<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>file001.txt
<DESCRIPTION>ANNUAL REPORT
<TEXT>
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS o OCTOBER 31, 2001

DEAR SHAREHOLDER:

During the fiscal year ended October 31, 2001, the U.S. economy slowed and the
fixed-income markets rallied. The terrorist attacks on September 11 aggravated
the decline in business and consumer activity. Almost immediately after the
attacks, many companies announced major layoffs. The unemployment rate jumped
from 4.9 percent to 5.4 percent and October reported the largest job loss in 20
years.

The Federal Reserve Board responded to the attacks by lowering short-term
interest rates by 50 basis points in both September and October. Subsequently,
the Fed cut rates another 50 basis points in November. The November action, the
tenth in 2001, reduced the federal funds rate to 2.00 percent, the lowest level
since 1961. Additionally, both the House and Senate have been formulating plans
to stimulate the economy. These monetary and fiscal actions appear to be laying
the groundwork for an economic recovery.

Within the fixed-income markets, events of the past fiscal year had the greatest
impact on U.S. Treasuries which appreciated throughout the year and rallied
further in a flight to quality following September 11. Yields of short
maturities declined the most, steepening the yield curve. On October 31, the
U.S. Treasury stunned the securities markets by announcing the cessation of the
30-year bond auction.

MUNICIPAL MARKET CONDITIONS

Over the past 12 months, tax-free interest rates have also moved lower. The
30-year insured municipal bond index, which was 5.65 percent last October,
declined to 5.04 percent by the end of October 2001.

The ratio of municipal yields as a percentage of U.S. Treasury yields is used as
a guide to track the relationship between the two markets. A declining yield
ratio indicates stronger relative performance by municipals. The ratio of
30-year insured municipal bond yields to U.S. Treasuries fell from 98 percent
last October to 94 percent at the end of August. However, following September 11
and the Treasury's auction announcement, the ratio jumped to 104 percent.
Long-term insured municipal yields above Treasuries is an anomaly that has
occurred only during periods of significant market uncertainty. In the 10-year
maturity range, the ratio also soared, from 83 percent to 95 percent between
August and October.

The change in the slope of the yield curve has been a major story in the
fixed-income markets this year. Since the Fed started lowering short-term rates
aggressively in January, the municipal yield curve between one- and 30-year
maturities steepened, from 125 to 300 basis points.

Lower interest rates also led to a rebound in new-issue volume. During the first
10 months of 2001, underwriting surged 36 percent, to $224 billion. Refunding
issues, the most interest-rate-sensitive category, represented almost
one-quarter of the total. The states with the greatest issuance, California,
Florida, New York and Texas, represented 35 percent of national volume.

<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS o OCTOBER 31, 2001 CONTINUED

30-YEAR BOND YIELDS 1997-2001

Date AAA Ins Tsy % Relationship
12/31/96 5.60 6.63 84.46%
1/31/97 5.70 6.79 83.95%
2/28/97 5.65 6.80 83.09%
3/31/97 5.90 7.10 83.10%
4/30/97 5.75 6.94 82.85%
5/31/97 5.65 6.91 81.77%
6/30/97 5.60 6.78 82.60%
7/31/97 5.30 6.30 84.13%
8/31/97 5.50 6.61 83.21%
9/30/97 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%
1/31/98 5.15 5.80 88.79%
2/28/98 5.20 5.92 87.84%
3/31/98 5.25 5.93 88.53%
4/30/98 5.35 5.95 89.92%
5/31/98 5.20 5.80 89.66%
6/30/98 5.20 5.65 92.04%
7/31/98 5.18 5.71 90.72%
8/31/98 5.03 5.27 95.45%
9/30/98 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%
1/31/99 5.00 5.09 98.23%
2/28/99 5.10 5.58 91.40%
3/31/99 5.15 5.63 91.47%
4/30/99 5.20 5.66 91.87%
5/31/99 5.30 5.83 90.91%
6/30/99 5.47 5.96 91.78%
7/31/99 5.55 6.10 90.98%
8/31/99 5.75 6.06 94.88%
9/30/99 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%
1/31/00 6.18 6.49 95.22%
2/29/00 6.04 6.14 98.37%
3/31/00 5.82 5.83 99.83%
4/30/00 5.91 5.96 99.16%
5/31/00 5.91 6.01 98.34%
6/30/00 5.84 5.90 98.98%
7/31/00 5.73 5.78 99.13%
8/31/00 5.62 5.67 99.12%
9/30/00 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%
1/31/01 5.30 5.50 96.36%
2/28/01 5.27 5.31 99.25%
3/31/01 5.26 5.44 96.69%
4/30/01 5.45 5.79 94.13%
5/31/01 5.40 5.75 93.91%
6/30/01 5.35 5.76 92.88%
7/31/01 5.16 5.52 93.48%
8/31/01 5.07 5.37 94.41%
9/30/01 5.20 5.42 95.94%
10/31/01 5.04 4.87 103.49%
11/30/01 5.17 5.29 97.73%

Source: Municipal Market Data - A Division of Thomson Financial Municipal Group
and Bloomberg L.P.

