-----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, HYnoc+rQa5CCE4gejKAX+i7KaMPddsr/ZZzmRVF/Fpr06iCSB8bQHswzi97YDDFQ ZIFC7qFCAAC+1nAHJjY7zw== 0000950136-01-500679.txt : 20010625 0000950136-01-500679.hdr.sgml : 20010625 ACCESSION NUMBER: 0000950136-01-500679 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010430 FILED AS OF DATE: 20010622 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST CENTRAL INDEX KEY: 0000885125 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 136993836 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06591 FILM NUMBER: 1665787 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CENTER CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123921600 FORMER COMPANY: FORMER CONFORMED NAME: INTERCAPITAL QUALITY MUNICIPAL INCOME TRUST DATE OF NAME CHANGE: 19920929 FORMER COMPANY: FORMER CONFORMED NAME: INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST II DATE OF NAME CHANGE: 19600201 N-30D 1 file001.txt ANNUAL REPORT
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST Two World Trade Center, LETTER TO THE SHAREHOLDERS April 30, 2001 New York, New York 10048
DEAR SHAREHOLDER: During the six-month period ended April 30, 2001, the U.S. economy began to show signs of a slowdown as retail sales flattened, capital spending stalled and unemployment edged upward. The stock market became more volatile and the value of many equities declined. Earlier fears about inflation were replaced with concerns over weakening asset prices. The change in market psychology was reinforced last December when comments by Federal Reserve Board Chairman Alan Greenspan indicated that the central bank was ready to switch to a bias toward easing rates if the economy continued to show weakness. These comments sparked a strong year-end rally in the fixed-income markets that lowered interest rates across the yield curve. Between January and April 2001, the Fed followed through by lowering the federal funds rate in four 50-basis-point moves from 6.50 to 4.50 percent. Subsequent to the end of the reporting period, on May 15, 2001, the Federal Reserve lowered rates an additional 50 basis points. MUNICIPAL MARKET CONDITIONS The yield of the long-term insured municipal bond index stabilized near 5.25 percent during the first three months of 2001. This level was nearly 75 basis points lower than a year ago. However, yields rose in April when economic data proved more favorable than expected. The index closed the month at a yield of 5.45 percent. As the Federal Reserve began to ease monetary policy, the yield pickup for extending tax-exempt maturities from one to 30 years jumped from 150 to 240 basis points. The California electric crisis has adversely affected California municipal bond yields. Whereas yields on California bonds were substantially lower than national levels six months ago, they were at or above national levels by the end of April. MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS APRIL 30, 2001, CONTINUED Historically, the ratios of municipal yields as a percentage of Treasury yields have been used to track the relationship between the two markets. The ratio of 30-year insured municipals to Treasuries declined slightly, to 95 percent, during the first half of the fiscal year. Over the past three years this ratio has ranged between 86 and 100 percent. Lower interest rates have led to a resurgence in new-issue supply. During the first four months of 2001, new-issue volume increased 36 percent, to $77 million. For all of calendar year 2000 total new-issue volume was $200 billion. 30-YEAR BOND YIELDS 1995-2001 Date AAA Ins Tsy % Relationship ---- ------- --- -------------- 12/30/94 6.75 7.88 85.66% 01/31/95 6.40 7.70 83.12% 02/28/95 6.15 7.44 82.66% 03/31/95 6.15 7.43 82.77% 04/28/95 6.20 7.34 84.47% 05/31/95 5.80 6.66 87.09% 06/30/95 6.10 6.62 92.15% 07/31/95 6.10 6.86 88.92% 08/31/95 6.00 6.66 90.09% 09/29/95 5.95 6.48 91.82% 10/31/95 5.75 6.33 90.84% 11/30/95 5.50 6.14 89.58% 12/29/95 5.35 5.94 90.07% 01/31/96 5.40 6.03 89.55% 02/29/96 5.60 6.46 86.69% 03/29/96 5.85 6.66 87.84% 04/30/96 5.95 6.89 86.36% 05/31/96 6.05 6.99 86.55% 06/28/96 5.90 6.89 85.63% 07/31/96 5.85 6.97 83.93% 08/30/96 5.90 7.11 82.98% 09/30/96 5.70 6.93 82.25% 10/31/96 5.65 6.64 85.09% 11/29/96 5.50 6.35 86.61% 12/31/96 5.60 6.63 84.46% 01/31/97 5.70 6.79 83.95% 02/28/97 5.65 6.80 83.09% 03/31/97 5.90 7.10 83.10% 04/30/97 5.75 6.94 82.85% 05/30/97 5.65 6.91 81.77% 06/30/97 5.60 6.78 82.60% 07/30/97 5.30 6.30 84.13% 08/31/97 5.50 6.61 83.21% 09/30/97 5.40 6.40 84.38% 10/31/97 5.35 6.15 86.99% 11/30/97 5.30 6.05 87.60% 12/31/97 5.15 5.92 86.99% 01/31/98 5.15 5.80 88.79% 02/28/98 5.20 5.92 87.84% 03/31/98 5.25 5.93 88.53% 04/30/98 5.35 5.95 89.92% 05/29/98 5.20 5.80 89.66% 06/30/98 5.20 5.65 92.04% 07/31/98 5.18 5.71 90.72% 08/31/98 5.03 5.27 95.45% 09/30/98 4.95 5.00 99.00% 10/31/98 5.05 5.16 97.87% 11/30/98 5.00 5.06 98.81% 12/31/98 5.05 5.10 99.02% 01/31/99 5.00 5.09 98.23% 02/28/99 5.10 5.58 91.40% 03/31/99 5.15 5.63 91.47% 04/30/99 5.20 5.66 91.87% 05/31/99 5.30 5.83 90.91% 06/30/99 5.47 5.96 91.78% 07/31/99 5.55 6.10 90.98% 08/31/99 5.75 6.06 94.88% 09/30/99 5.85 6.05 96.69% 10/31/99 6.03 6.16 97.89% 11/30/99 6.00 6.29 95.39% 12/31/99 5.97 6.48 92.13% 01/31/00 6.18 6.49 95.22% 02/29/00 6.04 6.14 98.37% 03/31/00 5.82 5.83 99.83% 04/30/00 5.91 5.96 99.16% 05/31/00 5.91 6.01 98.34% 06/30/00 5.84 5.90 98.98% 07/31/00 5.73 5.78 99.13% 08/31/00 5.62 5.67 99.12% 09/30/00 5.74 5.89 97.45% 10/31/00 5.65 5.79 97.58% 11/30/00 5.55 5.61 98.93% 12/31/00 5.27 5.46 96.52% 01/31/01 5.30 5.50 96.36% 02/28/01 5.27 5.31 99.25% 03/31/01 5.26 5.44 96.69% 04/30/01 5.45 5.79 94.13% SOURCE: MUNICIPAL MARKET DATA - A DIVISION OF