland Waste Disposal Authority, Montgomery - -------- County Ser 1993 A (AMT)................................ 6.30% 07/01/16 $ 5,197,350 ------------- Transportation Facilities Revenue (19.3%) Alaska State International Airports System, 1,500 Ser 2002 B (Ambac)..................................... 5.75 10/01/18 1,656,180 1,500 Ser 2002 B (Ambac)..................................... 5.75 10/01/19 1,648,605 10,000 Hillsborough County Port District, Florida, Tampa Port Authority Spl & Refg Ser 1995 (AMT) (FSA).............. 6.00 06/01/20 10,734,200 2,000 Lee County, Florida, Ser 1995 (MBIA)..................... 5.75 10/01/22 2,162,740 7,250 Atlanta, Georgia, Airport Ser 2000 A (FGIC).............. 5.50 01/01/26 7,578,860 10,000 Georgia State Road & Tollway Authority, Ser 2001......... 5.375 03/01/17 10,842,700 5,000 Massachusetts Bay Transportation Authority, Assessment 2000 Ser A............................................. 5.25 07/01/30 5,100,750 Metropolitan Transportation Authority, New York, 3,000 State Service Contract Ser 2002 A (MBIA)............... 5.50 01/01/19 3,252,450 3,000 State Service Contract Ser 2002 B (MBIA)............... 5.50 07/01/20 3,237,750 3,000 Triborough Bridge & Tunnel Authority, New York, Ser 2001 A...................................................... 5.00 01/01/32 3,001,980 - -------- ------------- 46,250 49,216,215 - -------- ------------- Water & Sewer Revenue (24.9%) 2,000 Birmingham, Alabama, Water & Sewer Ser 1998 A............ 4.75 01/01/21 1,959,340 2,000 Martin County, Florida, Utilities Ser 2001............... 5.00 10/01/26 2,017,040 8,000 Tampa Bay Water, Florida, Ser 2001 B (FGIC).............. 5.00 10/01/31 8,033,920 Louisville & Jefferson County Metropolitan Sewer District, Kentucky, 2,925 Ser 2001 A (MBIA)...................................... 5.375 05/15/20 3,094,855 3,075 Ser 2001 A (MBIA)...................................... 5.375 05/15/21 3,230,318 5,000 Ser 1999 A (FGIC)...................................... 5.75 05/15/33 5,425,700 1,585 Massachusetts Water Resources Authority, 2000 Ser A (FGIC)................................................. 6.00 08/01/13 1,826,617 New York City Municipal Water Finance Authority, New York, 3,000 2003 Ser A............................................. 5.375 06/15/18 3,219,990 5,000 1998 Ser D (MBIA)...................................... 4.75 06/15/25 4,864,550 5,000 2002 Ser G............................................. 5.00 06/15/34 4,998,900 7,500 Portland, Oregon, Sewer 2000 Ser A (FGIC)................ 5.75 08/01/19 8,142,900 7,000 Charleston, South Carolina, Refg Cap Impr Ser 1998 (FGIC)................................................. 4.50 01/01/24 6,554,380 10,000 Houston, Texas, Water & Sewer Jr Lien Refg Ser 2000 B (FGIC)................................................. 5.25 12/01/30 10,184,100 - -------- ------------- 62,085 63,552,610 - -------- -------------
See Notes to Financial Statements 11 Morgan Stanley Quality Municipal Investment Trust PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2002 continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------- Other Revenue (5.1%) $ 2,000 New York City Transitional Finance Authority, New York, Refg 2003 Ser A........................................ 5.50% 11/01/26 $ 2,216,900 10,000 New York Local Government Assistance Corporation, New York, Ser 1995 A....................................... 6.00 04/01/24 10,644,900 - -------- ------------- 12,000 12,861,800 - -------- ------------- Refunded (10.4%) 7,000 Hawaii, Airports Second Ser of 1991 (AMT) (ETM).......... 6.90 07/01/12 8,410,570 Massachusetts, 10,000 Ser 2000 C............................................. 5.75 10/01/10+ 11,551,200 3,000 2002 Ser B (FSA)....................................... 5.50 03/01/12+ 3,420,210 3,000 Salt Lake City, Utah, IHC Hospitals Inc Refg Ser 1991 (Ambac) (ETM).......................................... 11.624++ 05/15/20 3,136,560 - -------- ------------- 23,000 26,518,540 - -------- ------------- 323,710 Total Tax-Exempt Municipal Bonds (Cost $318,328,451)......................... 334,759,728 - -------- ------------- Short-Term Tax-Exempt Municipal Obligations (7.5%) 6,300 Massachusetts Development Finance Agency, Boston University Ser 2002 R-4 B (Demand 11/01/02)............ 1.69* 10/01/42 6,300,000 10,000 Montgomery County Industrial Development Authority, Pennsylvania, Ser 1989................................. 7.50 01/01/12++ 10,078,700 2,700 Lincoln County, Wyoming, Exxon Corp Ser 1984 D (Demand 11/01/02).............................................. 1.89* 11/01/14 2,700,000 - -------- ------------- 19,000 Total Short-Term Tax-Exempt Municipal Obligations (Cost $19,000,000)......... 19,078,700 - -------- ------------- $342,710 Total Investments (Cost $337,328,451) (a)................... 138.9% 353,838,428 ======== Other Assets in Excess of Liabilities....................... 2.3 5,881,947 Preferred Shares of Beneficial Interest..................... (41.2) (105,121,240) ----- ------------- Net Assets Applicable to Common Shareholders................ 100.0% $ 254,599,135 ===== =============
