-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, dUzoB1+7BAQ4jSmUQh3TN6Mx2fd97ACbi55Lz9p3oIw2x03/IS4nhHLncqrIjOPu FpaZO7MTotZfODk5F7lvow== 0000950136-95-000192.txt : 19950626 0000950136-95-000192.hdr.sgml : 19950626 ACCESSION NUMBER: 0000950136-95-000192 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950430 FILED AS OF DATE: 19950623 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST 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: 1940 Act SEC FILE NUMBER: 811-06346 FILM NUMBER: 95548902 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123922550 N-30D 1 SEMIANNUAL REPORT INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST Two World Trade Center New York, New York 10048 DEAR SHAREHOLDER: - ----------------------------------------------------------------------------- Fixed-income market conditions have steadily improved since late last year. Bonds began to rally in November 1994 on signs of slower economic growth in the wake of a progressively tighter Federal Reserve monetary policy. The recent trend toward lower long-term interest rates is in marked contrast to most of 1994 when rapidly rising rates created one of the most severe bear markets for bonds in recent history. MUNICIPAL MARKET CONDITIONS Long-term municipal bond yields, as tracked by The Bond Buyer Revenue Bond Index,* dropped from a high of 7.37 percent in November 1994 to 6.29 percent at the end of April 1995. This 108 basis point decline in yield corresponded to a 13 percent price increase for 30-year municipal bonds. Short-term municipal interest rates remained basically unchanged over the past six months. Thus, the yield spread or difference between short-term and long-term municipal bond interest rates narrowed as long-term rates declined. The seasonal demand for municipals in December more than offset the uncertainty caused by the Orange County, California bankruptcy filing. The market anticipated cash inflows from the reinvestment of coupons and the proceeds from bond calls and maturities in January at a time of scarce supply. Tax-exempt bonds outperformed U.S. Treasury bonds through February 1995. The ratio of the Revenue Bond Index yield to the 30-year U.S. Treasury yield fell from a high of 92 percent in November to 84 percent at the end of February. A declining ratio means that municipal bond prices have been stronger than U.S. Treasury prices. Tax reform proposals that advanced the concept of a flat tax were partially responsible for municipals underperforming Treasuries in March and April. By the end of April, the Revenue/Treasury yield ratio had risen to 86 percent. The pace of new-issue underwriting over the first four months of 1995 was 40 percent below the same period last year. With bond maturities and calls estimated to exceed new issues coming to market in 1995, the outstanding supply of municipal securities is expected to decline. This imbalance should continue to strengthen municipal market conditions. PERFORMANCE The net asset value (NAV) of InterCapital Quality Municipal Investment Trust (IQT) increased from $14.09 to $14.75 per share during the six-month period ended April 30, 1995. Based on this NAV change plus reinvestment of tax-free dividends totaling $0.54 per share, the Trust's total NAV return for the period was 8.79 percent. Concurrently, the Trust's market price on the New York Stock Exchange rose from $12.75 to $14.375 per share. Based on this stock price change and reinvestment of dividends, the Trust's total market return for the period was 17.24 percent. The Trust began the period trading at a 9.5 percent discount to NAV and closed at a 2.5 percent discount. - ------------ *The Bond Buyer Revenue Bond Index is an arithmetic average of the yields of 25 selected municipal revenue bonds with 30-year maturities. Credit ratings of these bonds range from Aa1 to Baa1 by Moody's and AA+ to A- by Standard & Poor's. PORTFOLIO STRUCTURE As of April 30, 1995, IQT's long-term investments were diversified among 14 specific municipal sectors and 50 issuers. The four largest sectors - mortgage revenue-single family, hospital, refunded and industrial development/pollution control - represented 55 percent of net assets. The average maturity, and call protection of the Trust's long-term holdings were 17 years and 7 years, respectively. At the end of the period, the Trust's net assets totaled approximately $374 million. The credit-quality ratings of the Trust's long-term portfolio are summarized below:
MOODY'S OR STANDARD & POOR'S RATING PERCENT - -------------------------------------- ----------- Aaa or AAA ............................ 44% Aa or AA .............................. 22 A or A ................................ 33 Baa or BBB ............................ 1
THE IMPACT OF LEVERAGING The Trust's common shares continue to be leveraged. As reported previously, leverage is created through the issuance of auction rate preferred shares (ARPS). The ARPS's auction periods normally range between one week and one year. Proceeds from ARPS underwritings are used to purchase additional long-term municipal bonds. Following the payment of ARPS dividends, the common shares earn incremental income when the portfolio yield is higher than the cost of the preferred shares (dividend plus operating and remarketing expenses). Although higher short-term interest rates have narrowed the yield spread this year, ARPS continue to provide positive incremental income to common shareholders. Leverage also impacts NAV. ARPS normally account for one-third of a leveraged fund's underwritten capital structure. This produces a volatility factor for common shares of 1.5 times the price change of bonds held in the portfolio. Since the value of the preferred shares does not fluctuate, the NAV of the common shares reflects the full market price change of the portfolio's investments. As bond prices eroded in 1994 the degree of leverage and volatility increased. The purchase and retirement of ARPS mitigated the impact of leverage. However, as bonds rallied in 1995, leverage improved performance. Over the last six months, the Trust purchased and retired $15 million in par amount of ARPS. Currently, $105 million ARPS are outstanding. Additional ARPS purchases may occur if ARPS become unprofitable (a negative yield spread) or the degree of leverage increases beyond its normal range. DIVIDEND RESERVES The monthly dividend was maintained at $0.09 per share. At the end of April 1995, the Trust had undistributed net investment income of $0.106 per share versus $0.139 per share on October 31, 1994. This dividend reserve or "cushion" helps sustain the Trust's current monthly dividend. Higher yields in future ARPS auctions and ARPS retirements may further erode the cushion. Future declines in IQT's cushion may lead to adjustment of the common-share dividend. LOOKING AHEAD Slower economic growth in 1995 and the extent of the Federal Reserve Board's previous interest rate moves have improved bond market expectations. Investor demand for municipal securities should also be sustained by significant bond maturities, calls for redemption and diminished new-issue supply. Changing market conditions and the profitability of ARPS are among the factors that will continue to determine the Trust's future level of income and influence its market price. The Trust's procedure for reinvestment of all dividends and distributions on common shares is through purchase in the open market. This method helps to 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, when appropriate, may 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. During the six-month period ended April 30, 1995, the Trust purchased 223,200 shares of common stock at a weighted average market discount of 8 percent. 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 InterCapital Quality Municipal Investment Trust and look forward to continuing to serve your investment needs. Very truly yours, /s/ Charles A. Fiumefreddo Charles A. Fiumefreddo Chairman of the Board INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 1995 (unaudited)
PRINCIPAL AMOUNT (IN COUPON MATURITY THOUSANDS) RATE DATE VALUE - ----------- ---------- ---------- -------------- MUNICIPAL BONDS (94.9%) GENERAL OBLIGATION (0.5%) $ 2,000 Seattle, Washington, Refg Ser 1993 ............................. 5.65 % 01/01/20 $ 1,838,080 - ----------- -------------- EDUCATIONAL FACILITIES REVENUE (0.6%) 2,500 Auburn University, Alabama, Ser 1993 (MBIA) .................... 5.25 06/01/13 2,281,700 - ----------- -------------- ELECTRIC REVENUE (7.7%) 5,000 North Carolina Municipal Power Agency #1, Catawba Ser 1992 .... 6.25 01/01/17 4,810,250 10,000 San Antonio, Texas, Electric & Gas Refg Ser 1994-A ............ 5.00 02/01/14 8,810,400 4,500 Intermountain Power Agency, Utah, Refg Fifth Crossover Ser .... 7.20 07/01/19 4,722,390 10,000 Washington Public Power Supply System, Proj #1 Refg Ser 1991 A 6.875 07/01/17 10,323,100 - ----------- -------------- 29,500 28,666,140 - ----------- -------------- HOSPITAL REVENUE (16.0%) 10,000 Wichita, Kansas, CSJ Health System of Wichita Inc Ser 1991 .... 