THOMSON FINANCIAL MUNICIPAL GROUP AND BLOOMBERG L.P. PERFORMANCE During the six-month period ended April 30, 2001, the net asset value (NAV) of Morgan Stanley Dean Witter Quality Municipal Income Trust (IQI) increased from $15.22 to $15.32 per share. Based on this change, plus reinvestment of tax-free dividends totaling $0.435 per share and capital gain distributions totaling $0.1255 per share, the Trust's total NAV return was 4.71 percent. IQI's value on the New York 2 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS April 30, 2001, continued Stock Exchange (NYSE) increased from $13.3125 to $14.10 per share during this period. Based on this change plus reinvestment of distributions, IQI's total market return was 10.19 percent. As of April 30, 2001, IQI's share price was at a 7.96 percent discount to its NAV. Monthly dividends for the second quarter of 2001, declared in March, were unchanged at $0.0725 per share. The Trust's level of undistributed net investment income was $0.078 per share on April 30, 2001, versus $0.082 per share six months earlier. PORTFOLIO STRUCTURE The Trust's net assets of $671.6 million were diversified among 14 long-term sectors and 84 credits. Issues in the refunded bond category comprised 8 percent of net assets. These bonds have been refinanced and will be redeemed on the dates shown in the portfolio. At the end of April, the portfolio's average maturity was 17 years. Average duration, a measure of sensitivity to interest-rate changes, was 5.2 years. The accompanying charts provide current information on the portfolio's credit quality, maturity distribution and sector concentrations. Optional redemption provisions are also shown by year of the call and their respective cost (book) yields. THE IMPACT OF LEVERAGING As discussed in previous shareholder reports, the total income available for distribution to common shareholders includes incremental income provided by the Trust's outstanding Auction Rate Preferred shares (ARPS). ARPS dividends reflect prevailing short-term interest rates on maturities normally ranging from one week to one year. Incremental income to common shareholders depends on two factors. The first factor is the amount of ARPS outstanding, while the second is the spread between the portfolio's cost yield and ARPS expenses (ARPS auction rate and expenses). The greater the spread and amount of ARPS outstanding, the greater the amount of incremental income available for distribution to common shareholders. The level of net investment income available for distribution to common shareholders varies with the level of short-term interest rates. ARPS leverage also increases the price volatility of common shares and has the effect of extending portfolio duration. During the six-month period, ARPS leverage contributed approximately $0.03 per share to common share earnings. The Trust's five ARPS series totaling $208 million represented 31 percent of net assets. Yields on the Trust's three weekly ARPS series ranged between 2.75 and 5.00 percent. Yields on the two series with annual auctions maturing in July 2001 and September 2001 were 4.48 and 4.40 percent, respectively. In comparison, the yield on 1-year municipal notes has fallen from 4.19 percent in October 2000 to 3.08 percent at the end of April. 3 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS April 30, 2001, continued LOOKING AHEAD The slower pace of economic growth and the Federal Reserve Board's shift to an easing bias in its monetary policy should create a favorable backdrop for fixed-income investments. In this environment, tax-free income and relative attractiveness versus Treasuries continue to offer good long-term value to municipal investors. The Trust's procedure for reinvesting all dividends and distributions in common shares is through purchases in the open market. This method helps support the market value of the Trust's shares. In addition, we would like to remind you that the Trustees have approved a procedure whereby the Trust may, when appropriate, purchase shares in the open market or in privately negotiated transactions at a price not above market value or net asset value, whichever is lower at the time of purchase. The Trust may also utilize procedures to reduce or eliminate the amount of outstanding ARPS, including their purchase in the open market or in privately negotiated transactions. During the six-month period ended April 30, 2001, the Trust purchased and retired 477,300 shares of common stock at a weighted average market discount of 8.67 percent. We appreciate your ongoing support of Morgan Stanley Dean Witter Quality Municipal Income Trust and look forward to continuing to serve your investment needs. Very truly yours, /s/ Charles A. Fiumefreddo /s/ Mitchell M. Merin - ------------------------------- --------------------------------- CHARLES A. FIUMEFREDDO MITCHELL M. MERIN Chairman of the Board President 4 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS April 30, 2001, continued [GRAPHIC OMITTED] LARGEST SECTORS AS OF APRIL 30, 2001 (% OF NET ASSETS) Water & Sewer 17% Mortgage 14% General Obligation 13% Transportation 12% Electric 8% IDR/PCR* 8% Refunded 8% Hospital 7% * INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE. PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. [GRAPHIC OMITTED] CREDIT RATINGS AS OF APRIL 30, 2001 (% OF TOTAL LONG-TERM PORTFOLIO) Aaa or AAA 53% Aa or AA 35% A or A 7% Baa or BBB 4% Ba or BB 1% AS MEASURED BY MOODY'S INVESTORS SERVICE, INC. OR STANDARD & POOR'S CORP. PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. [GRAPHIC OMITTED] DISTRIBUTION BY MATURITY (% OF NET ASSETS) -------------------- WEIGHTED AVERAGE MATURITY: 17 YEARS -------------------- 5.1% 4.3% 3.9% 50.3% 32.4% 4.6% - -------------------------------------------------------------------------------- UNDER 1 YEAR 1-5 YEARS 5-10 YEARS 10-20 YEARS 20-30 YEARS 30+ YEARS PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. 