-----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, D3gISa7qgeLxPhiaz2b+5HrJGKsiQXV9rxUrE69CxvgI92HSLOw+uXpI3r+oXxEH ATdiOmNI6h3rtw7if/sYCg== 0000950123-99-005949.txt : 19990628 0000950123-99-005949.hdr.sgml : 19990628 ACCESSION NUMBER: 0000950123-99-005949 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990430 FILED AS OF DATE: 19990625 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUS CENTRAL INDEX KEY: 0000876982 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06346 FILM NUMBER: 99652044 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123922550 FORMER COMPANY: FORMER CONFORMED NAME: INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST DATE OF NAME CHANGE: 19920929 N-30D 1 QUALITY MUNICIPAL INVESTMENT TRUST 1 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST Two World Trade Center LETTER TO THE SHAREHOLDERS April 30, 1999 New York, New York 10048 DEAR SHAREHOLDER: We are pleased to present the semiannual report on the operations of Morgan Stanley Dean Witter Quality Municipal Investment Trust (IQT) for the period ended April 30, 1999. The financial markets have begun to recover from last year's global economic difficulties. The turmoil which included the Asian crisis, the Russian debt default and the rescue of a major U.S. hedge fund has given way to more normal financial conditions. The major catalyst for this return to stability was the liquidity provided by the Federal Reserve Board's 75 basis point reduction in the federal-funds rate during the fourth quarter of 1998. International economic problems precipitated a "flight to quality" rally in fixed income securities and U.S. Treasury yields reached 30-year lows in October 1998. As the world markets recovered, foreign investors repatriated funds and Treasury yields began to rise. Interest rates also rose in response to the surprisingly robust domestic economic growth reported over the second half of 1998. The bond market became concerned that the central bank might become more restrictive by taking back some of the liquidity provided during the crisis. MUNICIPAL MARKET CONDITIONS During 1998, municipal yields were less volatile than Treasury yields. This pattern of stability continued into 1999. Long-term insured index yields stood at 5.25 percent at the end of April, only 20 basis points higher than their October 1998 levels. In contrast, Treasury bond yields rose 50 basis points from 5.15 to 5.65 percent. During the past six months, the yield pick up for extending tax-exempt maturities from one to 30 years averaged 225 basis points. The modest rally of municipals during 1998 created a favorable relative value relationship to Treasuries. Municipals underperformed Treasuries and the ratio of municipal yields to Treasury yields climbed to 99 percent by December. The higher the ratio, the more attractive municipals are 2 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST LETTER TO THE SHAREHOLDERS April 30, 1999, continued relative to Treasuries. Municipals have outperformed Treasuries this year and the ratio declined to 92 percent by April. The high-to-low annual range of municipal/Treasury yields for the past five years has averaged 93 to 84 percent. In addition to lagging 1998's Treasury rally, municipals also experienced a glut of new-issue supply. Underwriting volume of $284 billion was up 28 percent from the prior year and approached 1993's record. Issuers actively refinanced at lower interest rates and refundings were 29 percent of the total volume. This year's rise in interest rates has reduced the amount of refunding activity. Refunding volume was down 42 percent in the first four months of 1999 while total underwriting declined 22 percent. PERFORMANCE The Trust's net asset value (NAV) decreased from $15.66 to $15.38 per share for the six-month period ended April 30, 1999. Based on this change plus reinvestment of tax-free dividends totaling $0.45 per share and a long-term capital gains distribution of $0.11 per share paid on December 18, 1998, the Trust's total NAV return was 1.85 percent. The IQT's value on the New York Stock Exchange 30-YEAR BOND YIELDS 1994-1999