PERFORMANCE

During the 12-month period ended October 31, 2001, the net asset value (NAV) of
Morgan Stanley Quality Municipal Income Trust (IQI) increased from $15.22 to
$15.91 per share. Based on this change, plus a reinvestment of tax-free
dividends totaling $0.87 per share and the reinvestment of capital gains
totaling $0.13 per share, the Trust's total NAV return was 12.05 percent. IQI's
value on the New York Stock Exchange (NYSE) increased from $13.31 to $14.48 per
share during this period. Based on this change plus reinvestment of dividends
and distributions, IQI's total market return was 16.59 percent. As of October
31, 2001, IQI's share price was at a 8.99 percent discount to its NAV.

Monthly dividends for November and December 2001 were declared in October and
were unchanged at $0.0725 per share. On October 31, 2001, the Trust's level of
undistributed net investment income was

2
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS o OCTOBER 31, 2001 CONTINUED

$0.112 per share versus $0.065 per share at the beginning of the calendar year.
Dividend levels reflect the Trust's current earnings, which have benefited from
the lower short-term borrowing costs of Auction Rate Preferred Shares (ARPS).

PORTFOLIO STRUCTURE

The Trust's net assets of $681 million were diversified among 14 long-term
sectors and 88 credits. At the end of October, the portfolio's average maturity
was 19 years. Average duration, a measure of sensitivity to interest-rate
changes, was 5.8 years. The accompanying charts and table provide current
information on the portfolio's credit quality, maturity distribution and sector
concentration. Optional call provisions by year and their respective cost (book)
yields are also shown.

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 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 12-month period, ARPS leverage contributed approximately $0.10 per
share to common share earnings. The Trust's five ARPS series totaled $208
million and represented 31 percent of net assets. Weekly ARPS rates ranged
between 1.85 and 5.00 percent during the fiscal period. In July 2001, ARPS
series 3 was auctioned at 2.80 percent for 12 months, compared to 4.48 percent
over the previous 12-month period.

LOOKING AHEAD

Economists calculate the negative impact of the September 11 attacks to be a
full percentage point of gross domestic product. Consensus estimates for the
second half of 2001 have accordingly been revised from modestly positive to
negative. A decline in economic output for two successive quarters would meet
the customary definition of a recession, which would be the first in a record 10
years. While there is no doubt that the terrorist attacks are having a negative
impact on the economy, high-grade fixed-income securities have historically
fared well during periods of stress.

3
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS o] OCTOBER 31, 2001 CONTINUED

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 12-month period
ended October 31, 2001, the Trust purchased and retired 996,100 shares of common
stock at a weighted average market discount of 8.01 percent.

We appreciate your ongoing support of Morgan Stanley 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
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS o OCTOBER 31, 2001, CONTINUED

LARGEST SECTORS AS OF OCTOBER 31, 2001
(% OF NET ASSETS)

WATER & SEWER 16%
GENERAL OBLIGATION 15%
MORTGAGE 14%
TRANSPORTATION 13%
IDR/PCR* 9%
ELECTRIC 8%
REFUNDED 7%
HOSPITAL 5%

* INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE.

PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.

CREDIT RATINGS AS OF OCTOBER 31, 2001
(% OF TOTAL LONG-TERM PORTFOLIO)

Aaa or AAA 56%
Aa or AA 31%
A or A 8%
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.

DISTRIBUTION BY MATURITY
(% OF LONG-TERM PORTFOLIO)

WEIGHTED AVERAGE MATURITY: 19 YEARS

1-5 YEARS 1.9%
5-10 YEARS 3.4%
10-20 YEARS 47.7%
20-30 YEARS 42.2%
30+ YEARS 4.8%

PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.

5
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS o OCTOBER 31, 2001 CONTINUED

CALL AND COST (BOOK) YIELD STRUCTURE
(BASED ON LONG-TERM PORTFOLIO)
OCTOBER 31, 2001

BONDS CALLABLE

WEIGHTED AVERAGE CALL PROTECTION: 5 YEARS

2001 2%
2002 36%
2003 10%
2004 0%
2005 1%
2006 0%
2007 0%
2008 5%
2009 8%
2010 16%
2011+ 22%

COST (BOOK) YIELD*

WEIGHTED AVERAGE BOOK YIELD: 6.0%

2001 7.4%
2002 6.6%
2003 6.5%
2004
2005 6.0%
2006
2007
2008 6.0%
2009 5.5%
2010 5.7%
2011+ 5.4%

* 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 7.4% ON 2% OF THE LONG-TERM
PORTFOLIO THAT IS CALLABLE IN 2001.

PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.