5 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST LETTER TO THE SHAREHOLDERS April 30, 2001, continued [GRAPHIC OMITTED] CALL AND COST (BOOK) YIELD STRUCTURE (BASED ON LONG-TERM PORTFOLIO) APRIL 30, 2001 --------------------------- WEIGHTED AVERAGE CALL PROTECTION: 5 YEARS --------------------------- BONDS CALLABLE 2001 4% 2002 43% 2003 10% 2004 0% 2005 1% 2006 0% 2007 0% 2008 6% 2009 7% 2010 16% 2011+ 13% YEARS BONDS CALLABLE [GRAPHIC OMITTED] -------------------- WEIGHTED AVERAGE BOOK YIELD: 6.2% -------------------- COST (BOOK) YIELD* 2001 7.6% 2002 6.5% 2003 6.5% 2004 - 2005 6.0% 2006 - 2007 - 2008 6.1% 2009 5.5% 2010 5.7% 2011+ 5.5% * COST OR "BOOK" YIELD IS THE ANNUAL INCOME EARNED ON A PORTFOLIO INVESTMENT BASED ON ITS ORIGINAL PURCHASE PRICE BEFORE TRUST OPERATING EXPENSES. FOR EXAMPLE, THE TRUST IS EARNING A BOOK YIELD OF 7.6% ON 4% OF THE LONG-TERM PORTFOLIO THAT IS CALLABLE IN 2001. PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. 6 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS April 30, 2001 (unaudited)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- TAX-EXEMPT MUNICIPAL BONDS (95.5%) General Obligation (13.3%) $ 3,500 Denver City & County School Dist No 1, Colorado, Ser 1999 (FGIC) ................ 5.25% 12/01/16 $ 3,539,515 Hawaii, 5,000 1992 Ser BZ ................................................................... 6.00 10/01/10 5,558,300 8,000 1992 Ser BZ ................................................................... 6.00 10/01/11 8,883,520 4,000 Cook County, Illinois, Ser 1992 C (FGIC) ........................................ 6.00 11/15/09 4,418,520 10,000 Massachusetts, Ser 2000 C ....................................................... 5.75 10/01/15 10,611,500 South Carolina, 12,000 Highway Ser 1999 A ............................................................ 4.60 05/01/18 11,043,600 10,000 Highway Ser 1999 A** .......................................................... 4.60 05/01/19 9,093,700 2,000 Houston, Texas, Refg Ser 2000 (FSA) ............................................. 5.75 03/01/18 2,074,400 5,000 Houston Independent School District, Texas, School & Refg Ser 1999 A (PSF)....... 5.25 02/15/18 4,944,650 5,000 Northside Independent School District, Texas, Building & Refg Ser 2001 (PSF) 5.00 02/15/26 4,650,700 9,035 San Antonio, Texas, Refg Ser 1992 ............................................... 5.75 08/01/13 9,218,501 14,790 Washington, Ser 1993 A .......................................................... 5.75 10/01/17 15,050,303 - --------- ------------ 88,325 89,087,209 - --------- ------------ Educational Facilities Revenue (3.0%) Arizona Board of Regents, University of Arizona, 1,650 Ser 2001 A COPs (Ambac) ....................................................... 5.50 06/01/15 1,717,304 1,740 Ser 2001 A COPs (Ambac) ....................................................... 5.50 06/01/16 1,801,213 1,835 Ser 2001 A COPs (Ambac) ....................................................... 5.50 06/01/17 1,889,316 940 Ser 2001 A COPs (Ambac) ....................................................... 5.50 06/01/18 963,350 2,500 University of Illinois, Auxiliary Ser 1991 ...................................... 5.75 04/01/22 2,518,800 5,000 Massachusetts Health & Educational Facilities Authority, Brandeis University, 1998 Ser I (MBIA) ............................................................. 4.75 10/01/28 4,409,699 Scranton-Lackawanna Health & Welfare Authority, Pennsylvania, 3,000 University of Scranton 1992 Ser A ............................................. 6.40 03/01/07 3,126,870 3,300 University of Scranton 1992 Ser A ............................................. 6.50 03/01/13 3,426,060 - --------- ------------ 19,965 19,852,612 - --------- ------------ Electric Revenue (8.3%) 9,000 Orlando Utilities Commission, Florida, Ser 1991 A ............................... 5.50 10/01/26 9,002,430 10,000 Municipal Electric Authority of Georgia, Power 1992 Ser B (Secondary MBIA) 6.375 01/01/16 10,559,700 5,000 Hastings, Nebraska, Refg Ser 1992 ............................................... 6.30 01/01/19 5,317,500 10,000 Long Island Power Authority, New York, Ser 2000 A (FSA) ......................... 0.00 06/01/16 4,582,500 10,000 Hamilton!, Ohio, Refg 1992 Ser A (FGIC) ......................................... 6.00 10/15/23 10,378,500 5,200 San Antonio, Texas, Electric & Gas Ser 2000 A ................................... 5.75 02/01/17 5,394,896 Grant County Public Utility District #2, Washington, 8,220 Priest Rapids Hydro Second Ser 1992 A ......................................... 5.00 01/01/23 7,614,515 2,645 Wanapum Hydro Second Ser 1992 B (AMT) ......................................... 6.75 01/01/23 2,742,653 - --------- ------------ 60,065 55,592,694 - --------- ------------