Insured Municipal Yields 30-Year Insured 30-Year U.S. as a Percentage Municipal Yields Treasury Yields of U.S. Treasury Yields ---------------- --------------- ----------------------- 1994 5.40% 6.34% 85.17% 5.40 6.24 86.54 5.80 6.66 87.09 6.40 7.09 90.27 6.35 7.32 86.75 6.25 7.43 84.12 6.50 7.61 85.41 6.25 7.39 84.57 6.30 7.45 84.56 6.55 7.81 83.87 6.75 7.96 84.80 7.00 8.00 87.50 6.75 7.88 85.66 1995 6.40 7.70 83.12 6.15 7.44 82.66 6.15 7.43 82.77 6.20 7.34 84.47 5.80 6.66 87.09 6.10 6.62 92.15 6.10 6.86 88.92 6.00 6.66 90.09 5.95 6.48 91.82 5.75 6.33 90.84 5.50 6.14 89.58 5.35 5.94 90.07 1996 5.40 6.03 89.55 5.60 6.46 86.69 5.85 6.66 87.84 5.95 6.89 86.36 6.05 6.99 86.55 5.90 6.89 85.63 5.85 6.97 83.93 5.90 7.11 82.98 5.70 6.93 82.25 5.65 6.64 85.09 5.50 6.35 86.61 5.60 6.63 84.46 1997 5.70 6.79 83.95 5.65 6.80 83.09 5.90 7.10 83.10 5.75 6.94 82.85 5.65 6.91 81.77 5.60 6.78 82.60 5.30 6.30 84.13 5.50 6.61 83.21 5.40 6.40 84.38 5.35 6.15 86.99 5.30 6.05 87.60 5.15 5.92 86.99 1998 5.15 5.80 88.79 5.20 5.92 87.84 5.25 5.93 88.53 5.35 5.95 89.92 5.20 5.80 89.66 5.20 5.65 92.04 5.18 5.71 90.72 5.03 5.27 95.45 4.95 5.00 99.00 5.05 5.16 97.87 5.00 5.06 98.81 5.05 5.10 99.02 1999 5.00 5.09 98.23 5.10 5.58 91.40 5.15 5.63 91.47 5.20 5.66 91.87
Source: Municipal Market Data - A Division of Thomas Financial Municipal Group 2 3 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST LETTER TO THE SHAREHOLDERS April 30, 1999, continued LARGEST SECTORS as of April 30, 1999 (% of Net Assets) [LARGEST SECTORS BAR CHART] Mortgage 21% Refunded 14% Hospital 10% IDR/PCR* 9% Transportation 8% Water & Sewer 7% General Obligation 5% Electric 5% Resource Recovery 5%
*Industrial Development/Pollution Control Revenue Portfolio structure is subject to change. CREDIT RATINGS as of April 30, 1999 (% of Total Long-Term Portfolio) [CREDIT RATINGS PIE CHART] Aaa or AAA 56% Aa or AA 21% A or A 23%
As measured by Moody's Investors Service, Inc. or Standard & Poor's Corp. Portfolio structure is subject to change. CALL STRUCTURE as of April 30, 1999 (% of Total Long-Term Portfolio) WEIGHTED AVERAGE CALL PROTECTION: 5 YEARS [CALL STRUCTURE BAR CHART]
Years Bonds Percent Callable Callable ----------- -------- 1999 0% 2000 0% 2001 52% 2002 2% 2003 5% 2004 1% 2005 11% 2006 4% 2007 4% 2008 12% 2009 2% 2010+ 7%
Portfolio structure is subject to change. 3 4 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST LETTER TO THE SHAREHOLDERS April 30, 1999, continued decreased from $15.50 per share to $14.875 per share during the same period. Based on this change plus reinvestment of tax-free dividends and long-term capital gain distribution, IQT's total market return was -0.48 percent. As of April 30, 1999, IQT's share price was a 3.28 percent discount to its NAV. Monthly dividends for the second quarter of 1999 remained $0.075 per share. The Trust's level of undistributed net investment income was $0.109 per share on April 30, 1999, versus $0.084 per share on October 31, 1998. PORTFOLIO STRUCTURE The Trust's investments were diversified among 14 long-term sectors and 61 credits. At the end of April, the portfolio's average maturity was 21 years. Portfolio duration, a measure of sensitivity to interest-rate changes, was 5.2 years. Issues in the refunded bond category comprised 14 percent of net assets. These bonds have been refinanced and will be redeemed on the dates shown in the portfolio. The accompanying charts provide current information on the portfolio's call structure, largest sectors and mix of credit ratings. 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 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 the ARPS expenses (ARPS auction rate and expenses). The greater the spread and the larger 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. During this six month period, ARPS leverage contributed approximately $0.06 per share to common share earnings. Weekly ARPS yields ranged between 2.90 and 4.75 percent. Two ARPS series totaling $105 million represented 27 percent of net assets. ARPS leverage also increases the price volatility of common shares and has the effect of extending portfolio duration. 4 5 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST LETTER TO THE SHAREHOLDERS April 30, 1999, continued LOOKING AHEAD The combination of a flight to quality and the flood of new municipal issues made the municipal-to-Treasury yield relationship more favorable late last year than it had been in the previous 10 years. Although municipals have thus far outperformed Treasuries in 1999, we believe that municipals still offer investors considerable value versus their historical relationship to Treasuries. 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. On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley Dean Witter Funds. Mr. Merin is also the President and Chief Operating Officer of Asset Management of Morgan Stanley Dean Witter & Co. and President, Chief Executive Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the Trust's Investment Manager. He also serves as Chairman, Chief Executive Officer and Director of Morgan Stanley Dean Witter Distributors Inc. and Morgan Stanley Dean Witter Trust FSB. 