-----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, Tq1nYba+1AyY9PFdXYNTuD5ZMTJdrVYKNdvEdPvdZsQOEwB4PqDNB2+epfxvKKvF V83ecrsBuuk/CzwgNK4Ggg== 0000950136-96-000464.txt : 19960624 0000950136-96-000464.hdr.sgml : 19960624 ACCESSION NUMBER: 0000950136-96-000464 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960621 SROS: NYSE 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: 96583882 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 LETTER TO THE SHAREHOLDERS April 30, 1996 DEAR SHAREHOLDER: During the first six months of the InterCapital Quality Municipal Investment Trust's current fiscal year, interest rates initially declined, but reversed direction in February and began to move higher. Last year's favorable bond market environment was created by proposals to achieve a balanced federal budget within five to seven years and by continued easing of Federal Reserve Board monetary policy. However, budget negotiations reached a political impasse early in 1996 and federal offices were partially closed. This had an adverse impact on bonds. Concerns also developed about an increase in the pace of the economic recovery, which was marked by unexpectedly strong job growth in March and rising commodity prices. The bond market reacted to these developments by pushing yields sharply higher. MUNICIPAL MARKET CONDITIONS Long-term municipal revenue bond yields as tracked by The Bond Buyer Revenue Bond Index* moved from 6.02 percent in October 1995 to a low of 5.63 percent in January 1996. Interest rates subsequently began to rise in mid-February on signs of stronger economic growth and renewed inflationary fears. The Index yield reached 6.16 percent in April. Yields on one-year municipal notes declined from 3.82 percent to 3.70 percent over the past six months. The yield pickup for extending maturities from one-to-thirty years was 246 basis points at the end of April. The risk of flat-tax legislation had caused the ratio of Revenue Bond Index yields to 30-year U.S. Treasury bond yields to rise from 85 to 94 percent between March and September 1995. However, as the prospects of a flat tax faded, the ratio improved to 92 percent by the end of April. A declining ratio means that municipal bond prices have outperformed U.S. Treasury prices. Over the previous eight year period prior to the flat-tax debate, long-term municipal yields averaged 89 percent of U.S. Treasury yields. - ------------ * 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 Investors Service, Inc., and AA+ to A- by Standard & Poor's Corp. INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST LETTER TO THE SHAREHOLDERS April 30, 1996, continued Municipal underwriting activity was fueled by the trend of lower interest rates in 1995. Between November 1995 and April 1996, new issue volume increased 45 percent versus the same period a year ago. Despite a resurgence in underwriting, dealers have continued to withdraw from the municipal business. PERFORMANCE The Trust's net asset value (NAV) declined from $15.31 to $14.81 per share during the six-month period ended April 30, 1996. Based on this NAV change plus reinvestment of tax-free dividends totaling $0.51 per share and a long-term capital gains distribution totaling $0.17 per share, the Trust's total return was 1.31 percent. Over the same period, the Trust's market price on the New York Stock Exchange declined from $14.625 to $14.375 per share. Based on this market price change and reinvestment of tax-free dividends and distributions, the Trust's total return was 2.94 percent. The Trust began the period trading at a 4.5 percent discount to NAV and closed at a 3 percent discount. Undistributed net investment income totaled $0.040 per share on April 30, 1996 versus $0.062 per share six months ago. PORTFOLIO STRUCTURE On April 30, 1996, the Trust had $374 million in net assets diversified among 15 long-term municipal sectors and 51 credits. The five largest sectors represented 65 percent of net assets. The portfolio has consistently maintained its investment grade quality with 99 percent of its long-term holdings rated "A" or better. The average maturity and call protection of the Trust's long-term portfolio were 22 and 6 years, respectively. 