See Notes to Financial Statements 12 Morgan Stanley Quality Municipal Investment Trust PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2002 continued - --------------------- Note: The categories of investments are shown as a percentage of net assets applicable to common shareholders. AMT Alternative Minimum Tax. ETM Escrowed to Maturity. PSF Texas Permanent School Fund Guarantee Program. + Refunded to call date shown. ++ Entire maturity to be called at 100 on 01/02/03. ++ Current coupon rate for residual interest bonds. This rate resets periodically as the auction rate on the related short-term securities fluctuates. * 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 $17,721,577 and the aggregate gross unrealized depreciation is $1,211,600, resulting in net unrealized appreciation of $16,509,977. Bond Insurance: Ambac Ambac Assurance Corporation. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation.
Geographic Summary of Investments Based on Market Value as a Percent of Net Assets Applicable to Common Shareholders Alabama................ 0.8% Alaska................. 2.8 Arizona................ 2.0 Colorado............... 2.6 Connecticut............ 3.9 District of Columbia... 0.5 Florida................ 14.0 Georgia................ 8.7 Hawaii................. 6.7 Illinois............... 9.0 Indiana................ 1.4 Kentucky............... 4.6 Maryland............... 3.9 Massachusetts.......... 11.0 Michigan............... 1.4 Minnesota.............. 2.2 New Hampshire.......... 0.6 New Jersey............. 10.5 New York............... 15.6 North Carolina......... 3.3 Ohio................... 1.3 Oregon................. 3.7 Pennsylvania........... 4.0 South Carolina......... 9.1 Texas.................. 12.6 Utah................... 1.6 Wyoming................ 1.1 ----- Total.................. 138.9% =====
See Notes to Financial Statements 13 Morgan Stanley Quality Municipal Investment Trust FINANCIAL STATEMENTS Statement of Assets and Liabilities October 31, 2002 Assets: Investments in securities, at value (cost $337,328,451)............... $353,838,428 Cash................................ 64,642 Interest receivable................. 5,414,843 Prepaid expenses.................... 697,437 ------------ Total Assets.................... 360,015,350 ------------ Liabilities: Payable for: Investment management fee....... 118,650 Common shares of beneficial interest repurchased.......... 63,229 Accrued expenses.................... 113,096 ------------ Total Liabilities............... 294,975 ------------ Preferred shares of beneficial interest (at liquidation value), (1,000,000 shares authorized of non-participating $.01 par value, 2,100 shares outstanding)......... 105,121,240 ------------ Net Assets Applicable to Common Shareholders.................. $254,599,135 ============ Composition of Net Assets Applicable to Common Shareholders: Common shares of beneficial interest (unlimited shares authorized of $.01 par value, 16,716,613 shares outstanding)...................... $233,378,959 Net unrealized appreciation......... 16,509,977 Accumulated undistributed net investment income................. 3,160,924 Accumulated undistributed net realized gain..................... 1,549,275 ------------ Net Assets Applicable to Common Shareholders.................. $254,599,135 ============ Net Asset Value Per Common Share ($254,599,135 divided by 16,716,613 common shares outstanding)...................... $15.23 ============
Statement of Operations For the year ended October 31, 2002 Net Investment Income: Interest Income...................... $19,860,804 ----------- Expenses Investment management fee............ 1,252,200 Auction commission fees.............. 308,217 Transfer agent fees and expenses..... 79,893 Professional fees.................... 65,447 Shareholder reports and notices...... 27,218 Registration fees.................... 19,673 Trustees' fees and expenses.......... 19,326 Auction agent fees................... 17,499 Custodian fees....................... 16,478 Other................................ 25,237 ----------- Total Expenses................... 1,831,188 Less: expense offset................. (16,416) ----------- Net Expenses..................... 1,814,772 ----------- Net Investment Income............ 18,046,032 ----------- Net Realized and Unrealized Gain (Loss): Net realized gain.................... 1,520,550 Net change in unrealized appreciation....................... (806,164) ----------- Net Gain......................... 714,386 ----------- Dividends to preferred shareholders from net investment income......... (2,172,919) ----------- Net Increase......................... $16,587,499 ===========