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 5 6 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- TAX-EXEMPT MUNICIPAL BONDS (97.8%) General Obligation (5.2%) $ 4,000 Florida Board of Education, Cap Outlay Refg 1998 Ser D...... 4.50 % 06/01/24 $ 3,630,760 10,000 Chicago School Reform Board, Illinois, Dedicated Tax Ser 1997 (AMBAC)............................................... 5.75 12/01/27 10,652,500 1,000 Michigan Municipal Bond Authority, School Ser 1998.......... 5.25 12/01/13 1,047,630 4,430 Oregon, Veterans' Welfare Ser 75............................ 6.00 04/01/27 4,647,380 - -------- ------------ 19,430 19,978,270 - -------- ------------ Educational Facilities Revenue (1.5%) 3,480 Indiana University, Student Fee Ser K (MBIA)................ 5.875 08/01/20 3,707,766 2,200 University of North Carolina, Pool Ser 1998 B (MBIA)........ 4.50 10/01/18 2,053,854 - -------- ------------ 5,680 5,761,620 - -------- ------------ Electric Revenue (4.7%) 3,190 North Carolina Municipal Power Agency #1, Catawba Ser 1992....................................................... 6.25 01/01/17 3,375,116 5,000 South Carolina Public Service Authority, Santee Cooper 1997 Refg Ser A (MBIA).......................................... 5.00 01/01/29 4,856,600 4,965 San Antonio, Texas, Electric & Gas Refg Ser 1994-A.......... 5.00 02/01/14 5,004,224 5,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary FSA)....................................................... 5.00 07/01/21 4,856,150 - -------- ------------ 18,155 18,092,090 - -------- ------------ Hospital Revenue (9.8%) 6,000 Montgomery Special Care Facilities Financing Authority, Alabama, Baptist Health Ser 1998 B (MBIA).................. 5.00 11/15/29 5,764,020 10,000 Wichita, Kansas, CSJ Health System of Wichita Inc Ser 1991....................................................... 7.00 11/15/18 10,757,400 10,000 Massachusetts Health & Educational Facilities Authority, St Elizabeth's Hospital of Boston Ser D & E (FSA)............. 6.70 08/15/21 10,764,200 3,000 Missouri Health & Educational Facilities Authority, SSM Healthcare Ser 1998 A (MBIA)............................... 5.00 06/01/22 2,931,570 5,000 New York State Dormitory Authority, Long Island Jewish Medical Center Ser 1998 (MBIA)............................. 5.00 07/01/18 4,951,000 2,180 Charlotte-Mecklenburg Hospital Authority, North Carolina, Ser 1992................................................... 6.25 01/01/20 2,327,172 - -------- ------------ 36,180 37,495,362 - -------- ------------ Industrial Development/Pollution Control Revenue (9.1%) 9,000 Hawaii Department Budget & Finance, Citizen Utilities Co 1991 Ser A & B (AMT)....................................... 6.66 11/01/21 9,624,780 Chicago, Illinois, 5,000 Chicago-O'Hare Int'l Airport/ Lufthansa German Airlines Inc Ser 1990 (AMT)........................................... 7.125 05/01/18 5,347,850 2,000 Peoples Gas Light & Coke Co Refg 1995 Ser A................ 6.10 06/01/25 2,165,680 4,000 New York State Energy Research & Development Authority, Brooklyn Union Gas Co 1991 Ser A & B (AMT)................. 6.952 07/01/26 4,638,640 12,000 Richland County, South Carolina, Union Camp Corp Ser 1991 B (AMT)...................................................... 7.125 09/01/21 12,946,200 - -------- ------------ 32,000 34,723,150 - -------- ------------
SEE NOTES TO FINANCIAL STATEMENTS 6 7 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- Mortgage Revenue -- Multi-Family (7.7%) $ 10,000 Illinois Housing Development Authority, 1991 Ser A.......... 8.25 % 07/01/16 $ 10,916,300 15,000 New Jersey Housing & Mortgage Finance Agency, Presidential Plaza at Newport-FHA Insured Mortgages Refg 1991 Ser 1..... 7.00 05/01/30 16,254,600 1,970 New York State Housing Finance Agency, 1996 Ser A Refg (FSA)...................................................... 6.10 11/01/15 2,133,116 - -------- ------------ 26,970 29,304,016 - -------- ------------ Mortgage Revenue -- Single Family (13.5%) 600 Alaska Housing Finance Agency, Housing GNMA Collateralized 1990 Ser A Subser A-2...................................... 7.05 06/01/25 636,180 5,305 California Housing Finance Agency, Home 1991 Ser G (AMT).... 7.05 08/01/27 5,569,136 7,585 Colorado Housing Finance Authority, Refg 1991 Ser A......... 7.25 11/01/31 7,976,538 1,420 District of Columbia Housing Finance Agency, GNMA Collateralized Ser 1990 B (AMT)............................ 7.10 12/01/24 1,490,233 4,635 Maine Housing Authority, Purchase 1988 Ser D-6 (AMT)........ 7.25 11/15/19 4,864,989 1,790 Michigan Housing Development Authority, 1991 Ser B.......... 6.95 12/01/20 1,880,109 6,800 Nebraska Investment Finance Authority, GNMA-Backed 1991 Ser A & B (AMT)................................................ 