7.00 11/15/18 10,153,300 Massachusetts Health & Educational Facilities Authority, 10,000 Brigham & Women's Hospital Ser D .............................. 6.75 07/01/24 10,212,500 7,000 St Elizabeth's Hospital of Boston Ser D & E (FSA) ............ 6.70 08/15/21 7,245,980 5,000 Charlotte-Mecklenburg Hospital Authority, North Carolina, Ser 1992 ........................................................... 6.25 01/01/20 5,029,350 9,000 Lorain County, Ohio, Humility of Mary Health Care Corp Ser 1991 B .............................................................. 7.20 12/15/11 9,446,400 11,000 Middleburg Heights, Ohio, Southwest General Hospital Ser 1991 . 7.20 08/15/19 11,507,650 6,000 Salt Lake City, Utah, IHC Hospitals Inc Refg Ser 1991 (AMBAC) . 6.75 05/15/20 6,209,880 - ----------- -------------- 58,000 59,805,060 - ----------- -------------- INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (8.6%) 1,000 St Lucie County, Florida, Florida Power & Light Co Ser 1991 (AMT) .......................................................... 7.15 02/01/23 1,045,780 9,000 Hawaii Department of Budget & Financing, Citizens Utilities Co 1991 Ser A & B (AMT) ........................................... 6.66 11/01/21 9,162,540 5,000 Chicago, Illinois, Chicago-O'Hare Int'l Airport/Lufthansa German Airlines Inc Ser 1990 (AMT) .................................... 7.125 05/01/18 5,151,750 4,000 New York State Energy Research & Development Authority, Brooklyn Union Gas Co 1991 Ser A & B (AMT) ..................... 6.952 07/01/26 4,189,920 12,000 Richland County, South Carolina, Union Camp Corp Ser 1991 B (AMT) .......................................................... 7.125 09/01/21 12,452,160 - ----------- -------------- 31,000 32,002,150 - ----------- -------------- MORTGAGE REVENUE - MULTI-FAMILY (7.0%) 10,000 Illinois Housing Development Authority, 1991 Ser A ............ 8.25 07/01/16 10,778,500 15,000 New Jersey Housing & Mortgage Finance Agency, Presidential Plaza at Newport - FHA Insured Mortgages Refg 1991 Ser 1 ...... 7.00 05/01/30 15,493,800 - ----------- -------------- 25,000 26,272,300 - ----------- -------------- MORTGAGE REVENUE - SINGLE FAMILY (16.2%) 6,535 California Housing Finance Agency, Home 1991 Ser G (AMT) ...... 7.05 08/01/27 6,702,231 10,790 Colorado Housing Finance Authority, Refg 1991 Ser A ........... 7.25 11/01/31 11,148,875
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 1995 (unaudited) (continued) - -------------------------------------------------------------------------------
PRINCIPAL AMOUNT (IN COUPON MATURITY THOUSANDS) RATE DATE VALUE - ----------- ---------- ---------- -------------- $ 1,100 District of Columbia Housing Finance Agency, GNMA Collateralized Ser 1990 B (AMT) ........................... 7.10 % 12/01/24 $ 1,139,171 4,635 Maine Housing Authority, Purchase 1988 Ser D-6 (AMT) .......... 7.25 11/15/19 4,804,641 3,000 Michigan Housing Development Authority, 1991 Ser B ............ 6.95 12/01/20 3,083,550 9,800 Nebraska Investment Finance Authority, GNMA-Backed 1991 Ser A & B (AMT) .......................................... 7.025 09/15/23 10,050,586 5,000 New Hampshire Housing Finance Authority, Residential 1991 Ser D (AMT) .......................................................... 7.25 07/01/15 5,192,500 5,800 Ohio Housing Finance Agency, GNMA-Backed Ser A 1 & 2 (AMT) .... 6.903 03/01/31 5,921,568 4,000 Tennessee Housing Development Agency, Homeownership Issue T (AMT) .......................................................... 7.375 07/01/23 4,164,680 5,000 Virginia Housing Development Authority, 1992 Ser A ............ 7.15 01/01/33 5,138,850 3,000 Wyoming Community Development Authority, Federally Insured/ Guaranteed Loans 1988 Ser G (AMT) .............................. 7.25 06/01/21 3,114,990 - ----------- -------------- 58,660 60,461,642 - ----------- -------------- NURSING & HEALTH RELATED FACILITIES REVENUE (5.0%) 2,700 New York State Medical Care Facilities Finance Agency, Mental Health 1991 Ser C ....................................... 7.30 02/15/21 2,875,581 15,000 Emmaus General Authority, Pennsylvania, Local Government Ser 1988 H (FGIC) .............................................. 7.00 05/15/18 15,947,250 - ----------- -------------- 17,700 18,822,831 - ----------- -------------- RESOURCE RECOVERY REVENUE (6.7%) 3,660 Broward County, Florida, SES Broward Co South Ser 1984 ........ 7.95 12/01/08 3,979,811 Detroit Economic Development Corporation, Michigan, 5,000 Ser 1991 A (AMT) (FSA) ........................................ 