See Notes to Financial Statements 14 Morgan Stanley Quality Municipal Investment Trust FINANCIAL STATEMENTS continued
Statement of Changes in Net Assets FOR THE YEAR FOR THE YEAR ENDED ENDED OCTOBER 31, 2002 OCTOBER 31, 2001 ------------ ------------ Increase (Decrease) in Net Assets: Operations: Net investment income....................................... $ 18,046,032 $ 19,749,450 Net realized gain........................................... 1,520,550 2,327,707 Net change in unrealized appreciation....................... (806,164) 8,755,538 Dividends to preferred shareholders from net investment income.................................................... (2,172,919) (3,673,195) ------------ ------------ Net Increase............................................ 16,587,499 27,159,500 ------------ ------------ Dividends and Distributions to Common Shareholders from: Net investment income....................................... (15,680,616) (15,673,883) Net realized gain*.......................................... (2,327,706) (237,896) ------------ ------------ Total Dividends and Distributions....................... (18,008,322) (15,911,779) ------------ ------------ Decrease from transactions in common shares of beneficial interest.................................................. (1,798,675) (817,860) ------------ ------------ Net Increase (Decrease)................................. (3,219,498) 10,429,861 Net Assets: Beginning of period......................................... 257,818,633 247,388,772 ------------ ------------ End of Period (Including accumulated undistributed net investment income of $3,160,924 and $2,920,177, respectively)................. $254,599,135 $257,818,633 ============ ============ - --------------------- * Includes short-term capital gains of $ 310,272 $ -- ============ ============
See Notes to Financial Statements 15 Morgan Stanley Quality Municipal Investment Trust NOTES TO FINANCIAL STATEMENTS - OCTOBER 31, 2002 1. ORGANIZATION AND ACCOUNTING POLICIES Morgan Stanley 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 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 uses both a computerized matrix of tax-exempt securities and evaluations by its staff, in each case based on information concerning market transactions and quotations from dealers which reflect the bid side of the market each day. The portfolio securities are thus valued by reference to a combination of transactions and quotations for the same or other securities believed to be comparable in quality, coupon, maturity, type of issue, call provisions, trading characteristics and other features deemed to be relevant. Short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost. B. Accounting for Investments -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Discounts are accreted and premiums are amortized over the life of the respective securities. Interest income is accrued daily. C. Federal Income Tax Policy -- It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable and nontaxable income to its shareholders. Accordingly, no federal income tax provision is required. D. Dividends and Distributions to Shareholders -- Dividends and distributions to shareholders are recorded 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 these differences are permanent in nature, such amounts are reclassified within the capital 16 Morgan Stanley Quality Municipal Investment Trust NOTES TO FINANCIAL STATEMENTS - OCTOBER 31, 2002 continued 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. E. Use of Estimates -- The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amounts and disclosures. Actual results could differ from those estimates. 2. INVESTMENT MANAGEMENT AGREEMENT Pursuant to an Investment Management Agreement with Morgan Stanley Investment Advisors Inc. ("the Investment Manager"), 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 including preferred shares. 3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the year ended October 31, 2002 aggregated $59,653,350 and $71,650,020, respectively. Morgan Stanley Trust, an affiliate of the Investment Manager, is the Trust's transfer agent. At October 31, 2002, the Trust had transfer agent fees and expenses payable of approximately $6,900. 