7.025 09/15/23 7,159,652 3,335 New Hampshire Housing Finance Authority, Residential 1991 Ser D (AMT)................................................ 7.25 07/01/15 3,486,609 Ohio Housing Finance Agency, 4,250 GNMA-Backed Ser A 1 & 2 (AMT).............................. 6.903 03/24/31 4,474,740 1,990 Residential 1996 Ser B-2 (AMT)............................. 6.10 09/01/28 2,107,509 4,500 Tennessee Housing Development Agency, Homeownership Issue T (AMT)...................................................... 7.375 07/01/23 4,709,295 3,820 Virginia Housing Development Authority, 1992 Ser A.......... 7.15 01/01/33 3,993,046 3,000 Wyoming Community Development Authority, Federally Insured/Gtd Loans 1988 Ser G (AMT)......................... 7.25 06/01/21 3,190,470 - -------- ------------ 49,030 51,538,506 - -------- ------------ Nursing & Health Related Facilities Revenue (0.3%) 940 New York State Medical Care Facilities Finance Agency, - -------- Mental Health 1991 Ser C................................... 7.30 02/15/21 1,021,751 ------------ Resource Recovery Revenue (5.4%) 5,000 Northeast Maryland Waste Disposal Authority, Montgomery County Ser 1993 A (AMT).................................... 6.30 07/01/16 5,338,500 4,610 Detroit Economic Development Corporation, Michigan, Ser 1991 A (AMT) (FSA).............................................. 6.875 05/01/09 4,935,789 10,000 Montgomery County Industrial Development Authority, Pennsylvania, Ser 1989..................................... 7.50 01/01/12 10,535,000 - -------- ------------ 19,610 20,809,289 - -------- ------------ Student Loan Revenue (3.8%) 13,000 Pennsylvania Higher Education Assistance Agency, 1991 Ser A - -------- & B (AMT) (AMBAC).......................................... 6.854 09/01/26 14,438,060 ------------
SEE NOTES TO FINANCIAL STATEMENTS 7 8 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- Transportation Facilities Revenue (8.2%) $ 10,000 Hillsborough County Port District, Florida, Tampa Port Authority Spl & Refg Ser 1995 (AMT) (FSA).................. 6.00 % 06/01/20 $ 10,657,900 4,000 Lee County, Florida, Ser 1995 (MBIA)........................ 5.75 10/01/22 4,254,760 7,000 Hawaii, Airports Second Ser of 1991 (AMT)................... 6.90 07/01/12 8,324,400 3,000 Minneapolis -- St Paul Metropolitan Airports Commission, Minnesota, Ser 1998 A (AMBAC).............................. 5.00 01/01/30 2,939,850 5,000 Houston, Texas, Airport Sub Lien Ser 1991 A (AMT) (FGIC).... 6.75 07/01/21 5,364,650 - -------- ------------ 29,000 31,541,560 - -------- ------------ Water & Sewer Revenue (6.5%) 3,000 Birmingham, Alabama, Water & Sewer Ser 1998 A............... 4.75 01/01/21 2,825,520 5,470 California Department Water Resources, Central Valley Ser U.......................................................... 5.00 12/01/29 5,352,340 5,000 Massachusetts Water Pollution Abatement Trust, MWRA Loan Ser 1998 A..................................................... 4.75 08/01/18 4,810,350 5,000 New York City Water Finance Authority, New York, 1999 Ser A (FGIC)..................................................... 4.75 06/15/31 4,650,200 5,000 Charleston, South Carolina, Refg Cap Impr Ser 1998 (Secondary FGIC)........................................... 4.50 01/01/24 4,535,650 3,000 Loudoun County Sanitation Authority, Virginia, Ser 1998 (MBIA)..................................................... 4.75 01/01/30 2,798,310 - -------- ------------ 26,470 24,972,370 - -------- ------------ Other Revenue (8.1%) 10,000 New York Local Government Assistance Corporation, Ser 1995 A.......................................................... 6.00 04/01/24 10,827,300 15,000 Emmaus General Authority, Pennsylvania, Local Government Ser 1988 H (FGIC).............................................. 7.00 05/15/18 16,057,800 4,000 Houston, Texas, Sr Lien Hotel Occupancy Tax Refg Ser 1995 (FSA)...................................................... 5.50 07/01/15 4,140,880 - -------- ------------ 29,000 31,025,980 - -------- ------------ Refunded (14.0%) 10,000 Massachusetts Health & Educational Facilities Authority, Brigham & Woman's Hospital Ser D........................... 6.75 07/01/01+ 10,836,200 3,920 Cleveland, Ohio, Waterworks Impr Refg Ser H 1996 (MBIA)..... 5.75 01/01/06+ 4,358,530 9,000 Lorain County, Ohio, Humility of Mary Health Care Corp Ser 1991 B (ETM)............................................... 7.20 12/15/11 9,953,640 10,000 Middleburg Heights, Ohio, Southwest General Hospital Ser 1991....................................................... 7.20 08/15/01+ 10,950,900 6,000 Salt Lake City, Utah, IHC Hospitals Inc Refg Ser 1991 (AMBAC) (ETM).............................................. 6.75 05/15/20 6,446,040 10,000 Washington Public Power Supply System, Proj #1 Refg Ser 1991 A.......................................................... 6.875 07/01/01+ 10,846,700 - -------- ------------ 48,920 53,392,010 - -------- ------------ 354,385 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $350,647,794)................. 374,094,034 - -------- ------------