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 shares depends on two factors: first, the spread between interest INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST (The chart below represents information which appears as a graphic printed report for the Five Largest Sectors as of April 30, 1996.) MUNICIPAL SECTORS PERCENT - ----------------- ------- Other 35% Mortgage 23% Refunded 12% Hospital 11% Industrial Development/Pollution Control (IDR/PCR) 11% Electric 8% A pie chart reflecting the credit quality of the portfolio as rated by Moody's or Standard & Poors Credit Ratings of total long term investments as of April 30, 1996. CREDIT RATING PERCENT - ------------- ------- Aaa or AAA 40% Aa or AA 30% A or A 29% Baa or BBB 1% INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST LETTER TO THE SHAREHOLDERS April 30, 1996, continued earned on the long-term bonds in the established portfolio of investments and the ARPS auction rate plus ARPS expenses; second, the amount of ARPS outstanding. The greater the amount of ARPS outstanding, the greater the amount of incremental income available for distribution to common shareholders. ARPS yields ranged between 3.34 and 5.50 percent during the six-months ended April 30, 1996. Over the same period, ARPS leverage contributed $0.05 per share to common share earnings. As of April 30, 1996, $105 million in ARPS were outstanding, which represented 28 percent of net assets. LOOKING AHEAD Tax-reduction proposals may receive additional publicity. However, the balance between the supply of new issues and demand created by maturities and calls for redemption should remain positive for the municipal market. Long-term municipal securities currently yield 90 percent of the yield on U.S. Treasury securities and may be expected to move in tandem with the Treasury market. The Trust's procedure for reinvestment of all dividends and distributions on common shares is through purchases 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, 1996, the Trust purchased and retired 58,900 shares of common stock at a weighted average market discount of 5.68 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, 1996 (unaudited)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------- ---------------------------------------------------------------- -------- ----------- -------------- MUNICIPAL BONDS (97.4%) General Obligation (3.0%) $ 5,000 Chicago, Illinois, Refg Ser 1995 B (FGIC) ...................... 5.125% 01/01/25 $ 4,367,450 5,000 Oregon, Veterans' Welfare Ser 75 ............................... 6.00 04/01/27 4,944,250 2,000 Seattle, Washington, Refg Ser 1993 ............................. 5.65 01/01/20 1,887,860 - ----------- -------------- 12,000 11,199,560 - ----------- -------------- Educational Facilities Revenue (1.5%) 2,500 Auburn University, Alabama, Ser 1993 (MBIA) .................... 5.25 06/01/13 2,362,400 3,480 Indiana University, Student Fee Ser K (MBIA) ................... 5.875 08/01/20 3,398,359 - ----------- -------------- 5,980 5,760,759 - ----------- -------------- Electric Revenue (7.8%) 5,000 North Carolina Municipal Power Agency #1, Catawba Ser 1992 ..... 6.25 01/01/17 4,970,800 10,000 San Antonio, Texas, Electric & Gas Refg Ser 1994-A ............. 5.00 02/01/14 8,988,600 4,500 Intermountain Power Agency, Utah, Refg Fifth Crossover Ser ..... 7.20 07/01/19 4,694,580 10,000 Washington Public Power Supply System, Proj #1 Refg Ser 1991 A . 6.875 07/01/17 10,562,200 - ----------- -------------- 29,500 29,216,180 - ----------- -------------- Hospital Revenue (11.4%) 10,000 Wichita, Kansas, CSJ Health System of Wichita Inc Ser 1991 ..... 7.00 11/15/18 10,252,100 Massachusetts Health & Educational Facilities Authority, 10,000 Brigham & Women's Hospital Ser D .............................. 6.75 07/01/24 10,284,200 7,000 St Elizabeth's Hospital of Boston Ser D & E (FSA) ............. 6.70 08/15/21 7,301,630 5,000 Charlotte-Mecklenburg Hospital Authority, North Carolina, Ser 1992 .......................................................... 