6.60 05/01/02 5,271,700 5,000 Ser 1991 A (AMT) (FSA) ........................................ 6.875 05/01/09 5,304,250 10,000 Montgomery County Industrial Development Authority, Pennsylvania, Ser 1989 ......................................... 7.50 01/01/12 10,518,400 - ----------- -------------- 23,660 25,074,161 - ----------- -------------- STUDENT LOAN REVENUE (3.6%) 13,000 Pennsylvania Higher Education Assistance Agency, 1991 Ser A & B (AMT) (AMBAC) .................................................. 6.854 09/01/26 13,459,680 -------------- TRANSPORTATION FACILITIES REVENUE (3.3%) 7,000 Hawaii, Airport Second Ser of 1991 (AMT) ....................... 6.90 07/01/12 7,375,550 5,000 Houston, Texas, Airport Sub Lien Ser 1991 A (AMT) (FGIC) ...... 6.75 07/01/21 5,138,200 - ----------- -------------- 12,000 12,513,750 - ----------- -------------- WATER & SEWER REVENUE (2.8%) 10,000 Seattle, Washington, Drainage & Wastewater Utility 1990 ....... 7.125 12/01/20 10,490,400 - ----------- -------------- OTHER REVENUE (2.6%) 10,000 New York Local Government Assistance Corporation, Ser 1995 A .. 6.00 04/01/24 9,666,700 -------------- REFUNDED (14.3%) 6,000 Indiana Municipal Power Agency, 1990 Ser A ..................... 7.10 01/01/15 6,614,160 7,000 Massachusetts Water Resources Authority, 1991 Ser A ........... 6.875 12/01/11 7,809,060 Regional Convention & Sports Complex Authority, Missouri, 6,000 St Louis County Ser 1991 B .................................... 7.00 08/15/21 6,685,380 5,000 State Ser 1991 A .............................................. 6.90 08/15/21 5,573,550 5,000 New York City, New York, 1991 Ser D Group C .................... 8.00 08/01/18 5,849,050
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 1995 (unaudited) (continued) - -------------------------------------------------------------------------------
PRINCIPAL AMOUNT (IN COUPON MATURITY THOUSANDS) RATE DATE VALUE - ----------- ---------- ---------- -------------- $ 5,000 New York City Municipal Water Finance Authority, New York, 1991 Ser C .................................................... 7.375% 06/15/14 $ 5,647,000 5,000 New York Local Government Assistance Corporation, Ser 1991 C .. 7.00 04/01/21 5,570,800 5,000 New York State Medical Care Facilities Finance Agency, Mental Health 1991 Ser C ....................................... 7.30 02/15/21 5,684,500 3,500 Arlington County, Virginia, The Arlington Hospital Ser 1991-A . 7.125 09/01/21 3,938,585 - ----------- -------------- 47,500 53,372,085 - ----------- -------------- 340,520 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $341,055,709) ..................................... 354,726,679 - ----------- -------------- SHORT-TERM MUNICIPAL OBLIGATIONS (3.3%) 5,100 Massachusetts, Dedicated Income Tax Ser 1990 B (Tender 05/01/95) ...................................................... 5.15* 12/01/97 5,100,000 7,100 Harris County Health Facilities Development Corporation, Texas, Methodist Hospital 1994 (Tender 05/01/95) ...................... 5.00* 12/01/25 7,100,000 - ----------- -------------- 12,200 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS (IDENTIFIED COST $12,200,000) ........ 12,200,000 - ----------- -------------- $352,720 TOTAL INVESTMENTS (IDENTIFIED COST $353,255,709) (A) ......................... 98.2% 366,926,679 =========== CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ............................... 1.8 6,793,338 ------- -------------- NET ASSETS ................................................................... 100.0 % $373,720,017 ======= ==============
- ------------ Bond Insurance: AMBAC AMBAC Indemnity Corporation. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation. AMT Alternative Minimum Tax. * Variable or floating rate securities. Coupon rate shown reflects current rate. (a) The aggregate cost for federal income tax purposes is $353,255,709; the aggregate gross unrealized appreciation is $14,949,224 and the aggregate gross unrealized depreciation is $1,278,254, resulting in net unrealized appreciation of $13,670,970. GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percent of Net Assets April 30, 1995 (unaudited)