SEE NOTES TO FINANCIAL STATEMENTS 8 9 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------- SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (0.5%) $ 1,000 Missouri Health & Educational Facilities Authority, Washington University Ser 1996 D (Demand 05/03/99)......... 4.25*% 09/01/30 $ 1,000,000 1,000 Harris County Health Facilities Development Corporation, Texas, Methodist Hospital Ser 1994 (Demand 05/03/99)....... 4.30* 12/01/25 1,000,000 - -------- ------------ 2,000 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS - -------- (Identified Cost $2,000,000).................................................... 2,000,000 ------------ $356,385 TOTAL INVESTMENTS (Identified Cost $352,647,794) (a)................... 98.3% 376,094,034 ======== CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 1.7 6,406,107 ----- ------------ NET ASSETS.............................................................. 100.0% $382,500,141 ===== ============
- --------------------- AMT Alternative Minimum Tax. ETM Escrowed to maturity. + Prerefunded to call date shown. * Current coupon of variable rate demand obligation. (a) The aggregate cost for federal income tax purposes approximates identified cost. The aggregate gross unrealized appreciation is $24,140,019 and the aggregate gross unrealized depreciation is $693,779, resulting in net unrealized appreciation of $23,446,240. Bond Insurance: - --------------- AMBAC AMBAC Indemnity Corporation. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation. SEE NOTES TO FINANCIAL STATEMENTS 9 10 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 1999 (unaudited) continued GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percent of Net Assets April 30, 1999 Alabama.................. 2.2% Alaska................... 0.2 California............... 2.9 Colorado................. 2.1 District of Columbia..... 0.4 Florida.................. 4.8 Hawaii................... 4.7 Illinois................. 7.6 Indiana.................. 1.0 Kansas................... 2.8 Maine.................... 1.3 Maryland................. 1.4 Massachusetts............ 6.9 Michigan................. 2.1 Minnesota................ 0.8 Missouri................. 1.0 Nebraska................. 1.9 New Hampshire............ 0.9 New Jersey............... 4.2 New York................. 7.4 North Carolina........... 2.0 Ohio..................... 8.3 Oregon................... 1.2 Pennsylvania............. 10.7 South Carolina........... 5.8 Tennessee................ 1.2 Texas.................... 4.1 Utah..................... 3.0 Virginia................. 1.8 Washington............... 2.8 Wyoming.................. 0.8 ---- Total.................... 98.3% ====
SEE NOTES TO FINANCIAL STATEMENTS 10 11 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES April 30, 1999 (unaudited) ASSETS: Investments in securities, at value (identified cost $352,647,794)............................. $376,094,034 Cash........................................................ 206,057 Interest receivable......................................... 6,500,487 Prepaid expenses............................................ 49,755 ------------ TOTAL ASSETS............................................ 382,850,333 ------------ LIABILITIES: Payable for: Investment management fee............................... 128,932 Dividends to preferred shareholders..................... 107,394 Accrued expenses............................................ 113,866 ------------ TOTAL LIABILITIES....................................... 350,192 ------------ NET ASSETS.............................................. $382,500,141 ============ 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, 18,047,013 shares outstanding)............................................... 250,995,113 Net unrealized appreciation................................. 23,446,240 Accumulated undistributed net investment income............. 1,965,502 Accumulated undistributed net realized gain................. 1,093,286 ------------ NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS............ 277,500,141 ------------ TOTAL NET ASSETS........................................ $382,500,141 ============ NET ASSET VALUE PER COMMON SHARE ($277,500,141 divided by 18,047,013 common shares outstanding)............................................... $15.38 ======