6.25 01/01/20 5,063,200 9,000 Lorain County, Ohio, Humility of Mary Health Care Corp Ser 1991 B ........................................................ 7.20 12/15/11 9,584,100 - ----------- -------------- 41,000 42,485,230 - ----------- -------------- Industrial Development/Pollution Control Revenue (10.6%) 1,000 St Lucie County, Florida, Florida Power & Light Co Ser 1991 (AMT) ......................................................... 7.15 02/01/23 1,078,200 9,000 Hawaii Department of Budget & Finance, Citizens Utilities Co 1991 Ser A & B (AMT) .......................................... 6.66 11/01/21 9,217,530 5,000 Chicago, Illinois, Chicago-O'Hare Int'l Airport/Lufthansa German Airlines Inc Ser 1990 (AMT) ................................... 7.125 05/01/18 5,210,050 7,000 Chicago, Illinois, Peoples Gas Light & Coke Co Refg 1995 Ser A . 6.10 06/02/25 7,051,660 4,000 New York State Energy Research & Development Authority, Brooklyn Union Gas Co 1991 Ser A & B (AMT) ............................. 6.952 07/01/26 4,242,920 12,000 Richland County, South Carolina, Union Camp Corp Ser 1991 B (AMT) ......................................................... 7.125 09/01/21 12,846,600 - ----------- -------------- 38,000 39,646,960 - ----------- -------------- Mortgage Revenue - Multi-Family (7.1%) 10,000 Illinois Housing Development Authority, 1991 Ser A ............. 8.25 07/01/16 10,790,400 15,000 New Jersey Housing & Mortgage Finance Agency, Presidential Plaza at Newport - FHA Insured Mortgages Refg 1991 Ser 1 ............ 7.00 05/01/30 15,574,800 - ----------- -------------- 25,000 26,365,200 - ----------- -------------- SEE NOTES TO FINANCIAL STATEMENTS INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 1996 (unaudited) continued PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------- ---------------------------------------------------------------- -------- ----------- -------------- Mortgage Revenue - Single Family (16.2%) $ 6,535 California Housing Finance Agency, Home 1991 Ser G (AMT) ....... 7.05 % 08/01/27 $ 6,705,171 10,790 Colorado Housing Finance Authority, Refg 1991 Ser A ............ 7.25 11/01/31 11,238,540 1,100 District of Columbia Housing Finance Agency, GNMA Collateralized Ser 1990 B (AMT) .............................................. 7.10 12/01/24 1,129,689 4,635 Maine Housing Authority, Purchase 1988 Ser D-6 (AMT) ........... 7.25 11/15/19 4,786,565 3,000 Michigan Housing Development Authority, 1991 Ser B ............. 6.95 12/01/20 3,152,430 9,400 Nebraska Investment Finance Authority, GNMA-Backed 1991 Ser A & B (AMT) ...................................................... 7.025 09/15/23 9,684,256 4,755 New Hampshire Housing Finance Authority, Residential 1991 Ser D (AMT) ......................................................... 7.25 07/01/15 4,917,431 5,650 Ohio Housing Finance Agency, GNMA-Backed Ser A 1 & 2 (AMT) ..... 6.903 03/01/31 5,780,402 4,500 Tennessee Housing Development Agency, Homeownership Issue T (AMT) ......................................................... 7.375 07/01/23 4,654,575 5,000 Virginia Housing Development Authority, 1992 Ser A ............. 7.15 01/01/33 5,239,300 3,000 Wyoming Community Development Authority, Federally Insured/Gtd Loans 1988 Ser G (AMT) ........................................ 7.25 06/01/21 3,123,120 - ----------- -------------- 58,365 60,411,479 - ----------- -------------- Nursing & Health Related Facilities Revenue (0.8%) 2,700 New York State Medical Care Facilities Finance Agency, Mental Health 1991 Ser C ............................................. 7.30 02/15/21 2,936,034 - ----------- -------------- Public Facilities Revenue (4.3%) 15,000 Emmaus General Authority, Pennsylvania, Local Government - ----------- Ser 1988 H (FGIC) ............................................. 7.00 05/15/18 16,228,950 -------------- Resource Recovery Revenue (6.6%) 3,000 Broward County, Florida, SES Broward Co South Ser 1984 ......... 7.95 12/01/08 3,298,770 Detroit Economic Development Corporation, Michigan, 5,000 Ser 1991 A (AMT) (FSA) ........................................ 6.60 05/01/02 5,346,350 5,000 Ser 1991 A (AMT) (FSA) ........................................ 