Alabama ............. 0.6% California .......... 1.8 Colorado ............ 3.0 District of Columbia 0.3 Florida ............. 1.3 Hawaii .............. 4.4 Illinois ............ 4.3 Indiana ............. 1.8% Kansas .............. 2.7 Maine ............... 1.3 Massachusetts ....... 8.1 Michigan ............ 3.7 Missouri ............ 3.3 Nebraska ............ 2.7 New Hampshire ....... 1.4% New Jersey .......... 4.2 New York ............ 10.6 North Carolina ...... 2.6 Ohio ................ 7.2 Pennsylvania ........ 10.7 South Carolina ...... 3.3 Tennessee ........... 1.1% Texas ............... 5.6 Utah ................ 2.9 Virginia ............ 2.4 Washington .......... 6.1 Wyoming ............. 0.8 ------ Total ............... 98.2% ======
See Notes to Financial Statements INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL STATEMENTS - ----------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES April 30, 1995 (unaudited) - -----------------------------------------------------------------------------
ASSETS: Investments in securities, at value (identified cost $353,255,709) ......... $366,926,679 Cash .................................... 120,253 Interest receivable ..................... 6,781,539 Deferred organizational expenses ....... 12,685 Prepaid expenses and other assets ...... 69,650 -------------- TOTAL ASSETS .......................... 373,910,806 -------------- LIABILITIES: Investment management fee payable ...... 108,339 Accrued expenses and other payables .... 82,450 -------------- TOTAL LIABILITIES ..................... 190,789 -------------- 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, 18,217,813 shares outstanding) ........................... 253,435,960 Net unrealized appreciation ............. 13,670,970 Accumulated undistributed net investment income ................................. 1,933,860 Accumulated net realized loss ........... (320,773) -------------- NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ......................... 268,720,017 -------------- TOTAL NET ASSETS ...................... $373,720,017 ============== NET ASSET VALUE PER COMMON SHARE, ($268,720,017 divided by 18,217,813 common shares outstanding) ............. $14.75 ==============
STATEMENT OF OPERATIONS For the six months ended April 30, 1995 (unaudited) - -----------------------------------------------------------------------------
NET INVESTMENT INCOME: INTEREST INCOME ........................ $12,099,431 ------------- EXPENSES Investment management fee ............. 638,423 Auction commission fees ............... 156,328 Transfer agent fees and expenses ..... 54,950 Professional fees ..................... 50,911 Shareholder reports and notices ...... 17,895 Trustees' fees and expenses ........... 16,757 Auction agent fees .................... 15,868 Registration fees ..................... 11,035 Organizational expenses ............... 4,458 Other ................................. 13,620 ------------- TOTAL EXPENSES ....................... 980,245 ------------- NET INVESTMENT INCOME ................ 11,119,186 ------------- NET REALIZED AND UNREALIZED GAIN: Net realized gain ..................... 1,146,372 Net change in unrealized appreciation 11,139,324 ------------- NET GAIN ............................. 12,285,696 ------------- NET INCREASE ......................... $23,404,882 =============
See Notes to Financial Statements INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL STATEMENTS (continued) - ----------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - -----------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED FOR THE YEAR APRIL 30, 1995 ENDED OCTOBER (UNAUDITED) 31, 1994 ---------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income ................................................... $ 11,119,186 $ 25,125,115 Net realized gain (loss) ................................................ 1,146,372 (1,002,781) Net change in unrealized appreciation ................................... 11,139,324 (42,743,964) ---------------- ---------------- Net increase (decrease) ................................................ 23,404,882 (18,621,630) ---------------- ---------------- Dividends to shareholders from net investment income: Common .................................................................. (9,868,026) (22,878,556) Preferred ............................................................... (1,890,144) (4,001,354) ---------------- ---------------- Total .................................................................. (11,758,170) (26,879,910) ---------------- ---------------- Transactions in shares of beneficial interest: Common .................................................................. (2,812,961) (2,189,774) Preferred ............................................................... (15,000,000) (20,000,000) ---------------- ---------------- Total transactions ..................................................... (17,812,961) (22,189,774) ---------------- ---------------- Total decrease ......................................................... (6,166,249) (67,691,314) NET ASSETS: Beginning of period ...................................................... 379,886,266 447,577,580 ---------------- ---------------- END OF PERIOD (including undistributed net investment income of $1,933,860 and $2,572,844, respectively) ................................ $373,720,017 $379,886,266 ================ ================