See Notes to Financial Statements 7 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS April 30, 2001 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- Hospital Revenue (6.5%) $ 5,000 Birmingham-Carraway Special Care Facilities Financing Authority, Alabama, Carraway Methodist Health Ser 1995 A (Connie Lee) ....................5.875% 08/15/15 $ 5,205,900 9,250 Massachusetts Health & Educational Facilities Authority, Massachusetts General Hospital Ser F (Ambac) ................................................6.00 07/01/15 9,586,423 10,000 Missouri Health & Educational Facilities Authority, Health Midwest Ser 1992 B (MBIA) .............................................................6.25 02/15/22 10,284,100 4,500 Cuyahoga County, Ohio, Cleveland Clinic Foundation Refg Ser 1992 ................5.50 11/15/11 4,585,230 5,000 Dauphin County General Authority, Pennsylvania, HAPSO Group Inc/ The Western Pennsylvania Hospital Refg 1992 Ser A (MBIA) ......................6.25 07/01/16 5,587,150 3,000 Philadelphia Hospitals & Higher Education Facilities Authority, Pennsylvania, Chestnut Hill Hospital Ser of 1992 ............................................6.375 11/15/11 2,963,730 5,000 South Dakota Health & Educational Facilities Authority, Queen of Peace Hospital Ser 1992 (MBIA) ......................................................6.70 07/01/17 5,237,850 - --------- ------------ 41,750 43,450,383 - --------- ------------ Industrial Development/Pollution Control Revenue (7.9%) 6,000 California Pollution Control Financing Authority, Keller Cannon Landfill Co/ Browning-Ferris Industries Inc Ser 1992 (AMT) .................................6.875 11/01/27 6,050,820 5,000 Citrus County, Florida, Florida Power Corp Refg Ser 1992 B ......................6.35 02/01/22 5,143,950 5,000 Washoe County, Nevada, Sierra Pacific Power Co Ser 1987 (AMT) (MBIA) ............6.65 06/01/17 5,273,900 15,000 Berkeley County, South Carolina, South Carolina Electric & Gas Co Ser 1984 ......6.50 10/01/14 15,740,400 10,000 Brazos River Authority, Texas, Houston Lighting & Power Co Ser 1992 B (MBIA) ........................................................................6.375 04/01/12 10,507,200 10,000 Mason County, West Virginia, Appalachian Power Co Ser J .........................6.60 10/01/22 10,278,600 - --------- ------------ 51,000 52,994,870 - --------- ------------ Mortgage Revenue - Multi-Family (6.4%) 7,000 Illinois Housing Development Authority, Ser I ...................................6.625 09/01/12 7,234,150 15,705 Michigan Housing Development Authority, Rental 1992 Ser A (Bifurcated FSA) ..............................................................6.50 04/01/23 16,369,635 Missouri Housing Development Commission, 5,355 Federally Insured Mortgage Loans Refg Ser 11/15/92 ............................6.50 07/01/16 5,404,802 6,795 Federally Insured Mortgage Loans Refg Ser 11/15/92 ............................6.60 07/01/24 6,858,126 7,000 New Jersey Housing Mortgage Finance Agency, Home Buyer Ser 2000 CC (MBIA) (AMT) ..................................................................5.875 10/01/31 7,128,800 - --------- ------------ 41,855 42,995,513 - --------- ------------ Mortgage Revenue - Single Family (7.6%) 16,495 Connecticut Housing Finance Authority, 1992 Ser B ...............................6.70 11/15/12 17,145,398 4,690 Georgia Housing & Finance Authority, Home Ownership 1992 Ser C ..................6.50 12/01/11 4,809,830 7,000 Idaho Housing & Finance Association, 2000 Ser E (AMT) ...........................6.00 01/01/32 7,177,870 1,035 Idaho Housing Agency, 1992 Ser E (AMT) ..........................................6.75 07/01/12 1,063,193 3,000 Maryland Community Development Administration, 2000 Ser D (AMT) .................6.25 09/01/32 3,142,710
See Notes to Financial Statements 8 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS April 30, 2001 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- Minnesota Housing Finance Agency, $ 6,020 Ser 1992 CD-1 (AMT) ........................................................ 6.75% 07/01/23 $ 6,231,242 2,580 Ser 1992 D-1 ............................................................... 6.50 01/01/17 2,666,146 2,000 Missouri Housing Development Commission, Homeownership Loan Program, Ser 2000 B-1 (AMT) ......................................................... 6.25 03/01/31 2,078,160 6,300 Montana Board of Housing, 2000 Ser B (AMT) ................................... 6.00 12/01/29 6,450,192 - --------- ------------ 49,120 50,764,741 - --------- ------------ Nursing & Health Related Facilities Revenue (1.7%) 11,250 Minneapolis & Saint Paul Housing & Redevelopment Authority, Minnesota, - --------- Group Health Plan Inc Ser 1992 ............................................. 6.90 10/15/22 11,313,338 ------------ Public Facilities Revenue (1.9%) 5,000 Phoenix Industrial Development Authority, Arizona, Capital Mall LLC Ser 2000 (Ambac) ........................................................... 5.50 09/15/27 5,027,300 7,370 Indianapolis Local Public Improvement Bond Bank, Indiana, Ser 1992 D ......... 6.75 02/01/20 7,841,533 - --------- ------------ 12,370 12,868,833 - --------- ------------ Recreational Facilities Revenue (1.5%) 10,000 Atlanta Downtown Development Authority, Georgia, Underground Atlanta - --------- Refg Ser 1992 .............................................................. 6.25 10/01/16 10,367,800 ------------ Transportation Facilities Revenue (12.0%) 4,000 Colorado Department of Transportation, Ser 2001 A (MBIA) ..................... 5.50 06/15/16 4,150,440 Dade County, Florida, 3,000 Aviation 1992 Ser B (AMT) (MBIA) ........................................... 6.55 10/01/13 3,155,370 5,000 Aviation 1992 Ser B (AMT) (MBIA) ........................................... 6.60 10/01/22 5,256,300 5,000 Atlanta, Georgia, Airport Ser 2000 A (FGIC) .................................. 5.50 01/01/26 5,051,850 13,000 Chicago, Illinois, Chicago-O'Hare Int'l Terminal Ser 1992 (AMT) (MBIA) ....... 6.75 01/01/12 13,457,859 4,000 Regional Transportation Authority, Illinois, Refg Ser 1999 (FSA) ............. 5.75 06/01/21 4,241,080 7,500 Indiana Transportation Finance Authority, Ser 2000 ........................... 5.375 12/01/25 7,413,900 3,000 Kansas, Department of Transportation, Ser 2000 A ............................. 