6.875 05/01/09 5,323,600 10,000 Montgomery County Industrial Development Authority, Pennsylvania, Ser 1989 ........................................ 7.50 01/01/12 10,576,100 - ----------- -------------- 23,000 24,544,820 - ----------- -------------- Student Loan Revenue (3.6%) 13,000 Pennsylvania Higher Education Assistance Agency, 1991 Ser A & B - ----------- (AMT) (AMBAC) ................................................. 6.854 09/03/26 13,562,250 -------------- Transportation Facilities Revenue (7.1%) 10,000 Hillsborough County Port District, Florida, Tampa Port Authority Spl & Refg Ser 1995 (AMT) (FSA) ............................... 6.00 06/01/20 9,836,800 4,000 Lee County, Florida, Ser 1995 (MBIA) ........................... 5.75 10/01/22 3,930,480 7,000 Hawaii, Airports Second Ser of 1991 (AMT) ...................... 6.90 07/01/12 7,592,410 5,000 Houston, Texas, Airport Sub Lien Ser 1991 A (AMT) (FGIC) ....... 6.75 07/01/21 5,215,350 - ----------- -------------- 26,000 26,575,040 - ----------- -------------- SEE NOTES TO FINANCIAL STATEMENTS INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OF INVESTMENTS April 30, 1996 (unaudited) continued PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------- ---------------------------------------------------------------- -------- ----------- -------------- Water & Sewer Revenue (1.1%) $ 5,000 Santa Rosa, California, Wastewater Refg 1996 Ser A (FGIC) ...... 4.75 % 09/01/16 $ 4,271,000 - ----------- -------------- Other Revenue (4.1%) 10,000 New York Local Government Assistance Corporation, Ser 1995 A ... 6.00 04/01/24 9,892,500 5,800 Houston, Texas, Sr Lien Hotel Occupancy Tax Refg Ser 1995 (FSA) 5.50 07/01/15 5,509,710 - ----------- -------------- 15,800 15,402,210 - ----------- -------------- Refunded (12.2%) 5,000 Massachusetts Water Resources Authority, 1991 Ser A ............ 6.875 12/01/01++ 5,608,350 5,000 New York City Municipal Water Finance Authority, New York, 1991 Ser C ......................................................... 7.375 06/15/01++ 5,662,850 5,000 New York Local Government Assistance Corporation, Ser 1991 C ... 7.00 04/01/01++ 5,600,300 10,000 Middleburg Heights, Ohio, Southwest General Hospital Ser 1991 .. 7.20 08/15/01++ 11,276,500 6,000 Salt Lake City, Utah, IHC Hospitals Inc Refg Ser 1991 (AMBAC) (ETM) ......................................................... 6.75 05/15/20 6,400,620 10,000 Seattle, Washington, Drainage & Wastewater Utility 1990 ........ 7.125 12/01/99++ 11,030,400 - ----------- -------------- 41,000 45,579,020 - ----------- -------------- 351,345 TOTAL MUNICIPAL BONDS (Identified Cost $350,041,481) ................................ 364,184,692 - ----------- -------------- SHORT-TERM MUNICIPAL OBLIGATIONS (0.8%) 2,200 Massachusetts, Dedicated Income Tax Ser 1990 B (Demand 05/01/96) 3.90* 12/01/97 2,200,000 800 Gulf Coast Waste Disposal Authority, Texas, Amoco Oil Co Ser 1992 (Demand 05/01/96) ........................................ 4.00* 10/01/17 800,000 - ----------- -------------- 3,000 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS (Identified Cost $3,000,000) ................. 3,000,000 - ----------- -------------- $354,345 TOTAL INVESTMENTS (Identified Cost $353,041,481) (a) .................... 98.2% 367,184,692 =========== CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES .......................... 1.8 6,724,351 -------------- NET ASSETS .............................................................. 100.0% $373,909,043 ==============
[FN] - ------------ AMT Alternative Minimum Tax. ETM Escrowed to Maturity. ++ Prerefunded to call date shown. * Current coupon of variable rate security. (a) The aggregate cost for federal income tax purposes approximates identified cost. The aggregate gross unrealized appreciation was $15,863,597 and the aggregate gross unrealized depreciation was $1,720,386, resulting in net unrealized appreciation of $14,143,211. 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 INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST PORTFOLIO OFINVESTMENTS April 30, 1996 (unaudited) continued Geographic Summary of Investments Based on Market Value as a Percent of Net Assets April 30, 1996