See Notes to Financial Statements INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (unaudited) - ----------------------------------------------------------------------------- 1. ORGANIZATION AND ACCOUNTING POLICIES -- InterCapital Quality Municipal Investment Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. 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 for the Trust by an outside independent pricing service approved by the Trustees. The pricing service has informed the Trust that in valuing the Trust's portfolio securities, it uses both a computerized matrix of tax-exempt securities and evaluations by its staff, in each case based on information concerning market transactions and quotations from dealers which reflect the bid side of the market each day. The Trust's portfolio securities are thus valued by reference to a combination of transactions and quotations for the same or other securities believed to be comparable in quality, coupon, maturity, type of issue, call provisions, trading characteristics and other features deemed to be relevant. 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 on securities purchased 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 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. INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) - ----------------------------------------------------------------------------- E. Organizational Expenses -- Dean Witter InterCapital Inc. (the "Investment Manager") paid the organizational expenses of the Trust's common shares in the amount of $45,000 which have been deferred and are being amortized by the straight-line method over a period not to exceed five years from the commencement of operations. 2. INVESTMENT MANAGEMENT AGREEMENT --Pursuant to an Investment Management Agreement, the Trust pays its Investment Manager a management fee, calculated weekly and payable monthly, by applying the annual rate of 0.35% to the Trust's average weekly net assets. Under the terms of the Agreement, in addition to managing the Trust's investments, the Investment Manager maintains certain of the Trust's books and records and furnishes, 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, 1995 aggregated $9,760,000 and $36,523,002, respectively. Dean Witter Trust Company, an affiliate of the Investment Manager, is the Trust's transfer agent. At April 30, 1995, the Trust had transfer agent fees and expenses payable of approximately $7,000. The Trust adopted an unfunded noncontributory defined benefit pension plan covering all independent Trustees of the Trust who will have served as independent Trustees for at least five years at the time of retirement. Benefits under this plan are based on years of service and compensation during the last five years of service. Aggregate pension costs for the six months ended April 30, 1995, included in Trustees' fees and expenses in the Statement of Operations amounted to $6,134. At April 30, 1995, the Trust had an accrued pension liability of $15,539 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. On November 5, 1991, the Trust issued 2,800 shares of Auction Rate Preferred Shares ("Preferred Shares") consisting of 1,400 shares each of Series A and Series B for gross total proceeds of $140,000,000. The preferred shares have a liquidation value of $50,000 per share plus 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. During the six months ended April 30, 1995, the Trust purchased and retired 300 Series B shares in the amount of $15,000,000. Dividends, which are cumulative, are reset through auction procedures. INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) - -----------------------------------------------------------------------------
RESET RANGE OF SHARES SERIES RATE* DATE DIVIDEND RATES** - -------- -------- ------- --------- ---------------- 1,400 A 4.30% 5/02/95 2.92% - 4.30% 700 B 4.20 9/07/95 3.06 - 5.25 - ------------ * As of April 30, 1995. ** For the period ended April 30, 1995.