6
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
RESULTS OF ANNUAL MEETING

On October 23, 2001, an annual meeting of the Trust's shareholders was held for
the purpose of voting on one matter, the results of which were as follows:

(1) Election of Trustees:

Edwin J. Garn

For .......................................................... 22,617,640
Withheld ..................................................... 445,557

Michael E. Nugent
For .......................................................... 22,616,264
Withheld ..................................................... 446,933

Philip J. Purcell
For .......................................................... 22,597,522
Withheld ..................................................... 465,675

The following Trustees were not standing for reelection at this meeting: Michael
Bozic, Charles A. Fiumefreddo, Wayne E. Hedien, James F. Higgins, Dr. Manuel H.
Johnson and John L. Schroeder.

<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS o OCTOBER 31, 2001

PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (95.2%)
GENERAL OBLIGATION (14.6%)
$ 3,500 Denver City & County School Dist No 1, Colorado, Ser 1999 (FGIC) .......... 5.25 % 12/01/16 $ 3,693,200
Hawaii,
5,000 1992 Ser BZ .............................................................. 6.00 10/01/10 5,767,950
8,000 1992 Ser BZ .............................................................. 6.00 10/01/11 9,284,640
10,000 Chicago, Illinois, Neighborhoods Alive 21 Ser 2001 A (FGIC) ............... 5.50 01/01/36 10,395,400
4,000 Cook County, Illinois, Ser 1992 C (FGIC) .................................. 6.00 11/15/09 4,583,720
10,000 Massachusetts, Ser 2000 C ................................................. 5.75 10/01/15 11,087,600
South Carolina,
12,000 Highway Ser 1999 A ....................................................... 4.60 05/01/18 11,836,200
10,000 Highway Ser 1999 A ....................................................... 4.60 05/01/19 9,776,600
2,000 Houston, Texas, Refg Ser 2000 (FSA) ....................................... 5.75 03/01/18 2,157,740
5,000 Houston Independent School District, Texas, School & Refg
Ser 1999 A (PSF) ......................................................... 5.25 02/15/18 5,118,100
5,000 Northside Independent School District, Texas, Building & Refg
Ser 2001 (PSF) ........................................................... 5.00 02/15/26 4,944,150
5,000 San Antonio, Texas, Refg Ser 1992 ......................................... 5.75 08/01/13 5,102,100
14,790 Washington, Ser 1993 A .................................................... 5.75 10/01/17 15,420,054
--------- ------------
94,290 99,167,454
--------- ------------

EDUCATIONAL FACILITIES REVENUE (2.6%)
Arizona Board of Regents,
1,650 University of Arizona, Ser 2001 A COPs (Ambac) ........................... 5.50 06/01/15 1,800,051
1,740 University of Arizona, Ser 2001 A COPs (Ambac) ........................... 5.50 06/01/16 1,882,628
1,835 University of Arizona, Ser 2001 A COPs (Ambac) ........................... 5.50 06/01/17 1,969,102
940 University of Arizona, Ser 2001 A COPs (Ambac) ........................... 5.50 06/01/18 1,002,679
5,000 Massachusetts Health & Educational Facilities Authority, Brandeis
University, 1998 Ser I (MBIA) ............................................ 4.75 10/01/28 4,752,850
Scranton-Lackawanna Health & Welfare Authority, Pennsylvania,
3,000 University of Scranton 1992 Ser A ........................................ 6.40 03/01/07 3,097,920
3,300 University of Scranton 1992 Ser A ........................................ 6.50 03/01/13 3,405,963
--------- ------------
17,465 17,911,193
--------- ------------

ELECTRIC REVENUE (7.6%)
9,000 Orlando Utilities Commission, Florida, Ser 1991 A ......................... 5.50 10/01/26 9,030,150
10,000 Municipal Electric Authority of Georgia, Power 1992 Ser B
(Secondary MBIA) ......................................................... 6.375 01/01/16 10,611,500
10,000 Long Island Power Authority, New York, Ser 2000 A (FSA) ................... 0.00 06/01/16 4,985,700
</TABLE>

See Notes to Financial Statements

8
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS o OCTOBER 31, 2001 CONTINUED

HOSPITAL REVENUE (5.4%)
5,000 Birmingham - Carraway Special Care Facilities Financing Authority,
Alabama, Carraway Methodist Health Ser 1995 A (Connie Lee) .......... 5.875 08/15/15 5,321,150
9,250 Massachusetts Health & Educational Facilities Authority,
Massachusetts General Hospital Ser F (Ambac) ........................ 6.00 07/01/15 9,837,375
10,000 Missouri Health & Educational Facilities Authority, Health Midwest
Ser 1992 B (MBIA) ................................................... 6.25 02/15/22 10,285,700
3,000 Lorain County, Ohio, Catholic Healthcare Partners Ser 2001 A .......... 5.625 10/01/17 3,114,750
3,000 Philadelphia Hospitals & Higher Education Facilities Authority,
Pennsylvania, Chestnut Hill Hospital Ser of 1992 .................... 6.375 11/15/11 3,032,880
5,000 South Dakota Health & Educational Facilities Authority, Queen of
Peace Hospital Ser 1992 (MBIA) ...................................... 6.70 07/01/17 5,227,550
--------- ------------
35,250 36,819,405
--------- ------------

INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (8.6%)
6,000 California Pollution Control Financing Authority, Keller Cannon
Landfill Co/Browning-Ferris Industries Inc Ser 1992 (AMT) ........... 6.875 11/01/27 6,081,540
5,000 Citrus County, Florida, Florida Power Corp Refg Ser 1992 B ............ 6.35 02/01/22 5,152,850
5,000 Michigan Strategic Fund, Detroit Edison Co Ser 2001 C (AMT) ........... 5.65 09/01/29 5,075,700
5,000 Washoe County, Nevada, Sierra Pacific Power Co Ser 1987 (AMT)
(MBIA) .............................................................. 6.65 06/01/17 5,298,100
15,000 Berkeley County, South Carolina, South Carolina Electric & Gas Co
Ser 1984 ............................................................ 6.50 10/01/14 15,910,500
10,000 Brazos River Authority, Texas, Houston Lighting & Power Co
Ser 1992 B (MBIA) ................................................... 6.375 04/01/12 10,556,700
10,000 Mason County, West Virginia, Appalachian Power Co Ser J ............... 6.60 10/01/22 10,299,400
--------- ------------
56,000 58,374,790
--------- ------------

MORTGAGE REVENUE - MULTI-FAMILY (6.3%)
7,000 Illinois Housing Development Authority, Ser 1 ......................... 6.625 09/01/12 7,243,180
15,705 Michigan Housing Development Authority, Rental 1992 Ser A
(Bifurcated FSA) .................................................... 6.50 04/01/23 16,300,691
</TABLE>

See Notes to Financial Statements

9
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS o OCTOBER 31, 2001 CONTINUED

PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Missouri Housing Development Commission,
$ 5,355 Federally Insured Mortgage Loans Refg Ser 11/15/92 ................ 6.50 % 07/01/16 $ 5,407,586
6,795 Federally Insured Mortgage Loans Refg Ser 11/15/92 ................ 6.60 07/01/24 6,862,406
7,000 New Jersey Housing Mortgage Finance Agency, Home Buyer
Ser 2000 CC (AMT) (MBIA) .......................................... 5.875 10/01/31 7,262,570
--------- ------------
41,855 43,076,433
--------- ------------

MORTGAGE REVENUE - SINGLE FAMILY (7.4%)
16,495 Connecticut Housing Finance Authority, 1992 Ser B .................. 6.70 11/15/12 17,123,130
4,335 Georgia Housing & Finance Authority, Home Ownership 1992 Ser C...... 6.50 12/01/11 4,465,657
7,000 Idaho Housing & Finance Association, 2000 Ser E (AMT) .............. 6.00 01/01/32 7,301,770
975 Idaho Housing Agency, 1992 Ser E (AMT) ............................. 6.75 07/01/12 1,005,449
2,995 Maryland Community Development Administration, 2000 Ser D (AMT). 6.25 09/01/32 3,186,470
Minnesota Housing Finance Agency,
2,530 Ser 1992 D-1 ...................................................... 6.50 01/01/17 2,617,108
5,905 Ser 1992 CD-1 (AMT) ............................................... 6.75 07/01/23 6,102,995
1,890 Missouri Housing Development Commission, Homeownership Loan
Program, Ser 2000 B-1 (AMT) ....................................... 6.25 03/01/31 1,995,197
6,255 Montana Board of Housing, 2000 Ser B (AMT) ......................... 6.00 12/01/29 6,514,082
--------- ------------
48,380 50,311,858
--------- ------------

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 11,455,762
------------
PUBLIC FACILITIES REVENUE (3.8%)
5,000 Phoenix Industrial Development Authority, Arizona, Capital Mall LLC
Ser 2000 (Ambac) .................................................. 5.50 09/15/27 5,222,950
10,000 Indiana Bond Bank, Revolving Fund Ser 2001 A (WI) .................. 5.00 02/01/23 9,960,300
7,370 Indianapolis Local Public Improvement Bond Bank, Indiana,Ser 1992 D 6.75 02/01/20 7,875,656
3,000 Albuquerque, New Mexico, Gross Receipts Refg Ser 1999 C ............ 5.25 07/01/17 3,103,050
--------- ------------
25,370 26,161,956
--------- ------------

RECREATIONAL FACILITIES REVENUE (1.5%)
10,000 Atlanta Downtown Development Authority, Georgia, Underground
--------- Atlanta Refg Ser 1992 ............................................. 6.25 10/01/16 10,491,800
------------
TRANSPORTATION FACILITIES REVENUE (12.6%)
4,000 Colorado Department of Transportation, Ser 2001 A (MBIA) ........... 5.50 06/15/16 4,348,520
</TABLE>

See Notes to Financial Statements

10
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS o OCTOBER 31, 2001 CONTINUED

PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dade County, Florida,
$ 3,000 Aviation 1992 Ser B (AMT) (MBIA) ......................................... 6.55 % 10/01/13 $ 3,151,410
5,000 Aviation 1992 Ser B (AMT) (MBIA) ......................................... 6.60 10/01/22 5,268,100
5,000 Atlanta, Georgia, Airport Ser 2000 A (FGIC) ............................... 5.50 01/01/26 5,226,350
13,000 Chicago, Illinois, Chicago O'Hare Int'l Terminal Ser 1992 (AMT) (MBIA) 6.75 01/01/12 13,340,340
4,000 Regional Transportation Authority, Illinois, Refg Ser 1999 (FSA) .......... 5.75 06/01/21 4,495,160
7,500 Indiana Transportation Finance Authority, Ser 2000 ........................ 5.375 12/01/25 7,708,500
3,000 Kansas, Department of Transportation Ser 2000 A ........................... 5.75 09/01/16 3,319,020
3,400 Maine Turnpike Authority, Ser 2000 (FGIC) ................................. 5.50 07/01/30 3,557,998
6,000 St Louis, Missouri, Lambert - St. Louis Int'l Airport Ser 2001 A
(MBIA) ................................................................... 5.00 07/01/26 5,915,880
4,595 Nevada Department of Business and Industry, Las Vegas Monorail
Project, 1st Tier Ser 2000 (Ambac) ....................................... 0.00 01/01/22 1,588,813
New Jersey Transportation Trust Fund Authority,
5,000 1998 Ser A (FSA) ......................................................... 4.50 06/15/19 4,782,600
5,000 1999 Ser A ............................................................... 5.75 06/15/20 5,639,750
6,000 Puerto Rico Highway & Transportation Authority, Refg Ser V ................ 6.625 07/01/12 6,252,900
Houston, Texas,
6,000 Airport Sub Lien Ser 2000 A (AMT) (FSA) .................................. 5.875 07/01/17 6,369,480
5,000 Airport Sub Lien Ser 2000 A (AMT) (FSA) .................................. 5.625 07/01/30 5,166,800
--------- ------------
85,495 86,131,621
--------- ------------
WATER & SEWER REVENUE (16.3%)
4,000 Birmingham, Alabama, Water & Sewer Ser 1998 A ............................. 4.75 01/01/21 3,863,000
6,000 Tampa Bay Water Authority, Florida, Ser 1998 B (FGIC) ..................... 4.75 10/01/27 5,762,940
10,000 Augusta, Georgia, Water and Sewerage Ser 2000 (FSA) ....................... 5.25 10/01/30 10,256,100
3,500 Clayton County Water Authority, Georgia, Ser 2001 ......................... 5.125 05/01/23 3,544,240
5,000 Douglasville-Douglas County Water & Sewer Authority, Georgia,
Ser 1998 (FGIC) .......................................................... 4.50 06/01/23 4,647,050
5,000 Louisville & Jefferson County Metropolitan Sewer District, Kentucky,
Ser 1999 A (FGIC) ........................................................ 5.75 05/15/33 5,351,200
Massachusetts Water Resources Authority,
5,000 Refg 1992 Ser B .......................................................... 5.50 11/01/15 5,215,150
10,000 1998 Ser A (FSA) ......................................................... 4.50 08/01/22 9,272,800
5,000 2000 Ser A (FGIC) ........................................................ 5.75 08/01/39 5,375,400
3,000 Rio Rancho, New Mexico, Water & Wastewater Refg Ser 1999
(Ambac) .................................................................. 5.25 05/15/19 3,069,240
20,000 New York City Municipal Water Finance Authority, New York,
Ser 2001 B ............................................................... 5.00 06/15/26 19,747,800
</TABLE>

See Notes to Financial Statements

<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS o OCTOBER 31, 2001 CONTINUED

PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 4,500 Charlotte, North Carolina, Water & Sewer System Ser 2001 ............. 5.125% 06/01/26 $ 4,579,650
4,000 Western Carolina Regional Sewer Authority, South Carolina,
Ser 2001 (FSA) ...................................................... 5.375 03/01/18 4,183,360
10,000 Austin, Texas, Water & Wastewater Refg Ser 2001 A (FSA) .............. 5.125 05/15/27 10,032,700
13,960 San Antonio, Texas, Water & Refg Ser 2001 (FGIC) ..................... 5.00 05/15/26 13,842,736
2,000 Fairfax County Water Authority, Virginia, Refg Ser 1992 .............. 6.00 04/01/22 2,179,180
--------- ------------
110,960 110,922,546
--------- ------------
OTHER REVENUE (0.3%)
2,000 Philadelphia, Pennsylvania, Gas Works First Ser 1998 B (FSA) ......... 5.00 07/01/28 1,974,620
--------- ------------
REFUNDED (6.5%)
7,500 Alaska Housing Finance Corporation, Gen Hsg 1992 Ser A ............... 6.60 12/01/02+ 7,753,125
14,285 Massachusetts Water Pollution Abatement Trust, Ser 1998 A (ETM) ...... 4.75 08/01/18 14,465,562
5,000 Hastings, Nebraska, Refg Ser 1992 .................................... 6.30 01/01/03+ 5,327,900
10,000 New York State Medical Care Facilities Agency, The Mount Sinai
Hospital - FHA Insured Mortgage 1992 Ser C** ........................ 5.75 02/15/08+ 10,943,000
5,000 Dauphin County General Authority, Pennsylvania, HAPSO Group Inc/
The Western Pennsylvania Hospital Refg 1992 Ser A (ETM) (MBIA) ...... 6.25 07/01/16 5,846,550
--------- ------------
41,785 44,336,137
--------- ------------
635,165 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Cost $607,108,344) .......................................... 648,586,350
--------- ------------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (4.8%)
3,500 East Baton Rouge Parish, Louisianna, Exxon Corp Ser 1989
(Demand 11/01/01) ................................................... 1.85* 03/01/22 3,500,000
13,400 Missouri Health & Educational Facilities Authority, Washington
University Ser 2000 C (Demand 11/01/01) ............................. 2.00* 03/01/40 13,400,000
8,400 Harris County Health Facilities Development Corporation, Texas,
YMCA of Houston Area Ser 1999 (Demand 11/01/01) ..................... 2.00* 07/01/34 8,400,000
7,045 Houston, Texas, Water & Sewer Jr Lien Refg Ser 1991 C (Ambac) ........ 6.375 12/01/01+ 7,210,910
--------- ------------
32,345 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Cost $32,165,118)........................... 32,510,910
--------- ------------
$ 667,510 TOTAL INVESTMENTS (Cost $639,273,462) (a) ............................................ 100.0% 681,097,260
=========
OTHER ASSETS IN EXCESS OF LIABILITIES ................................................ 0.0 5,317
------ ------------
NET ASSETS ........................................................................... 100.0% $681,102,577
====== ============
</TABLE>

See Notes to Financial Statements

12
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS o OCTOBER 31, 2001 CONTINUED

-------------------------------------------------------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to maturity.
WI Security purchased on a "when-issued" basis.
+ Prerefunded to call date shown.
* Current coupon of variable rate demand obligation.
** This security is 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 and net unrealized
appreciation is $41,823,798.

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.

Geographic Summary of Investments
Based on Market Value as a Percent of Net Assets

Alabama ................. 1.4% Illinois ................ 5.9%
Alaska ................... 1.1 Indiana ................. 3.8
Arizona ................. 1.7 Kansas .................. 0.5
California ............... 0.9 Kentucky ................. 0.8
Colorado ................. 1.2 Louisiana ................ 0.5
Connecticut .............. 2.5 Maine ................... 0.5
Florida .................. 4.2 Maryland ................. 0.5
Georgia .................. 7.2 Massachusetts ........... 8.8
Hawaii ................... 2.2 Michigan ................. 3.1
Idaho .................... 1.2 Minnesota ................ 3.0

Missouri ................ 6.4% Puerto Rico .............. 0.9%
Montana ................. 1.0 South Carolina ........... 6.1
Nebraska ................ 0.8 South Dakota ........... 0.8
Nevada ................... 1.0 Texas ................... 12.4
New Jersey ............... 2.6 Virginia ................ 0.3
New Mexico ............. 0.9 Washington ............... 3.8
New York ................. 5.2 West Virginia ........... 1.5
North Carolina ......... 0.7 -----
Ohio .................... 2.0 Total ................... 100.0%
Pennsylvania ............ 2.6 =====

See Notes to Financial Statements

13
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
October 31, 2001

<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at value
(cost $639,273,462).................................................... $681,097,260
Cash ................................................................... 126,366
Receivable for:
Interest ............................................................. 10,154,393
Investments sold ..................................................... 75,781
Prepaid expenses ....................................................... 348,295
------------
TOTAL ASSETS ......................................................... 691,802,095
------------
LIABILITIES:
Payable for:
Investments purchased ................................................ 9,807,000
Dividends to preferred shareholders .................................. 392,219
Investment management fee ............................................ 215,445
Common shares of beneficial interest repurchased ..................... 158,665
Accrued expenses ....................................................... 126,189
------------
TOTAL LIABILITIES .................................................... 10,699,518
------------
NET ASSETS ........................................................... $681,102,577
============

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, 29,742,820 shares outstanding)......................... 416,255,335
Net unrealized appreciation ............................................ 41,823,798
Accumulated undistributed net investment income ........................ 3,324,769
Accumulated undistributed net realized gain ............................ 11,698,675
------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ......................... 473,102,577
------------
TOTAL NET ASSETS ..................................................... $681,102,577
============
NET ASSET VALUE PER COMMON SHARE
($473,102,577 divided by 29,742,820 common shares outstanding).......... $15.91
======
</TABLE>

See Notes to Financial Statements

14
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS CONTINUED

STATEMENT OF OPERATIONS
For the year ended October 31, 2001

NET INVESTMENT INCOME:
<S> <C>
INTEREST INCOME ............................... $38,711,910
-----------
EXPENSES
Investment management fee ..................... 2,381,048
Auction commission fees ....................... 660,784
Transfer agent fees and expenses .............. 139,567
Professional fees ............................. 110,442
Shareholder reports and notices ............... 47,028
Auction agent fees ............................ 41,009
Registration fees ............................. 32,113
Custodian fees ................................ 31,903
Trustees' fees and expenses ................... 20,509
Other ......................................... 48,474
-----------
TOTAL EXPENSES .............................. 3,512,877