SEE NOTES TO FINANCIAL STATEMENTS 11 12 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS For the six months ended April 30, 1999 (unaudited) NET INVESTMENT INCOME: INTEREST INCOME............................................. $11,427,133 ----------- EXPENSES Investment management fee................................... 668,908 Auction commission fees..................................... 152,040 Professional fees........................................... 48,384 Transfer agent fees and expenses............................ 37,995 Shareholder reports and notices............................. 21,819 Registration fees........................................... 12,116 Trustees' fees and expenses................................. 8,951 Auction agent fees.......................................... 8,382 Custodian fees.............................................. 8,093 Other....................................................... 10,460 ----------- TOTAL EXPENSES.......................................... 977,148 Less: expense offset........................................ (8,059) ----------- NET EXPENSES............................................ 969,089 ----------- NET INVESTMENT INCOME................................... 10,458,044 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain........................................... 1,093,286 Net change in unrealized appreciation....................... (4,635,604) ----------- NET LOSS................................................ (3,542,318) ----------- NET INCREASE................................................ $ 6,915,726 ===========
SEE NOTES TO FINANCIAL STATEMENTS 12 13 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX MONTHS ENDED FOR THE YEAR APRIL 30, ENDED 1999 OCTOBER 31, 1998 - -------------------------------------------------------------------------------------- (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................ $10,458,044 $ 21,547,513 Net realized gain.................................... 1,093,286 2,019,373 Net change in unrealized appreciation................ (4,635,604) 583,434 ------------ ------------ NET INCREASE..................................... 6,915,726 24,150,320 ------------ ------------ Dividends to preferred shareholders from net investment income................................... (1,887,493) (3,849,905) ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income................................ (8,121,034) (17,235,737) Net realized gain.................................... (2,019,370) (195,290) ------------ ------------ TOTAL DIVIDENDS AND DISTRIBUTIONS................ (10,140,404) (17,431,027) ------------ ------------ Decrease from transactions in common shares of beneficial interest................................. -- (29,810) ------------ ------------ NET INCREASE (DECREASE).......................... (5,112,171) 2,839,578 NET ASSETS: Beginning of period.................................. 387,612,312 384,772,734 ------------ ------------ END OF PERIOD (Including undistributed net investment income of $1,965,502 and $1,515,985, respectively)......... $382,500,141 $387,612,312 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 13 14 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1999 (unaudited) 1. ORGANIZATION AND ACCOUNTING POLICIES Morgan Stanley Dean Witter Quality Municipal Investment Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The Trust's investment objective is to provide current income which is exempt from federal income tax. The Trust was organized as a Massachusetts business trust on July 2, 1991 and commenced operations on September 27, 1991. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of significant accounting policies: A. VALUATION OF INVESTMENTS -- Portfolio securities are valued by an outside independent pricing service approved by the Trustees. The pricing service has informed the Trust that in valuing the portfolio securities, it uses both a computerized matrix of tax-exempt securities and evaluations by its staff, in each case based on information concerning market transactions and quotations from dealers which reflect the bid side of the market each day. The portfolio securities are thus valued by reference to a combination of transactions and quotations for the same or other securities believed to be comparable in quality, coupon, maturity, type of issue, call provisions, trading characteristics and other features deemed to be relevant. Short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost. B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. The Trust amortizes premiums and accretes discounts over the life of the respective securities. Interest income is accrued daily. C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable and nontaxable income to its shareholders. Accordingly, no federal income tax provision is required. D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends and distributions to its shareholders on the ex-dividend date. The amount of dividends and distributions from net 14 15 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1999 (unaudited) continued investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized capital gains. To the extent they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in-capital. 