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 year ended October 31, 2002 included in Trustees' fees and expenses in the Statement of Operations amounted to $7,163. At October 31, 2002, the Trust had an accrued pension liability of $52,094 which is included in accrued expenses in the Statement of Assets and Liabilities. 17 Morgan Stanley Quality Municipal Investment Trust NOTES TO FINANCIAL STATEMENTS - OCTOBER 31, 2002 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 1.90% 09/08/04 1.90% - 2.20% B 700 35,000 1.65 11/01/02 1.03 - 2.00
- --------------------- * As of October 31, 2002. ** For the year ended October 31, 2002. Subsequent to October 31, 2002 and up through December 6, 2002 the Trust paid dividends to Series A and B at rates ranging from 0.71% to 1.90% in the aggregate amount of $150,542. 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. 18 Morgan Stanley Quality Municipal Investment Trust NOTES TO FINANCIAL STATEMENTS - OCTOBER 31, 2002 continued 5. COMMON SHARES OF BENEFICIAL INTEREST Transactions in common shares of beneficial interest were as follows:
CAPITAL PAID IN PAR EXCESS OF SHARES VALUE PAR VALUE ---------- -------- ------------ Balance, October 31, 2000................................... 16,899,913 $168,999 $235,826,495 Treasury shares purchased and retired (weighted average discount 6.22%)*.......................................... (58,300) (583) (817,277) ---------- -------- ------------ Balance, October 31, 2001................................... 16,841,613 168,416 235,009,218 Treasury shares purchased and retired (weighted average discount 5.95%)*.......................................... (125,000) (1,250) (1,797,425) ---------- -------- ------------ Balance, October 31, 2002................................... 16,716,613 $167,166 $233,211,793 ========== ======== ============
- --------------------- * The Trustees have voted to retire the shares purchased. 6. FEDERAL INCOME TAX STATUS As of October 31, 2002, the Trust had temporary book/tax differences primarily attributable to book amortization of discount on debt securities and dividend payable and permanent book/tax differences attributable to tax adjustments on debt securities sold by the Trust. To reflect reclassifications arising from the permanent differences, accumulated undistributed net investment income was charged and accumulated net realized gain was credited $28,738. 7. DIVIDENDS TO COMMON SHAREHOLDERS On September 24, 2002, the Trust declared the following dividends from net investment income:
AMOUNT RECORD PAYABLE PER SHARE DATE DATE - --------- ---------------- ----------------- $0.08 November 8, 2002 November 22, 2002 $0.08 December 6, 2002 December 20, 2002
8. EXPENSE OFFSET The expense offset represents a reduction of the custodian fees for earnings on cash balances maintained by the Trust. 9. 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. 19 Morgan Stanley Quality Municipal Investment Trust NOTES TO FINANCIAL STATEMENTS - OCTOBER 31, 2002 continued At October 31, 2002, the Trust held positions in residual interest bonds having a total value of $5,617,320, which represents 2.2% of the Trust's net assets applicable to common shareholders. 10. CHANGE IN ACCOUNTING POLICY Effective November 1, 2001, the Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies, as revised, related to premiums and discounts on debt securities. The cumulative effect of this accounting change had no impact on the net assets of the Trust, but resulted in a $76,988 increase to the cost of securities and a corresponding increase to undistributed net investment income based on securities held as of October 31, 2001. The effect of this change for the year ended October 31, 2002 was to increase net investment income by $63,733; decrease unrealized appreciation by $34,995; and decrease net realized gains by $28,738. The Statement of Changes in Net Assets and the Financial Highlights for prior periods have not been resulted to reflect this change. 11. CHANGE IN FINANCIAL STATEMENT CLASSIFICATION FOR PREFERRED SHARES In accordance with the provisions of EITF D-98, "Classification and Measurement of Redeemable Securities", effective for the current reporting period, the Trust has reclassified its Preferred Shares out of the composition of net assets section on the Statement of Assets and Liabilities. In addition, dividends to preferred shareholders are now classified as a component of operations on the Statement of Operations, the Statement of Changes in Net Assets and the Financial Highlights. Additionally, the categories of investments on the Portfolio of Investments are shown as a percentage of net assets applicable to common shareholders. Prior year amounts have been reclassified to conform to this period's presentation. This change has no impact on the net assets applicable to common shareholders of the Trust. 