Less: expense offset .......................... (31,849)
-----------
NET EXPENSES ................................ 3,481,028
-----------
NET INVESTMENT INCOME ....................... 35,230,882
-----------

NET REALIZED AND UNREALIZED GAIN:
Net realized gain ............................. 11,698,710
Net change in unrealized appreciation ......... 10,834,159
-----------
NET GAIN .................................... 22,532,869
-----------
NET INCREASE .................................. $57,763,751
===========
</TABLE>

See Notes to Financial Statements

15
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS CONTINUED

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2001 OCTOBER 31, 2000
------------------ -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income .......................................................... $ 35,230,882 $ 36,984,845
Net realized gain .............................................................. 11,698,710 4,965,229
Net change in unrealized appreciation .......................................... 10,834,159 2,723,226
------------ ------------
NET INCREASE ................................................................. 57,763,751 44,673,300
------------ ------------
Dividends to preferred shareholders from net investment income ................. (8,079,452) (8,231,899)
------------ ------------

DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM:
Net investment income .......................................................... (26,347,810) (29,155,707)
Net realized gain .............................................................. (3,847,396) -
------------ ------------
TOTAL ........................................................................ (30,195,206) (29,155,707)
------------ ------------
Decrease from transactions in common shares of beneficial interest ............. (14,261,185) (26,590,117)
------------ ------------
NET INCREASE (DECREASE) ...................................................... 5,227,908 (19,304,423)

NET ASSETS:
Beginning of period ............................................................ 675,874,669 695,179,092
------------ ------------
END OF PERIOD
(Including accumulated undistributed net investment income of $3,324,769 and
$2,529,092, respectively)....................................................... $681,102,577 $675,874,669
============ ============
</TABLE>

See Notes to Financial Statements

16
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS o OCTOBER 31, 2001

1. ORGANIZATION AND ACCOUNTING POLICIES

Morgan Stanley Quality Municipal Income Trust (the "Trust"), formerly Morgan
Stanley Dean Witter Quality Municipal Income Trust (the Trust's name changed
effective December 20, 2001), 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 substantially all of its taxable and nontaxable
income to its shareholders. Accordingly, no federal income tax provision is
required.

D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - The Trust records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment

17
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS o OCTOBER 31, 2001 CONTINUED

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 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 year ended October 31, 2001 aggregated
$127,153,984 and $158,266,166, respectively.

Morgan Stanley Trust, an affiliate of the Investment Manager, is the Trust's
transfer agent. At October 31, 2001, the Trust had transfer agent fees and
expenses payable of approximately $1,800.

The Trust has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Trust who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended October 31, 2001 included
in Trustees' fees and expenses in the Statement of Operations amounted to
$8,502. At October 31, 2001, the Trust had an accrued pension liability of
$45,766 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 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.

18
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS o OCTOBER 31, 2001 CONTINUED

Dividends, which are cumulative, are reset through auction procedures.

AMOUNT IN RESET RANGE OF
SERIES SHARES* THOUSANDS* RATE* DATE DIVIDEND RATES**
-------- --------- ------------ ---------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
1 1,120 $56,000 2.60% 09/04/02 2.60% - 4.40%
2 400 20,000 1.85 11/01/01 1.85 - 5.00
3 1,120 56,000 2.80 07/05/02 2.80 - 4.48
4 1,120 56,000 2.75 01/03/02 2.75 - 4.90
5 400 20,000 1.85 11/02/01 1.85 - 4.90
</TABLE>

------------
* As of October 31, 2001.
** For the year ended October 31, 2001.

Subsequent to October 31, 2001 and up through December 5, 2001, the Trust paid
dividends to each of the Series 1 through 5 at rates ranging from 1.30% to 2.80%
in the aggregate amount of $845,128.

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:

<TABLE>
<CAPTION>
CAPITAL
PAID IN
PAR EXCESS OF
SHARES VALUE PAR VALUE
---------- --------- -------------
<S> <C> <C> <C>
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 8.01%)* .... (996,100) (9,961) (14,251,224)
Reclassification due to permanent book/tax differences ...................... - - 3,631
---------- --------- -------------
Balance, October 31, 2001 ................................................... 29,742,820 $ 297,428 $ 415,957,907
========== ========= =============
</TABLE>

------------
* The Trustees have voted to retire the shares purchased.

19
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS o OCTOBER 31, 2001 CONTINUED

6. DIVIDENDS TO COMMON SHAREHOLDERS

On October 30, 2001, the Trust declared the following dividends from net
investment income:

AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
-------------- ------------------ ------------------
<S> <C> <C>
$ 0.0725 November 9, 2001 November 23, 2001
$ 0.0725 December 7, 2001 December 21, 2001
</TABLE>

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 October 31, 2001, the Trust did not hold positions in residual interest
bonds.