Subsequent to April 30, 1995 and up through June 9, 1995, the Trust paid dividends to Series A and B at a rate of 4.30% and rates ranging from 3.90% to 4.45%, respectively, in the aggregate amount of $484,976. 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, entitled to one vote per share, generally vote with the common shares but vote separately as a class to elect two Trustees and on any matters affecting the rights of the preferred shares. 5. COMMON SHARES OF BENEFICIAL INTEREST --Transactions in common shares of beneficial interest were as follows:
CAPITAL PAID IN EXCESS OF SHARES PAR VALUE PAR VALUE ------------ ---------- -------------- Balance, October 31, 1993 ............ 18,607,113 $186,071 $258,252,624 Treasury shares purchased and retired (weighted average discount 8.87%)* . (166,100) (1,661) (2,188,113) ------------ ---------- -------------- Balance, October 31, 1994 ............ 18,441,013 184,410 256,064,511 Treasury shares purchased and retired (weighted average discount 8.02%)* . (223,200) (2,232) (2,810,729) ------------ ---------- -------------- Balance, April 30, 1995 .............. 18,217,813 $182,178 $253,253,782 ============ ========== ============== - ------------ * The Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS -- At October 31, 1994, the Trust had a net capital loss carryover which may be used to offset future capital gains to the extent provided by regulations as follows:
AVAILABLE THROUGH OCTOBER 31, - ---------------------------------------------------------- 1999 2000 2001 2002 TOTAL - -------- --------- ---------- ------------ ----------- $4,000 $89,000 $371,000 $1,003,000 $1,467,000 ======== ========= ========== ============ ===========
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) - ----------------------------------------------------------------------------- 7. DIVIDENDS TO COMMON SHAREHOLDERS -- The Trust has declared the following dividends from net investment income:
DECLARATION AMOUNT PER RECORD PAYABLE DATE SHARE DATE DATE - -------------- ------------- --------------- -------------- April 25, 1995 $0.09 May 5, 1995 May19,1995 June 6, 1995 0.09 June 16, 1995 June 30, 1995
8. SELECTED QUARTERLY FINANCIAL DATA --
QUARTERS ENDED ------------------------------------ 4/30/95 1/31/95 ----------------- ----------------- PER PER TOTAL* SHARE TOTAL* SHARE -------- ------- -------- ------- Total investment income .......... $5,924 $0.33 $6,175 $0.33 Net investment income ............ 5,441 0.30 5,678 0.31 Net realized and unrealized gain 6,969 0.39 5,317 0.30
QUARTERS ENDED -------------------------------------------------------------------------------- 10/31/94 7/31/94 4/30/94 1/31/94 -------------------- ----------------- -------------------- ----------------- PER PER PER PER TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE ---------- -------- -------- ------- ---------- -------- -------- ------- Total investment income $6,693 $0.36 $6,791 $0.37 $6,776 $0.36 $7,198 $0.39 Net investment income . 6,120 0.33 6,231 0.34 6,195 0.33 6,579 0.35 Net realized and unrealized gain (loss) (16,393) (0.87) 2,444 0.13 (33,353) (1.79) 3,555 0.19
QUARTERS ENDED -------------------------------------------------------------------------- 10/31/93 7/31/93 4/30/93 1/31/93 ----------------- ----------------- ----------------- ----------------- PER PER PER PER TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE -------- ------- -------- ------- -------- ------- -------- ------- Total investment income $7,320 $0.39 $7,186 $0.39 $7,276 $0.39 $7,093 $0.38 Net investment income . 6,686 0.36 6,591 0.35 6,674 0.36 6,554 0.35 Net realized and unrealized gain ....... 8,711 0.47 5,165 0.28 11,117 0.60 13,099 0.70 - ------------ * Totals expressed in thousands.