5.75 09/01/16 3,161,400 3,400 Maine Turnpike Authority, Ser 2000 (FGIC) .................................... 5.50 07/01/30 3,418,122 2,390 St Louis, Missouri, Lambert-St Louis Int'l Airport Ser 1992 (AMT) (FGIC) ..... 6.00 07/01/08 2,492,651 4,595 Nevada Department of Business and Industry, Las Vegas Monorail Project, 1st Tier Ser 2000 (Ambac) .................................................. 0.00 01/01/22 1,403,773 New Jersey Transportation Trust Fund Authority, 5,000 1998 Ser A (FSA) ........................................................... 4.50 06/15/19 4,543,950 5,000 1999 Ser A ................................................................. 5.75 06/15/20 5,349,250 6,000 Puerto Rico Highway & Transportation Authority, Refg Ser V ................... 6.625 07/01/12 6,272,880 Houston, Texas, 6,000 Airport Sub Lien Ser 2000 A (AMT) (FSA) .................................... 5.875 07/01/17 6,207,420 5,000 Airport Sub Lien Ser 2000 A (AMT) (FSA) .................................... 5.625 07/01/30 5,012,000 - --------- ------------ 81,885 80,588,245 - --------- ------------ Water & Sewer Revenue (16.8%) 4,000 Birmingham, Alabama, Water & Sewer Ser 1998 A ................................ 4.75 01/01/21 3,609,800 6,000 Tampa Bay Water, Florida, Utility Ser 1998 B (FGIC) .......................... 4.75 10/01/27 5,346,840
See Notes to Financial Statements 9 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS April 30, 2001 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ----------------------------------------------------------------------------------------------------------------------------------- $ 10,000 Augusta, Georgia, Water and Sewerage Ser 2000 (FSA) ........................... 5.25% 10/01/30 $ 9,866,800 3,500 Clayton County Water Authority, Georgia, Ser 2001 (WI) ........................ 5.125 05/01/23 3,398,850 5,000 Douglasville-Douglas County Water & Sewer Authority, Georgia, Ser 1998 (FGIC) ...................................................................... 4.50 06/01/23 4,315,600 5,000 Louisville & Jefferson County Metropolitan Sewer District, Kentucky, Ser 1999 A (FGIC) ........................................................... 5.75 05/15/33 5,159,400 Massachusetts Water Resources Authority, 5,000 Refg 1992 Ser B ............................................................. 5.50 11/01/15 5,074,600 10,000 1998 Ser A (FSA) ............................................................ 4.50 08/01/22 8,656,800 5,000 2000 Ser A (FGIC) ........................................................... 5.75 08/01/39 5,147,350 3,000 Rio Rancho, New Mexico, Water & Wastewater Refg Ser 1999 (Ambac) .............. 5.25 05/15/19 2,972,310 New York City Municipal Water Finance Authority, New York, 20,000 Ser 1993 A .................................................................. 6.00 06/15/17 20,502,999 3,000 Ser 2000 B .................................................................. 6.00 06/15/33 3,225,990 4,000 Western Carolina Regional Sewer Authority, South Carolina, Ser 2001 (FSA) ..... 5.375 03/01/18 4,040,800 10,000 Austin, Texas, Water & Wastewater Refg Ser 2001 A (FSA) (WI) .................. 5.125 05/15/27 9,468,000 7,045 Houston, Texas, Water & Sewer Jr Lien Refg Ser 1991 C (Ambac) ................. 6.375 12/01/17 7,295,098 13,960 San Antonio, Texas, Water & Refg Ser 2001 (FGIC) .............................. 5.00 05/15/26 13,016,722 2,000 Fairfax County Water Authority, Virginia, Refg Ser 1992 ....................... 6.00 04/01/22 2,128,040 - --------- ------------ 116,505 113,225,999 - --------- ------------ Other Revenue (0.7%) 3,000 Albuquerque, New Mexico, Gross Receipts Refg Ser 1999 C ....................... 5.25 07/01/17 3,001,740 2,000 Philadelphia, Pennsylvania, Gas Works First Ser 1998 B (FSA) .................. 5.00 07/01/28 1,860,460 - --------- ------------ 5,000 4,862,200 - --------- ------------ Refunded (7.9%) 7,500 Alaska Housing Finance Corporation, Gen Hag 1992 Ser A ........................ 6.60 12/01/02+ 7,768,050 14,285 Massachusetts Water Pollution Abatement Trust, MWRA Loan Ser 1998 A (ETM) ....................................................................... 4.75 08/01/18 13,635,890 19,700 Clark County, Nevada, Las Vegas - McCarran Int'l Airport Passenger Facility Charge 1992 Ser B (AMT) ..................................................... 6.25 07/01/02+ 20,676,332 10,000 New York State Medical Care Facilities Agency, The Mount Sinai Hospital - FHA Insured Mortgage 1992 Ser C ** ............................... 5.75 02/15/08+ 10,690,200 210 Washington, Ser 1993 A ........................................................ 5.75 10/01/02+ 220,735 - --------- ------------ 51,695 52,991,207 - --------- ------------ 640,785 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Cost $609,511,205)......................... 640,955,644 - --------- ------------
See Notes to Financial Statements 10 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS April 30, 2001 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------------------------------- SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (5.1%) $ 10,000 Idaho Health Facilities Authority, St Lukas Regional Medical Center Ser 2000 (FSA) (Demand 05/01/01) ...................................... 4.35*% 07/01/30 $ 10,000,000 10,000 Delaware County Industrial Development Authority, Pennsylvania, United Parcel Service of America Inc Ser 1985 (Demand 05/01/01) .............. 4.30* 12/01/15 10,000,000 6,550 Harris County Health Facilities Development Corporation, Texas, Methodist Hospital Ser 1994 (Demand 05/01/01) ................................... 4.35* 12/01/25 6,550,000 7,500 Fredericksburg Industrial Development Authority, Virginia, MWH Medicorp Ser 1991 A & B (FGIC) ................................................. 9.367# 08/15/01+ 7,931,250 - ---------- ------------ 34,050 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Cost $34,229,901) ............................ 34,481,250 - ---------- ------------ $ 6 74,835 TOTAL INVESTMENTS (Cost $643,741,106) (a) ...................................... 100.6 % 675,436,894 ========= LIABILITIES IN EXCESS OF OTHER ASSETS .......................................... (0.6) (3,825,485) ----- ------------ NET ASSETS ..................................................................... 100.0 % $671,611,409 ===== ============