20 Morgan Stanley 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 YEAR ENDED OCTOBER 31 --------------------------------------------------------- 2002 2001 2000 1999 1998 --------- --------- --------- --------- --------- Selected Per Share Data: Net asset value, beginning of period....................... $15.31 $14.64 $ 14.35 $15.66 $15.50 ------ ------ ------- ------ ------ Income (loss) from investment operations: Net investment income*................................. 1.07 1.17 1.18 1.16 1.19 Net realized and unrealized gain (loss)................ 0.04 0.66 0.23 (1.28) 0.15 Common share equivalent of dividends paid to preferred shareholders*........................................ (0.13) (0.22) (0.25) (0.20) (0.21) ------ ------ ------- ------ ------ Total income (loss) from investment operations............. 0.98 1.61 1.16 (0.32) 1.13 ------ ------ ------- ------ ------ Less dividends and distributions from: Net investment income.................................. (0.93) (0.93) (0.93) (0.90) (0.96) Net realized gain...................................... (0.14) (0.01) -- (0.11) (0.01) ------ ------ ------- ------ ------ Total dividends and distributions.......................... (1.07) (0.94) (0.93) (1.01) (0.97) ------ ------ ------- ------ ------ Anti-dilutive effect of acquiring treasury shares*......... 0.01 -- 0.06 0.02 -- ------ ------ ------- ------ ------ Net asset value, end of period............................. $15.23 $15.31 $ 14.64 $14.35 $15.66 ====== ====== ======= ====== ====== Market value, end of period................................ $14.08 $15.08 $13.688 $13.00 $15.50 ====== ====== ======= ====== ====== Total Return+.............................................. 0.52% 17.52% 12.84% (10.12)% 7.71% Ratios to Average Net Assets of Common Shareholders: Expenses (before expense offset)........................... 0.73%(1) 0.74%(1) 0.75% 0.71% 0.71%(1) Net investment income before preferred stock dividends..... 7.15%(2) 7.83% 8.18% 7.66% 7.65% Preferred stock dividends.................................. 0.86% 1.46% 1.74% 1.34% 1.37% Net investment income available to common shareholders..... 6.29%(2) 6.37% 6.44% 6.32% 6.28% Supplemental Data: Net assets applicable to common shareholders, end of period, in thousands...................................... $254,599 $257,819 $247,389 $253,633 $282,612 Asset coverage on preferred shares at end of period........ 342% 345% 335% 341% 369% Portfolio turnover rate.................................... 17% 23% 20% 8% 9%
- --------------------- * The per share amounts were computed using an average number of common 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) Does not reflect the effect of expense offset of 0.01%. (2) Effective November 1, 2001, the Trust has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies, as revised, related to premiums and discounts on debt securities. The effect of this change for the year ended October 31, 2002 was to increase the ratio of net investment income to average net assets by 0.03%. The Financial Highlights data presented in this table for prior periods has not has not been restated to reflect this change.
See Notes to Financial Statements 21 Morgan Stanley Quality Municipal Investment Trust INDEPENDENT AUDITORS' REPORT To the Shareholders and Board of Trustees of Morgan Stanley Quality Municipal Investment Trust: We have audited the accompanying statement of assets and liabilities of Morgan Stanley Quality Municipal Investment Trust (the "Trust"), including the portfolio of investments, as of October 31, 2002, and the related statements of operations for the year then ended and changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2002, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Morgan Stanley Quality Municipal Investment Trust as of October 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP New York, New York December 9, 2002 ------------------------------------------------------------------------ 2002 FEDERAL TAX NOTICE (UNAUDITED) During the year ended October 31, 2002, the Trust paid the following per share amounts from tax-exempt income: $0.95 to common shareholders, $922 to Series A preferred shareholders and $568 to Series B preferred shareholders. For the year ended October 31, 2002, the Trust paid the following per share amounts from long-term capital gains: $0.12 to common shareholders, $169 to Series A preferred shareholders and $217 to Series B preferred shareholders. 22 Morgan Stanley Quality Municipal Investment Trust TRUSTEE AND OFFICER INFORMATION