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL HIGHLIGHTS - ----------------------------------------------------------------------------- Selected ratios and per share data for a common share of beneficial interest outstanding throughout each period:
FOR THE SIX FOR THE PERIOD MONTHS ENDED FOR THE YEAR ENDED OCTOBER 31, SEPTEMBER 27, 1991* APRIL 30, 1995** THROUGH OCTOBER 31, (UNAUDITED) 1994** 1993** 1992** 1991** ---------------- ---------- ---------- ---------- ------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period ........................... $ 14.09 $ 16.53 $ 14.51 $ 14.09 $ 14.06 ---------------- ---------- ---------- ---------- ------------------- Net investment income ............. 0.61 1.35 1.42 1.41 0.06 Net realized and unrealized gain (loss) ........................... 0.69 (2.34) 2.05 0.38 (0.01) ---------------- ---------- ---------- ---------- ------------------- Total from investment operations . 1.30 (0.99) 3.47 1.79 0.05 ---------------- ---------- ---------- ---------- ------------------- Less dividends and distributions from: Net investment income ............ (0.54) (1.23) (1.23) (0.97) -- Common share equivalent of dividend paid to preferred shareholders .................... (0.10) (0.22) (0.22) (0.25) -- ---------------- ---------- ---------- ---------- ------------------- Total dividends and distributions (0.64) (1.45) (1.45) (1.22) -- Offering costs charged against capital .......................... -- -- -- (0.15) (0.02) ---------------- ---------- ---------- ---------- ------------------- Net asset value, end of period ... $ 14.75 $ 14.09 $ 16.53 $ 14.51 $ 14.09 ================ ========== ========== ========== =================== Market value, end of period ...... $ 14.375 $ 12.75 $ 16.625 $ 15.00 $ 15.25 ================ ========== ========== ========== =================== TOTAL INVESTMENT RETURN+ .......... 17.24%(1) (16.77)% 19.68% 4.83% 1.67%(1) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) ................... $373,720 $379,886 $447,578 $409,916 $262,146 Ratios to average net assets of common shareholders: Total expenses ................... 0.76%(2) 0.82% 0.81% 0.79% 0.49%(2) Net investment income before preferred stock dividends ....... 8.58%(2) 8.80% 9.05% 9.64% 5.01%(2) Preferred stock dividends ........ 1.46%(2) 1.40% 1.38% 1.70% N/A%(2) Net investment income available to common shareholders .......... 7.12%(2) 7.40% 7.67% 7.94% 5.01%(2) Asset coverage on preferred shares at end of period ................. 355% 316% 320% 293% N/A% Portfolio turnover rate ........... 3%(1) 10% 3% 9% 0%(1)
- ------------ * Commencement of operations. ** The per share amounts were computed using an average number of shares outstanding during the period. + Total investment 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 investment return does not reflect sales charges or brokerage commissions. (1) Not annualized. (2) Annualized. See Notes to Financial Statements - ----------------------------------------------------------------------------- The financial statements included herein have been taken from the records of the Trust without examination by the independent accountants and accordingly they do not express an opinion thereon. TRUSTEES Jack F. Bennett Michael Bozic Charles A. Fiumefreddo Edwin J. Garn John R. Haire Dr. Manuel H. Johnson Paul Kolton Michael E. Nugent Philip J. Purcell John L. Schroeder OFFICERS Charles A. Fiumefreddo Chairman and Chief Executive Officer Sheldon Curtis Vice President, Secretary and General Counsel James F. Willison Vice President Thomas F. Caloia Treasurer TRANSFER AGENT Dean Witter Trust Company Harborside Financial Center - Plaza Two Jersey City, New Jersey 07311 INDEPENDENT ACCOUNTANTS Price Waterhouse LLP 1177 Avenue of the Americas New York, New York 10036 INVESTMENT MANAGER Dean Witter InterCapital Inc. Two World Trade Center New York, New York 10048 InterCapital Quality Municipal Investment Trust Semiannual Report April 30, 1995 -----END PRIVACY-ENHANCED MESSAGE-----