- --------------- AMT Alternative Minimum Tax. COPs Certificates of Participation. ETM Escrowed to maturity. WI Security purchased on a "when-issued" basis. + Prerefunded to maturity. # Current coupon rate for residual interest bond. This rate resets periodically as the auction rate on the related short-term security changes. * Current coupon of variable rate demand obligation. ** All or a portion of this security has been segregated in connection with the purchase of a "when-issued" security. (a) The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $34,027,694 and the aggregate gross unrealized depreciation is $2,331,906, resulting in net unrealized appreciation of $31,695,788. Bond Insurance: - -------------- Ambac Ambac Assurance Corporation. Connie Lee Connie Lee Insurance Company - a wholly owned subsidiary of Ambac Assurance Corporation. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation. PSF Texas Permanent School Fund Guarantee Program. See Notes to Financial Statements 11 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS April 30, 2001 (unaudited) continued GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percent of Net Assets Alabama ............... 1.3% Alaska .................. 1.2 Arizona ................. 1.7 California .............. 0.9 Colorado .............. 1.1 Connecticut ............. 2.6 Delaware .............. 1.5 Florida ................. 4.2 Georgia ................. 7.2 Hawaii .................. 2.2 Idaho ................... 2.7 Illinois ................ 4.7 Indiana ............... 2.3 Kansas ................ 0.5% Kentucky ................ 0.8 Maine ................. 0.5 Massachusetts ........... 8.5 Maryland ................ 0.5 Michigan ................ 2.4 Minnesota ............. 3.0 Missouri ................ 4.0 Montana ............... 1.0 Nebraska ................ 0.8 Nevada ................ 4.1 New Jersey .............. 2.5 New Mexico .............. 0.9 New York ................ 5.8% Ohio .................... 2.2 Pennsylvania ............ 2.5 Puerto Rico ............. 0.9 South Carolina .......... 5.9 South Dakota .......... 0.8 Texas ................. 12.6 Virginia ................ 1.5 Washington ............ 3.8 West Virginia ........... 1.5 ----- Total ................... 100.6% ===== See Notes to Financial Statements 12 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES April 30, 2001 (unaudited) ASSETS: Investments in securities, at value (cost $643,741,106) .......................... $675,436,894 Cash ............................................ 70,830 Interest receivable ............................. 9,876,281 Prepaid expenses ................................ 160,245 ------------ TOTAL ASSETS ............................... 685,544,250 ------------ LIABILITIES: Payable for: Investments purchased ...................... 13,014,066 Dividends to preferred shareholders ........ 395,091 Common shares of beneficial interest repurchased ............................. 207,822 Investment management fee .................. 201,702 Accrued expenses ................................ 114,160 ------------ TOTAL LIABILITIES .......................... 13,932,841 ------------ NET ASSETS ................................. $671,611,409 ============ COMPOSITION OF NET ASSETS: Preferred shares of beneficial interest (1,000,000 shares authorized of non-participating $.01 par value, 4,160 shares outstanding) .......................... $208,000,000 ------------ Common shares of beneficial interest (unlimited shares authorized of $.01 par value, 30,261,620 shares outstanding) ................................. 423,767,733 Net unrealized appreciation ..................... 31,695,788 Accumulated undistributed net investment income ....................................... 2,345,510 Accumulated undistributed net realized gain ..... 5,802,378 ------------ NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ............................... 463,611,409 ------------ TOTAL NET ASSETS ........................... $671,611,409 ============ NET ASSET VALUE PER COMMON SHARE ($463,611,409 divided by 30,261,620 common shares outstanding) ................. $15.32 ====== STATEMENT OF OPERATIONS For the six months ended April 30, 2001 (unaudited) NET INVESTMENT INCOME: INTEREST INCOME ............................... $19,521,863 ----------- EXPENSES Investment management fee ..................... 1,182,740 Auction commission fees ....................... 327,410 Transfer agent fees and expenses .............. 76,348 Professional fees ............................. 63,992 Shareholder reports and notices ............... 29,506 Custodian fees ................................ 15,779 Registration fees ............................. 15,394 Auction agent fees ............................ 15,116 Trustees' fees and expenses ................... 9,254 Other ......................................... 23,682 ----------- TOTAL EXPENSES ........................... 1,759,221 Less: expense offset .......................... (15,754) ----------- NET EXPENSES ............................. 