INDEPENDENT TRUSTEES: NUMBER OF PORTFOLIOS IN FUND POSITION(S) TERM OF OFFICE COMPLEX NAME, AGE AND ADDRESS OF HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN BY INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* 5 YEARS TRUSTEE** - ------------------------------------- ----------- -------------- ----------------------------------- --- Michael Bozic (61) Trustee Since April Retired; Director or Trustee of the 129 c/o Mayer, Brown, Rowe & Maw 1994 Morgan Stanley Funds and the TCW/DW Counsel to the Independent Trustees Term Trusts; formerly Vice Chairman 1675 Broadway of Kmart Corporation (December New York, NY 1998- October 2000), Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991-July 1995); formerly variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co. Edwin J. Garn (70) Trustee Since January Director or Trustee of the Morgan 129 c/o Summit Ventures LLC 1993 Stanley Funds and the TCW/DW Term 1 Utah Center Trusts; formerly United States 201 S. Main Street Senator (R-Utah) (1974-1992) and Salt Lake City, UT Chairman, Senate Banking Committee (1980-1986); formerly Mayor of Salt Lake City, Utah (1971-1974); formerly Astronaut, Space Shuttle Discovery (April 12-19, 1985); Vice Chairman, Huntsman Corporation (chemical company); member of the Utah Regional Advisory Board of Pacific Corp. Wayne E. Hedien (68) Trustee Since Retired; Director or Trustee of the 129 c/o Mayer, Brown, Rowe & Maw September 1997 Morgan Stanley Funds and the TCW/DW Counsel to the Independent Trustees Term Trusts; formerly associated 1675 Broadway with the Allstate Companies New York, NY (1966-1994), most recently as Chairman of The Allstate Corporation (March 1993-December 1994) and Chairman and Chief Executive Officer of its wholly- owned subsidiary, Allstate Insurance Company (July 1989-December 1994). NAME, AGE AND ADDRESS OF INDEPENDENT TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE - ------------------------------------- ----------------------------------- Michael Bozic (61) Director of Weirton Steel c/o Mayer, Brown, Rowe & Maw Corporation. Counsel to the Independent Trustees 1675 Broadway New York, NY Edwin J. Garn (70) Director of Franklin Covey (time c/o Summit Ventures LLC management systems), BMW Bank of 1 Utah Center North America, Inc. (industrial 201 S. Main Street loan corporation), United Space Salt Lake City, UT Alliance (joint venture between Lockheed Martin and the Boeing Company) and Nuskin Asia Pacific (multilevel marketing); member of the board of various civic and charitable organizations. Wayne E. Hedien (68) Director of The PMI Group Inc. c/o Mayer, Brown, Rowe & Maw (private mortgage insurance); Counsel to the Independent Trustees Trustee and Vice Chairman of The 1675 Broadway Field Museum of Natural History; New York, NY director of various other business and charitable organizations.
23 Morgan Stanley Quality Municipal Investment Trust TRUSTEE AND OFFICER INFORMATION continued
NUMBER OF PORTFOLIOS IN FUND POSITION(S) TERM OF OFFICE COMPLEX NAME, AGE AND ADDRESS OF HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN BY INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* 5 YEARS TRUSTEE** - ------------------------------------- ----------- -------------- ----------------------------------- --- Dr. Manuel H. Johnson (53) Trustee Since July Chairman of the Audit Committee and 129 c/o Johnson Smick International, Inc. 1991 Director or Trustee of the Morgan 1133 Connecticut Avenue, N.W. Stanley Funds and the TCW/DW Term Washington, D.C. Trusts; Senior Partner, Johnson Smick International, Inc., a consulting firm; Co-Chairman and a founder of the Group of Seven Council (G7C), an international economic commission; formerly Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury. Michael E. Nugent (66) Trustee Since July Chairman of the Insurance Committee 207 c/o Triumph Capital, L.P. 1991 and Director or Trustee of the 237 Park Avenue Morgan Stanley Funds and the TCW/DW New York, NY Term Trusts; director/trustee of various investment companies managed by Morgan Stanley Investment Management Inc. and Morgan Stanley Investments LP (since July 2001); General Partner, Triumph Capital, L.P., a private investment partnership; formerly Vice President, Bankers Trust Company and BT Capital Corporation (1984-1988). NAME, AGE AND ADDRESS OF INDEPENDENT TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE - ------------------------------------- ----------------------------------- Dr. Manuel H. Johnson (53) Director of NVR, Inc. (home c/o Johnson Smick International, Inc. construction); Chairman and Trustee 1133 Connecticut Avenue, N.W. of the Financial Accounting Washington, D.C. Foundation (oversight organization of the Financial Accounting Standards Board). Michael E. Nugent (66) Director of various business c/o Triumph Capital, L.P. organizations. 237 Park Avenue New York, NY