Alabama 0.6% California 2.9 Colorado 3.0 District of Columbia 0.3 Florida 4.9 Hawaii 4.5 Illinois 7.3 Indiana 0.9% Kansas 2.8 Maine 1.3 Massachusetts 6.8 Michigan 3.7 Nebraska 2.6 New Hampshire 1.3 New Jersey 4.2% New York 7.6 North Carolina 2.7 Ohio 7.1 Oregon 1.3 Pennsylvania 10.8 South Carolina 3.4 Tennessee 1.2% Texas 5.5 Utah 3.0 Virginia 1.4 Washington 6.3 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, 1996 (UNAUDITED)
ASSETS: Investments in securities, at value (identified cost $353,041,481) ....................................... $367,184,692 Cash .................................................................. 191,070 Interest receivable ................................................... 6,799,082 Deferred organizational expenses ...................................... 3,670 Prepaid expenses and other assets ..................................... 28,313 ----------- Total Assets ........................................................ 374,206,827 ----------- LIABILITIES: Payable for: Dividends to preferred shareholders ................................. 147,433 Investment management fee ........................................... 115,284 Accrued expenses and other payables ................................... 35,067 ----------- Total Liabilities ................................................... 297,784 ----------- 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, 18,153,913 shares outstanding) ....................... 252,512,270 Net unrealized appreciation ........................................... 14,143,211 Accumulated undistributed net investment income ....................... 718,556 Accumulated undistributed net realized gain ........................... 1,535,006 ----------- NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ........................ 268,909,043 ----------- TOTAL NET ASSETS .................................................... $373,909,043 =========== Net Asset Value Per Common Share ($268,909,043 divided by 18,153,913 common shares outstanding) .... $ 14.81 ===========
SEE NOTES TO FINANCIAL STATEMENTS INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL STATEMENTS, continued STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
NET INVESTMENT INCOME: INTEREST INCOME ........................ $11,928,990 -------------- EXPENSES Investment management fee .............. 669,170 Auction commission fees ................ 131,040 Transfer agent fees and expenses ...... 48,870 Professional fees ...................... 25,572 Shareholder reports and notices ....... 21,109 Trustees' fees and expenses ............ 16,792 Registration fees ...................... 12,533 Auction agent fees ..................... 8,789 Custodian fees ......................... 6,739 Organizational expenses ................ 4,483 Other .................................. 11,129 -------------- TOTAL EXPENSES BEFORE EXPENSE OFFSET 956,226 LESS: EXPENSE OFFSET ................. (6,698) -------------- TOTAL EXPENSES AFTER EXPENSE OFFSET . 949,528 -------------- NET INVESTMENT INCOME ................ 10,979,462 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain ...................... 1,535,002 Net change in unrealized appreciation . (7,262,188) -------------- NET LOSS ............................. (5,727,186) -------------- NET INCREASE ........................... $ 5,252,276 ==============
SEE NOTES TO FINANCIAL STATEMENTS INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST FINANCIAL STATEMENTS, continued STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED OCTOBER APRIL 30, 1996 31, 1995 - ------------------------------------------------- ----------------- ---------------- (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ............................ $ 10,979,462 $ 22,298,222 Net realized gain ................................ 1,535,002 4,480,093 Net change in unrealized appreciation ............ (7,262,188) 18,873,753 ------------------ ---------------- NET INCREASE ................................... 5,252,276 45,652,068 ------------------ ---------------- DIVIDENDS TO PREFERRED SHAREHOLDERS FROM NET INVESTMENT INCOME ................................ (2,129,519) (4,027,874) ------------------ ---------------- DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income ............................ (9,269,575) (19,705,004) Net realized gain ................................ (3,012,944) -- ------------------ ---------------- TOTAL .......................................... (12,282,519) (19,705,004) ------------------ ---------------- TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST: Preferred ........................................ -- (15,000,000) Common ........................................... (851,040) (2,885,611) ------------------ ---------------- TOTAL .......................................... (851,040) (17,885,611) ------------------ ---------------- TOTAL INCREASE (DECREASE) ...................... (10,010,802) 4,033,579 NET ASSETS: Beginning of period .............................. 383,919,845 379,886,266 ------------------ ---------------- END OF PERIOD (Including undistributed net investment income of $718,556 and $1,138,188, respectively) ...... $373,909,043 $383,919,845 ================== ================
SEE NOTES TO FINANCIAL STATEMENTS INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1996 (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 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 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; INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued 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. 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 reimbursed for the full amount thereof. Such expenses 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 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, 1996 aggregated $9,416,250 and $13,932,774, respectively. Dean Witter Trust Company, an affiliate of the Investment Manager, is the Trust's transfer agent. At April 30, 1996, the Trust had transfer agent fees and expenses payable of approximately $4,000. The Trust has an unfunded noncontributory defined benefit pension plan covering all independent Trustees of the Trust who will have served as independent Trustees for at least five years at the time of retirement. Benefits under this plan are based on years of service and compensation during the last five years of service. Aggregate pension costs for the six months ended April 30, 1996 included in Trustees' fees and expenses in the Statement of Operations amounted to $5,966. At April 30, 1996, the Trust had an accrued pension liability of $26,283 which is included in accrued expenses in the Statement of Assets and Liabilities. INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued 4. PREFERRED SHARES OF BENEFICIAL INTEREST The Trust is authorized to issue up to 1,000,000 non-participating preferred shares of beneficial interest having a par value of $.01 per share, in one or more series, with rights as determined by the Trustees, without approval of the common shareholders. 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. Dividends, which are cumulative, are reset through auction procedures.
RANGE OF DIVIDEND SHARES SERIES RATE* RESET DATE RATES** - -------- -------- --------- ------------ ---------------------- 1,400 A 3.825% 04/30/96 3.35% - 5.50% 700 B 3.34 09/05/96 3.34 - 3.60
[FN] - ------------ * As of April 30, 1996. ** For the six months ended April 30, 1996. Subsequent to April 30, 1996 and up through June 7, 1996, the Trust paid dividends to each of the Series A and B at rates ranging from 3.56% to 3.80% and 3.34%, respectively, in the aggregate amount of $351,631. 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. INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued 5. COMMON SHARES OF BENEFICIAL INTEREST Transactions in common shares of beneficial interest were as follows:
CAPITAL PAID PAR IN EXCESS OF SHARES VALUE PAR VALUE ------------ ---------- -------------- Balance, October 31, 1994 .............................................. 18,441,013 $184,410 $256,064,511 Treasury shares purchased and retired (weighted average discount 7.94%)* ............................................................... (228,200) (2,282) (2,883,329) ------------ ---------- -------------- Balance, October 31, 1995 .............................................. 18,212,813 182,128 253,181,182 Treasury shares purchased and retired (weighted average discount 5.68%)* ............................................................... (58,900) (589) (850,451) ------------ ---------- -------------- Balance, April 30, 1996 ................................................ 18,153,913 $181,539 $252,330,731 ============ ========== ==============
[FN] - ------------ * The Trustees have voted to retire the shares purchased. 6. FEDERAL INCOME TAX STATUS During the year ended October 31, 1995, the Trust utilitized its net capital loss carryover of approximately $1,467,000. 7. DIVIDENDS TO COMMON SHAREHOLDERS The Trust declared the following dividends from net investment income:
AMOUNT PER RECORD PAYABLE DECLARATION DATE SHARE DATE DATE - ---------------- ----------- --------------- -------------- April 23, 1996 $0.085 May 3, 1996 May 17, 1996 May 28, 1996 $0.085 June 7, 1996 June 21, 1996
SEE NOTES TO FINANCIAL STATEMENTS 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 PERIOD FOR THE SIX FOR THE YEAR ENDED OCTOBER 31 SEPTEMBER 27, 1991* MONTHS ENDED ------------------------------------------- THROUGH APRIL 30, 1996** 1995** 1994** 1993** 1992** OCTOBER 31, 1991** - --------------------------------------------------------------------------------------------------------------------------- (unaudited) PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period .... $ 15.31 $ 14.09 $16.53 $ 14.51 $14.09 $14.06 --------- -------- ------ -------- ------- ------- Net investment income ................... 0.60 1.22 1.35 1.42 1.41 0.06 Net realized and unrealized gain (loss) . (0.31) 1.30 (2.34) 2.05 0.38 (0.01) --------- -------- ------ -------- ------- ------ Total from investment operations ........ 0.29 2.52 (0.99) 3.47 1.79 0.05 -------- -------- ------ -------- ------- ------ Less dividends and distributions from: Net investment income ................. (0.51) (1.08) (1.23) (1.23) (0.97) -- Common share equivalent of dividends paid to preferred shareholders ...... (0.11) (0.22) (0.22) (0.22) (0.25) -- Net realized gain .................... (0.17) -- -- -- -- -- ------- -------- ------ -------- ------- ------ Total dividends and distributions ....... (0.79) (1.30) (1.45) (1.45) (1.22) -- Offering costs charged against capital .. -- -- -- -- (0.15) (0.02) ------- -------- ------ -------- ------ ------ Net asset value, end of period .......... $ 14.81 $ 15.31 $14.09 $ 16.53 $14.51 $14.09 ======= ======== ====== ======== ====== ====== Market value, end of period ............. $14.375 $14.625 $12.75 $16.625 $15.00 $15.25 ======= ======== ====== ======== ====== ====== TOTAL INVESTMENT RETURN+ ................ 2.94%(1) 23.76% (16.77)% 19.68% 4.83% 1.67%(1) RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS: Total expenses before expense offset .... 0.69%(2)(3) 0.74% 0.82% 0.81% 0.79% 0.49%(2) Net investment income before preferred stock dividends ....................... 7.92%(2) 8.31% 8.80% 9.05% 9.64% 5.01%(2) Preferred stock dividends ............... 1.54%(2) 1.50% 1.40% 1.38% 1.70% N/A Net investment income available to common shareholders ................... 6.38%(2) 6.81% 7.40% 7.67% 7.94% 5.01%(2) Supplemental Data: Net assets, end of period, in thousands . $373,909 $383,920 $379,886 $447,578 $409,916 $262,146 Asset coverage on preferred shares at end of period .......................... 356% 365% 316% 320% 293% N/A Portfolio turnover rate ................. 3%(1) 12% 10% 3% 9% -- %(1)
[FN] - ----------- * 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 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) The above annualized expense ratio would have been 0.68%, which reflects 0.01% effect for custody cash credits. SEE NOTES TO FINANCIAL STATEMENTS TRUSTEES - ------------------------------------------------------------ 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 The financial statements 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. INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST SEMIANNUAL REPORT APRIL 30, 1996 -----END PRIVACY-ENHANCED MESSAGE-----