1,743,467 ----------- NET INVESTMENT INCOME ....................... 17,778,396 ----------- NET REALIZED AND UNREALIZED GAIN: Net realized gain ............................. 5,806,725 Net change in unrealized appreciation ......... 706,149 ----------- NET GAIN ................................. 6,512,874 ----------- NET INCREASE .................................. $24,291,270 ============ See Notes to Financial Statements 13 Morgan Stanley Dean Witter Quality Municipal Income Trust Financial Statements, continued STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED APRIL 30, 2001 OCTOBER 31, 2000 ---------------- ----------------- (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ................................. $ 17,778,396 $ 36,984,845 Net realized gain ..................................... 5,806,725 4,965,229 Net change in unrealized appreciation ................. 706,149 2,723,226 ------------- ------------- NET INCREASE ....................................... 24,291,270 44,673,300 ------------- ------------- Dividends to preferred shareholders from net investment income .............................................. (4,683,914) (8,231,899) ------------- ------------- DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM: Net investment income ................................. (13,278,064) (29,155,707) Net realized gain ..................................... (3,847,396) - ------------- ------------- TOTAL DIVIDENDS AND DISTRIBUTIONS .................. (17,125,460) (29,155,707) ------------- ------------- Decrease from transactions in common shares of beneficial interest ................................. (6,745,156) (26,590,117) ------------- ------------- NET DECREASE ....................................... (4,263,260) (19,304,423) NET ASSETS: Beginning of period ................................... 675,874,669 695,179,092 ------------- ------------- END OF PERIOD (Including undistributed net investment income of $2,345,510 and $2,529,092, respectively) ........... $671,611,409 $ 675,874,669 ============ =============
See Notes to Financial Statements 14 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS April 30, 2001 (unaudited) 1. ORGANIZATION AND ACCOUNTING POLICIES Morgan Stanley Dean Witter Quality Municipal Income 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 March 12, 1992 and commenced operations on September 29, 1992. 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 investment income and net realized capital gains are determined in accordance with federal income tax regulations 15 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS April 30, 2001 (unaudited) continued which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in-capital. 2. INVESTMENT MANAGEMENT AGREEMENT Pursuant to an Investment Management Agreement with Morgan Stanley Investment Advisors Inc. (the "Investment Manager"), formerly Morgan Stanley Dean Witter Advisors Inc., the Trust pays the Investment Manager a management fee, calculated weekly and payable monthly, by applying the annual rate of 0.35% to the Trust's weekly net assets. 3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the six months ended April 30, 2001 aggregated $69,142,559 and $90,875,936, respectively. Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is the Trust's transfer agent. At April 30, 2001, the Trust had transfer agent fees and expenses payable of approximately $6,200. The Trust has an unfunded noncontributory defined benefit pension plan covering all independent Trustees of the Trust who will have served as independent Trustees for at least five years at the time of retirement. Benefits under this plan are based on years of service and compensation during the last five years of service. Aggregate pension costs for the six months ended April 30, 2001 included in Trustees' fees and expenses in the Statement of Operations amounted to $2,471. At April 30, 2001, the Trust had an accrued pension liability of $41,416 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 1 through 5 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 16 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS April 30, 2001 (unaudited) continued 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 RANGE OF SERIES SHARES* IN THOUSANDS* RATE* RESET DATE DIVIDEND RATES** - -------- --------- --------------- ---------- ------------ ----------------- 1 1,120 $56,000 4.40% 09/05/01 4.40% 2 400 20,000 3.60 05/03/01 2.75 - 5.00 3 1,120 56,000 4.48 07/05/01 4.48 4 1,120 56,000 3.60 05/03/01 3.00 - 4.90 5 400 20,000 3.70 05/04/01 2.99 - 4.90
- --------------- * As of April 30, 2001. ** For the six months ended April 30, 2001. Subsequent to April 30, 2001 and up through June 8, 2001, the Trust paid dividends to each of the Series 1 through 5 at rates ranging from 2.96% to 4.48% in the aggregate amount of $1,176,358. 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. 5. COMMON SHARES OF BENEFICIAL INTEREST Transactions in common shares of beneficial interest were as follows:
CAPITAL PAID IN EXCESS OF SHARES PAR VALUE PAR VALUE --------------- ----------- --------------- Balance, October 31, 1999 ................................................ 32,730,413 $ 327,304 $ 456,775,702 Treasury shares purchased and retired (weighted average discount 10.16%)* (1,991,493) (19,915) (26,570,202) ---------- --------- ------------- Balance, October 31, 2000 ................................................ 30,738,920 307,389 430,205,500 Treasury shares purchased and retired (weighted average discount 8.67%)* . (477,300) (4,773) (6,740,383) ---------- --------- ------------- Balance, April 30, 2001 .................................................. 30,261,620 $ 302,616 $ 423,465,117 ========== ========= =============