24 Morgan Stanley Quality Municipal Investment Trust TRUSTEE AND OFFICER INFORMATION continued
INTERESTED TRUSTEES: NUMBER OF PORTFOLIOS IN FUND POSITION(S) TERM OF OFFICE COMPLEX NAME, AGE AND ADDRESS OF HELD WITH AND LENGTH OF OVERSEEN BY INTERESTED TRUSTEE REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS TRUSTEE** - ------------------------------ --------------------- -------------- ------------------------------------------- --- Charles A. Fiumefreddo (69) Chairman and Trustee Since July Chairman and Trustee of the Morgan Stanley 129 c/o Morgan Stanley Trust 1991 Funds and the TCW/DW Term Trusts; formerly Harborside Financial Center, Chairman, Chief Executive Officer and Plaza Two, Director of the Investment Manager, the Jersey City, NJ Distributor and Morgan Stanley Services, Executive Vice President and Director of Morgan Stanley DW, Chairman and Director of the Transfer Agent, and Director and/or officer of various Morgan Stanley subsidiaries (until June 1998) and Chief Executive Officer of the Morgan Stanley Fund and the TCW/DW Trusts (until September 2002). James F. Higgins (54) Trustee Since June Senior Advisor of Morgan Stanley (since 129 c/o Morgan Stanley Trust 2000 August 2000); Director of the Distributor Harborside Financial Center, and Dean Witter Realty Inc.; Director or Plaza Two, Trustee of the Morgan Stanley Funds and the Jersey City, NJ TCW/DW Term Trusts (since June 2000); previously President and Chief Operating Officer of the Private Client Group of Morgan Stanley (May 1999-August 2000), President and Chief Operating Officer of Individual Securities of Morgan Stanley (February 1997-May 1999). Philip J. Purcell (59) Trustee Since April Director or Trustee of the Morgan Stanley 129 1585 Broadway 1994 Funds and the TCW/DW Term Trusts; Chairman New York, NY of the Board of Directors and Chief Executive Officer of Morgan Stanley and Morgan Stanley DW; Director of the Distributor; Chairman of the Board of Directors and Chief Executive Officer of Novus Credit Services Inc.; Director and/or officer of various Morgan Stanley subsidiaries. NAME, AGE AND ADDRESS OF OTHER DIRECTORSHIPS HELD BY INTERESTED TRUSTEE TRUSTEE - ------------------------------ -------------------------------- Charles A. Fiumefreddo (69) None c/o Morgan Stanley Trust Harborside Financial Center, Plaza Two, Jersey City, NJ James F. Higgins (54) None c/o Morgan Stanley Trust Harborside Financial Center, Plaza Two, Jersey City, NJ Philip J. Purcell (59) Director of American Airlines, 1585 Broadway Inc. and its parent company, AMR New York, NY Corporation.
- --------------------- * Each Trustee serves an indefinite term, until his or her successor is elected. ** The Fund Complex includes all open and closed-end funds (including all of their portfolios) advised by Morgan Stanley Investment Advisors Inc. and any funds that have an investment advisor that is an affiliated person of Morgan Stanley Investment Advisors Inc. (including but not limited to, Morgan Stanley Investment Management Inc., Morgan Stanley Investments LP and Van Kampen Asset Management Inc.). 25 Morgan Stanley Quality Municipal Investment Trust TRUSTEE AND OFFICER INFORMATION continued
OFFICERS: TERM OF POSITION(S) OFFICE AND NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - -------------------------------- --------------- -------------- ------------------------------------------------------------ Mitchell M. Merin (49) President and President President and Chief Operating Officer of Morgan Stanley 1221 Avenue of the Americas Chief Executive since May 1999 Investment Management (since December 1998); President, New York, NY Officer and Chief Director (since April 1997) and Chief Executive Officer Executive (since June 1998) of the Investment Manager and Morgan Officer since Stanley Services; Chairman, Chief Executive Officer and September 2002 Director of the Distributor (since June 1998); Chairman (since June 1998) and Director (since January 1998) of the Transfer Agent; Director of various Morgan Stanley subsidiaries; President (since May 1999) and Chief Executive