9. CHANGE IN ACCOUNTING POLICY

Effective November 1, 2001, the Trust will adopt the provisions of the AICPA
Audit and Accounting Guide for Investment Companies, as revised, related to
premiums and discounts on debt securities. The cumulative effect of this
accounting change will have no impact on the net assets of the Trust, but will
result in an adjustment to the cost of securities and a corresponding adjustment
to undistributed net investment income based on securities held as of October
31, 2001.

20
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
FINANCIAL HIGHLIGHTS

Selected ratios and per share data for a common share of beneficial interest
outstanding throughout each period:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31*
-----------------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................. $15.22 $14.88 $16.26 $15.91 $15.44
------ ------- ------ ------ -------
Income (loss) from investment operations:
Net investment income ............................... 1.16 1.17 1.16 1.19 1.20
Net realized and unrealized gain (loss) ............. 0.76 0.26 (1.36) 0.34 0.51
------ ------- ------ ------ -------
Total income (loss) from investment operations ....... 1.92 1.43 (0.20) 1.53 1.71
------ ------- ------ ------ -------
Less dividends and distributions from:

Net investment income ............................... (0.87) (0.93) (0.93) (0.93) (0.99)
Common share equivalent of dividends paid to
preferred shareholders ............................. (0.27) (0.26) (0.22) (0.23) (0.23)
Net realized gain ................................... (0.13) -- (0.05) (0.03) (0.03)
------ ------- ------ ------ -------
Total dividends and distributions .................... (1.27) (1.19) (1.20) (1.19) (1.25)
------ ------- ------ ------ -------
Anti-dilutive effect of acquiring treasury shares..... 0.04 0.10 0.02 0.01 0.01
------ ------- ------ ------ -------
Net asset value, end of period ....................... $15.91 $ 15.22 $14.88 $16.26 $ 15.91
====== ======= ====== ====== =======
Market value, end of period .......................... $14.48 $13.313 $13.25 $15.75 $14.875
====== ======= ====== ====== =======
TOTAL RETURN+......................................... 16.59% 7.51% (10.21)% 12.66% 8.84%

RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS:
Expenses (before expense offset) ..................... 0.74% 0.75%(1) 0.73% 0.71%(1) 0.70%(1)
Net investment income before preferred stock
dividends ........................................... 7.47% 7.83% 7.32% 7.35% 7.68%
Preferred stock dividends ............................ 1.71% 1.74% 1.42% 1.45% 1.47%
Net investment income available to common
shareholders ........................................ 5.76% 6.09% 5.90% 5.90% 6.21%

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .............. $681,103 $675,875 $695,179 $750,329 $742,504
Asset coverage on preferred shares at end of
period .............................................. 325% 324% 333% 360% 356%
Portfolio turnover rate .............................. 19% 15% 21% 2% 2%
</TABLE>

------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total return is based upon the current market value on the last day of each
period reported. Dividends and distributions are assumed to be reinvested
at the prices obtained under the Trust's dividend reinvestment plan. Total
return does not reflect brokerage commissions.
(1) Does not reflect the effect of the expense offset of 0.01%.

See Notes to Financial Statements

21
<PAGE>

MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST
INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST:

We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Quality Municipal Income Trust (the "Trust"), formerly Morgan Stanley
Dean Witter Quality Municipal Income Trust, including the portfolio of
investments, as of October 31, 2001, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2001, by correspondence with the custodian
and broker. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Morgan
Stanley Quality Municipal Income Trust as of October 31, 2001, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.

Deloitte & Touche LLP
New York, New York
December 20, 2001

--------------------------------------------------------------------------------
2001 Federal Tax Notice (unaudited)

During the year ended October 31, 2001, the Trust paid the following
per share amounts from tax-exempt income: $0.91 to common
shareholders, $1,887 to Series 1 preferred shareholders, $1,352 to
Series 2 preferred shareholders, $1,811 to Series 3 preferred
shareholders, $1,438 to Series 4 preferred shareholders and $1,324 to
Series 5 preferred shareholders. For the year ended October 31, 2001,
the Trust paid the following per share amounts from long-term capital
gains: $0.09 to common shareholders, $330 to Series 1 preferred
shareholders, $336 to Series 2 preferred shareholders, $302 to Series
3 preferred shareholders, $254 to Series 4 preferred shareholders and
$366 to Series 5 preferred shareholders.
--------------------------------------------------------------------------------

22
<PAGE>

(This page has been left blank intentionally.)

<PAGE>

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 Trust
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311

INDEPENDENT AUDITORS

Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281

INVESTMENT MANAGER

Morgan Stanley Investment Advisors Inc.
1221 Avenue of the Americas
New York, New York 10020

[MORGAN STANLEY LOGO]

[GRAPHIC OMITTED]

MORGAN STANLEY
QUALITY MUNICIPAL
INCOME TRUST

ANNUAL REPORT
OCTOBER 31, 2001

</TEXT>
</DOCUMENT>