- --------------- * The Trustees have voted to retire the shares purchased. 17 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST NOTES TO FINANCIAL STATEMENTS April 30, 2001 (unaudited) continued 6. DIVIDENDS TO COMMON SHAREHOLDERS On March 27, 2001, the Trust declared the following dividends from net investment income: AMOUNT PER SHARE RECORD DATE PAYABLE DATE - -------------- ---------------- ---------------- $ 0.0725 May 4, 2001 May 18, 2001 $ 0.0725 June 8, 2001 June 22, 2001 7. EXPENSE OFFSET The expense offset represents a reduction of the custodian fees for earnings on cash balances maintained by the Trust. 8. RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS The Trust may invest a portion of its assets in residual interest bonds, which are inverse floating rate municipal obligations. The prices of these securities are subject to greater market fluctuations during periods of changing prevailing interest rates than are comparable fixed rate obligations. At April 30, 2001, the Trust held positions in residual interest bonds, having a total value of $7,931,250, which represents 1.2% of the Trust's net assets. 18 MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST FINANCIAL HIGHLIGHTS Selected ratios and per share data for a common share of beneficial interest outstanding throughout each period:
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31,* MONTHS ENDED ---------------------------------------------------------- APRIL 30, 2001* 2000 1999 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------------------------- (unaudited) SELECTED PER SHARE DATA: Net asset value, beginning of period ................... $15.22 $ 14.88 $16.26 $15.91 $ 15.44 $ 15.33 ------ ------- ------ ------ ------- ------- Income (loss) from investment operations: Net investment income ................................. 0.58 1.17 1.16 1.19 1.20 1.19 Net realized and unrealized gain (loss) ............... 0.21 0.26 (1.36) 0.34 0.51 0.13 ------ ------- ------ ------ ------- ------- Total income (loss) from investment operations ......... 0.79 1.43 (0.20) 1.53 1.71 1.32 ------ ------- ------ ------ ------- ------- Less dividends and distributions from: Net investment income ................................. (0.43) (0.93) (0.93) (0.93) (0.99) (0.99) Common share equivalent of dividends paid to preferred shareholders ............................... (0.15) (0.26) (0.22) (0.23) (0.23) (0.22) Net realized gain ..................................... (0.13) - (0.05) (0.03) (0.03) (0.04) ------ ------- ------ ------ ------- ------- Total dividends and distributions ...................... (0.71) (1.19) (1.20) (1.19) (1.25) (1.25) ------ ------- ------ ------ ------- ------- Anti-dilutive effect of acquiring treasury shares ...... 0.02 0.10 0.02 0.01 0.01 0.04 ------ ------- ------ ------ ------- ------- Net asset value, end of period ......................... $15.32 $ 15.22 $14.88 $16.26 $ 15.91 $ 15.44 ====== ======= ====== ====== ======= ======= Market value, end of period ............................ $14.10 $13.313 $13.25 $15.75 $14.875 $14.625 ====== ======= ====== ====== ======= ======= TOTAL RETURN+ .......................................... 10.19%(1) 7.51% (10.21)% 12.66% 8.84% 14.27% RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS: Total expenses ......................................... 0.75%(2)(3) 0.75%(3) 0.73 % 0.71%(3) 0.70%(3) 0.69%(3) Net investment income before preferred stock dividends . 7.58%(2) 7.83% 7.32 % 7.35% 7.68% 7.73% Preferred stock dividends .............................. 2.00%(2) 1.74% 1.42 % 1.45% 1.47% 1.41% Net investment income available to common shareholders . 5.58%(2) 6.09% 5.90 % 5.90% 6.21% 6.32% SUPPLEMENTAL DATA: Net assets, end of period, in thousands ................ $671,611 $675,875 $695,179 $750,329 $742,504 $734,799 Asset coverage on preferred shares at end of period .... 322% 324% 333 % 360% 356% 353% Portfolio turnover rate ................................ 10%(1) 15% 21 % 2% 2% -
- ------------- * 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 last day of each period reported. Dividends and distributions are assumed to be reinvested at the prices obtained under the Trust's dividend reinvestment plan. Total return does not reflect brokerage commissions. (1) Not annualized. (2) Annualized. (3) Does not reflect the effect of the expense offset of 0.01%. See Notes to Financial Statements 19 TRUSTEES - ------------------------------------------------- Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien James F. Higgins Dr. Manuel H. Johnson Michael E. Nugent Philip J. Purcell John L. Schroeder OFFICERS - ------------------------------------------------- Charles A. Fiumefreddo Chairman and Chief Executive Officer Mitchell M. Merin President Barry Fink Vice President, Secretary and General Counsel James F. Willison Vice President Thomas F. Caloia Treasurer TRANSFER AGENT - ------------------------------------------------- Morgan Stanley Dean Witter Trust FSB Harborside Financial Center - Plaza Two Jersey City, New Jersey 07311 INDEPENDENT AUDITORS - ------------------------------------------------- Deloitte & Touche LLP Two World Financial Center New York, New York 10281 INVESTMENT MANAGER - ------------------------------------------------- Morgan Stanley Investment Advisors Inc. Two World Trade Center New York, New York 10048 The financial statements included herein have been taken from the records of the Trust without examination by the independent auditors and accordingly they do not express an opinion thereon. MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST Semiannual Report April 30, 2001 -----END PRIVACY-ENHANCED MESSAGE-----