2. INVESTMENT MANAGEMENT AGREEMENT Pursuant to an Investment Management Agreement with Morgan Stanley Dean Witter Advisors Inc. (the "Investment Manager"), the Trust pays a management fee, calculated weekly and payable monthly, by applying the annual rate of 0.35% to the Trust's weekly net assets. Under the terms of the Agreement, in addition to managing the Trust's investments, the Investment Manager maintains certain of the Trust's books and records and furnishes, at its own expense, office space, facilities, equipment, clerical, bookkeeping and certain legal services and pays the salaries of all personnel, including officers of the Trust who are employees of the Investment Manager. The Investment Manager also bears the cost of telephone services, heat, light, power and other utilities provided to the Trust. 3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the six months ended April 30, 1999 aggregated $18,928,880 and $18,934,775, respectively. Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is the Trust's transfer agent. At April 30, 1999, the Trust had transfer agent fees and expenses payable of approximately $3,500. 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 15 16 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1999 (unaudited) continued 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, 1999 included in Trustees' fees and expenses in the Statement of Operations amounted to $2,842. At April 30, 1999, the Trust had an accrued pension liability of $41,577 which is included in accrued expenses in the Statement of Assets and Liabilities. 4. PREFERRED SHARES OF BENEFICIAL INTEREST The Trust is authorized to issue up to 1,000,000 non-participating preferred shares of beneficial interest having a par value of $.01 per share, in one or more series, with rights as determined by the Trustees, without approval of the common shareholders. The Trust has issued Series A and Series B Auction Rate Preferred Shares ("Preferred Shares") which have a liquidation value of $50,000 per share plus the redemption premium, if any, plus accumulated but unpaid dividends, whether or not declared, thereon to the date of distribution. The Trust may redeem such shares, in whole or in part, at the original purchase price of $50,000 per share plus accumulated but unpaid dividends, whether or not declared, thereon to the date of redemption. Dividends, which are cumulative, are reset through auction procedures.
AMOUNT RESET RANGE OF SERIES SHARES* IN THOUSANDS* RATE* DATE DIVIDEND RATES** - ------ ------- ------------- ----- -------- ---------------- A 1,400 $70,000 3.60% 05/05/99 2.90% - 4.75% B 700 35,000 3.50 09/03/99 3.50
- --------------------- * As of April 30, 1999. ** For the six months ended April 30, 1999. Subsequent to April 30, 1999 and up through June 4, 1999 the Trust paid dividends to Series A and B at rates ranging from 3.23% to 3.50% in the aggregate amount of $322,728. The Trust is subject to certain restrictions relating to the preferred shares. Failure to comply with these restrictions could preclude the Trust from declaring any distributions to common shareholders or purchasing common shares and/or could trigger the mandatory redemption of preferred shares at liquidation value. The preferred shares, which are entitled to one vote per share, generally vote with the common shares but vote separately as a class to elect two Trustees and on any matters affecting the rights of the preferred shares. 16 17 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1999 (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, 1997................................... 18,049,013 $180,490 $250,844,433 Treasury shares purchased and retired (weighted average discount 3.40%)*........................................... (2,000) (20) (29,790) ---------- -------- ------------ Balance, October 31, 1998 and April 30, 1999................ 18,047,013 $180,470 $250,814,643 ========== ======== ============
- --------------------- * The Trustees have voted to retire the shares purchased. 6. DIVIDENDS TO COMMON SHAREHOLDERS On March 30, 1999, the Trust declared the following dividends from net investment income:
AMOUNT RECORD PAYABLE PER SHARE DATE DATE - --------- ------------ ------------- $0.075 May 7, 1999 May 21, 1999 $0.075 June 4, 1999 June 18, 1999
17 18 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL HIGHLIGHTS Selected ratios and per share data for a common share of beneficial interest outstanding throughout each period:
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31* MONTHS ENDED ------------------------------------------------------- APRIL 30, 1999* 1998 1997 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------------------- (unaudited) SELECTED PER SHARE DATA: Net asset value, beginning of period............... $ 15.66 $15.50 $ 15.18 $ 15.31 $ 14.09 $16.53 ------- ------ ------- ------- ------- ------ Income (loss) from investment operations: Net investment income............................. 0.58 1.19 1.20 1.21 1.22 1.35 Net realized and unrealized gain (loss)........... (0.20) 0.15 0.34 0.06 1.30 (2.34) ------- ------ ------- ------- ------- ------ Total income (loss) from investment operations..... 0.38 1.34 1.54 1.27 2.52 (0.99) ------- ------ ------- ------- ------- ------ Less dividends and distributions from: Net investment income............................. (0.45) (0.96) (0.96) (1.02) (1.08) (1.23) Common share equivalent of dividends paid to preferred shareholders.......................... (0.10) (0.21) (0.22) (0.22) (0.22) (0.22) Net realized gain................................. (0.11) (0.01) (0.05) (0.16) -- -- ------- ------ ------- ------- ------- ------ Total dividends and distributions.................. (0.66) (1.18) (1.23) (1.40) (1.30) (1.45) ------- ------ ------- ------- ------- ------ Anti-dilutive effect of acquiring treasury shares............................................ -- -- 0.01 -- -- -- ------- ------ ------- ------- ------- ------ Net asset value, end of period..................... $ 15.38 $15.66 $ 15.50 $ 15.18 $ 15.31 $14.09 ======= ====== ======= ======= ======= ====== Market value, end of period........................ $14.875 $15.50 $15.313 $14.625 $14.625 $12.75 ======= ====== ======= ======= ======= ====== TOTAL RETURN+...................................... (0.48)%(1) 7.71% 12.16% 8.44% 23.76% (16.77)% RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS: Total expenses..................................... 0.70%(2) 0.71%(3) 0.71% 0.72% 0.74% 0.82% Net investment income before preferred stock dividends......................................... 7.53%(2) 7.65% 7.93% 8.02% 8.31% 8.80% Preferred stock dividends.......................... 1.36%(2) 1.37% 1.44% 1.45% 1.50% 1.40% Net investment income available to common shareholders...................................... 6.17%(2) 6.28% 6.49% 6.57% 6.81% 7.40% SUPPLEMENTAL DATA: Net assets, end of period, in thousands............ $382,500 $387,612 $384,773 $380,488 $383,920 $379,886 Asset coverage on preferred shares at end of period............................................ 364% 369% 366% 362% 365% 316% Portfolio turnover rate............................ 5%(1) 9% 5% 7% 12% 10%
- --------------------- * 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 are assumed to be reinvested at the prices obtained under the Trust's dividend reinvestment plan. Total investment return does not reflect brokerage commissions. (1) Not annualized. (2) Annualized. (3) Does not reflect the effect of expense offset of 0.01%. SEE NOTES TO FINANCIAL STATEMENTS 18 19 (This Page Intentionally Left Blank) 20 TRUSTEES - ---------------------------------- Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien Dr. Manuel H. Johnson Michael E. Nugent Philip J. Purcell John L. Schroeder OFFICERS - ---------------------------------- Charles A. Fiumefreddo Chairman and Chief Executive Officer Mitchell M. Merin President Barry Fink Vice President, Secretary and General Counsel James F. Willison Vice President Thomas F. Caloia Treasurer TRANSFER AGENT - ---------------------------------- Morgan Stanley Dean Witter Trust FSB Harborside Financial Center -- Plaza Two Jersey City, New Jersey 07311 INDEPENDENT ACCOUNTANTS - ---------------------------------- PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York 10036 INVESTMENT MANAGER - ---------------------------------- Morgan Stanley Dean Witter Advisors Inc. Two World Trade Center New York, New York 10048 The financial statements included herein have been taken from the records of the Trust without examination by the independent accountants and accordingly they do not express an opinion thereon. MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INVESTMENT TRUST Semiannual Report April 30, 1999 -----END PRIVACY-ENHANCED MESSAGE-----