Officer (since September 2002) of the Morgan Stanley Funds and TCW/DW Term Trusts; Trustee of various Van Kampen investment companies (since December 1999); previously Chief Strategic Officer of the Investment Manager and Morgan Stanley Services and Executive Vice President of the Distributor (April 1997-June 1998), Vice President of the Morgan Stanley Funds (May 1997-April 1999), and Executive Vice President of Morgan Stanley. Barry Fink (47) Vice President, Since February General Counsel (since May 2000) and Managing Director 1221 Avenue of the Americas Secretary and 1997 (since December 2000) of Morgan Stanley Investment New York, NY General Counsel Management; Managing Director (since December 2000), and Secretary and General Counsel (since February 1997) and Director (since July 1998) of the Investment Manager and Morgan Stanley Services; Assistant Secretary of Morgan Stanley DW; Vice President, Secretary and General Counsel of the Morgan Stanley Funds and TCW/DW Term Trusts (since February 1997); Vice President and Secretary of the Distributor; previously, Senior Vice President, Assistant Secretary and Assistant General Counsel of the Investment Manager and Morgan Stanley Services. Thomas F. Caloia (56) Treasurer Since April First Vice President and Assistant Treasurer of the c/o Morgan Stanley Trust 1989 Investment Manager, the Distributor and Morgan Stanley Harborside Financial Center, Services; Treasurer of the Morgan Stanley Funds. Plaza Two, Jersey City, NJ Ronald E. Robison (63) Vice President Since October Managing Director, Chief Administrative Officer and Director 1221 Avenue of the Americas 1998 (since February 1999) of the Investment Manager and Morgan New York, NY Stanley Services and Chief Executive Officer and Director of the Transfer Agent; previously Managing Director of the TCW Group Inc. Joseph J. McAlinden (59) Vice President Since July Managing Director and Chief Investment Officer of the 1221 Avenue of the Americas 1995 Investment Manager, Morgan Stanley Investment Management New York, NY Inc. and Morgan Stanley Investments LP; Director of the Transfer Agent, Chief Investment Officer of the Van Kampen Funds. Francis Smith (37) Vice President Since Vice President and Chief Financial Officer of the Morgan c/o Morgan Stanley Trust and Chief September 2002 Stanley Funds and the TCW/DW Term Trusts (since September Harborside Financial Center Financial 2002). Executive Director of the Investment Manager and Plaza Two, Officer Morgan Stanley Services (since December 2001). Formerly, Jersey City, NJ Vice President of the Investment Manager and Morgan Stanley Services (August 2000-November 2001), Senior Manager at PricewaterhouseCoopers LLP (January 1998-August 2000) and Associate-Fund Administration at BlackRock Financial Management (July 1996-December 1997).
26 Morgan Stanley Quality Municipal Investment Trust TRUSTEE AND OFFICER INFORMATION continued
TERM OF POSITION(S) OFFICE AND NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - -------------------------------- --------------- -------------- ------------------------------------------------------------ James F. Willison (58) Vice President Since Managing Director and Portfolio Manager of the Investment 1221 Avenue of the Americas Inception Manager and/or its investment management affiliates for over New York, New York 5 years. Joseph R. Arcieri (53) Vice President Since January Executive Director and Portfolio Manager of the Investment 1221 Avenue of the Americas 2002 Manager and/or its investment management affiliates for over New York, New York 5 years. Robert W. Wimmel (37) Vice President Since January Vice President and Portfolio Manager of the Investment 1 Parkview Plaza 2002 Manager and/or its investment management affiliates for over Oakbrook Terrace, Illinois 5 years.
- --------------------- * Each Officer serves an indefinite term, until his or her successor is elected. 27 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 OFFICERS Charles A. Fiumefreddo Chairman Mitchell M. Merin President and Chief Executive Officer Barry Fink Vice President, Secretary and General Counsel Joseph J. McAlinden Vice President Ronald E. Robison Vice President Thomas F. Caloia Treasurer Francis Smith Vice President and Chief Financial Officer 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 Investment Advisors Inc. 1221 Avenue of the Americas New York, New York 10020 MORGAN STANLEY QUALITY MUNICIPAL INVESTMENT TRUST Investments and services offered through Morgan Stanley DW Inc., member SIPC. Annual Report October 31, 2002 38570RPT-9141K02-AS-11/02 -----END PRIVACY-ENHANCED MESSAGE-----