<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- - - - - --------------------------------------------------------------------------------
When InterCapital Quality Municipal Investment Trust (NYSE Symbol: IQT)
began its new fiscal year November 1993, municipal yields had reached record
lows in a trend that began six years ago. Strong economic growth in the fourth
quarter of 1993 prompted concern about inflation and caused interest rates to
rise. This induced the Federal Reserve Board to tighten monetary policy by
raising the federal-funds rate -- the interest rate that banks charge each other
for overnight loans -- from 3.00 percent to 3.75 percent in three separate moves
between early February and April. This action was presented as a preemptive
strike against inflation. However, the fixed-income markets interpreted the
change in Fed policy as the beginning of a trend toward higher interest rates.
In mid-May the Federal Reserve Board initiated another round of tightening with
a 50 basis point increase in both the federal-funds rate and the discount rate
- - - - - -- the interest rate the Federal Reserve charges member banks for loans.
By the end of April the bond market was battered. Interest rates were at
levels not seen in over a year. Long-term municipal bond yields as measured by
THE BOND BUYER Revenue Bond Index* increased by 86 basis points from 5.56
percent to 6.42 percent between November and April. This corresponded to a price
decline of more than 12 percent.
New-issue underwriting totaled $290 billion in 1993, a 23 percent increase
over the previous high of $235 billion set in 1992. Refunding issues, which are
used by state and local governments to refinance higher-coupon debt, represented
66 percent of total volume last year. It is estimated that 1994's underwriting
volume will decline by 30 percent to about $200 billion and that approximately
$260 billion in bonds will either mature or be called. Thus, the amount of
municipal debt outstanding will be reduced. In line with these projections,
new-issue volume for the first four months of 1994 declined by 34 percent and
totaled $59 billion. Refunding activity, the catalyst of last year's record
underwriting, dropped even more sharply.
PERFORMANCE
For the six-month period ended April 30, 1994, the Trust paid shareholders
tax-free income dividends totaling $0.69 per share, including an extra income
dividend of $0.15 per share distributed in December. IQT's total return for this
period was -8.14 percent. This calculation is based on a change in the Trust's
New York Stock Exchange market price from $16.625 on October 31, 1993 to $14.625
per share on April 30, 1994 and includes the reinvestment of all dividends and
distributions. Over the same period, the Trust's net asset value (NAV) fell by
10.3 percent from $16.53 to $14.82 per share. Although IQT is leveraged with
Auction Rate Preferred Shares (as discussed below), its NAV decline was in line
with the unleveraged Revenue Bond Index. The defensive nature of the high-coupon
bonds in the portfolio aided performance. As of April 30, 1994, the Trust was
trading at 1.32 percent discount to NAV.
PORTFOLIO STRUCTURE
The portfolio's long-term investments were diversified among 14 municipal
sectors and 56 credits. The three largest sectors were hospital, single-family
mortgage and electric revenue bonds, representing 41 percent of net assets. The
average maturity and call protection of the Trust's long-term holdings were 22
years and 8 years, respectively. Bonds subject to the alternative minimum tax
(AMT) represented
- - - - - ---------------
* THE BOND BUYER Revenue Bond Index is an arithmetic average of the yields of 25
selected municipal revenue bonds with 30-year maturities. Ratings of these bonds
range from Aaa to Baa1 by Moody's and AAA to A- by S&P.
<PAGE>
approximately 26 percent of net assets. At the end of the period, the Trust's
net assets exceeded $415 million. The credit quality ratings of the long-term
portfolio are summarized below:
<TABLE>
<CAPTION>
MOODY'S OR STANDARD & POOR'S RATING: PERCENT:
- - - - - ------------------------------------------------------------ -----------
<S> <C>
Aaa or AAA.................................................. 35.8%
Aa or AA.................................................... 32.0
A1 or A+.................................................... 12.2
A or A...................................................... 18.7
Baa or BBB.................................................. 1.3
-----------
100.0%
-----------
-----------
</TABLE>
PREFERRED SHARE LEVERAGE
In addition to common shares, the Trust has also issued two $70 million
series of Auction Rate Preferred Shares (ARPS). Dividend and distribution
payments for these shares rank ahead of the common shares. ARPS are short-term
securities with maturities normally ranging from one week to one year. The
dividend rates on tax-free ARPS are established by an auction process, when the
maturity is rolled over. The Trust uses the proceeds from ARPS issuance to
purchase long-term municipal bonds.
The common shares are impacted by the preferred shares in two ways. First,
following the payment of the dividend on the ARPS, common shares receive any
extra incremental income when the long-term portfolio yield is higher than the
cost of the ARPS (yield plus expenses). Second, the preferred shares leverage
the common shares by a factor of approximately 1.5 times, thus multiplying any
market change in NAV. Over the past six months, incremental tax-free income from
the ARPS leverage maintained common share dividends and increased the level or
cushion of undistributed net investment income. As of April 30, 1994, an amount
equivalent to $0.125 per share had been accumulated in this cushion to help
sustain the Trust's current dividend. The average ARPS rate on the Trust's two
outstanding series as of April 30, 1994 was 2.77 percent, with all resets
scheduled to occur within the next nine months. Higher yields in future ARPS
auctions may begin to erode the Trust's cushion of undistributed net investment
income available for distribution to common shareholders. If the cushion were to
erode significantly over time, the Trust would take appropriate action, which
could include an adjustment in the common dividend and/or a reduction in the
amount of ARPS.
Leverage was a positive influence on the overall value of the portfolio for
the first two years of the Trust's existence. However, the increase in interest
rates over the past few months has adversely impacted NAV.
LOOKING AHEAD
A continuation of low new-issue supply, coupled with significant bond calls
and maturities should sustain investor demand for municipals. However, the
overall direction of interest rates will primarily be determined by the strength
of the economy, the trend of inflation and the Federal Reserve Board's response
to economic conditions.
The Trust's procedure for reinvestment of all dividends and distributions on
common shares is by purchase in the open market. This method helps to support
the market value of the Trust's shares. In addition, the Trustees have approved
a procedure whereby the Trust may attempt to reduce or eliminate a market value
discount from net asset value by repurchasing common shares in the open market
or in privately negotiated transactions. The Trust may also utilize procedures
to reduce or eliminate the amount of outstanding ARPS, including their
repurchase in the open market or in privately negotiated transactions.
We appreciate your support of InterCapital Quality Municipal Investment
Trust and look forward to continuing to serve your investment needs.
Very truly yours,
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS APRIL 30, 1994 (UNAUDITED)
- - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - - - - ----------- ----------- --------- -------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (93.7%)
GENERAL OBLIGATION (2.1%)
$ 5,000 New York City, New York, 1991 Ser D Group C (Prerefunded)............. 8.00 % 8/ 1/18 $ 5,898,200
3,195 Seattle, Washington, Refg Ser 1993.................................... 5.65 1/ 1/20 2,890,803
- - - - - ----------- -------------
8,195 8,789,003
- - - - - ----------- -------------
EDUCATIONAL FACILITIES REVENUE (0.5%)
2,500 Auburn University, Alabama, Ser 1993 (MBIA Insured)................... 5.25 6/ 1/13 2,223,400
- - - - - ----------- -------------
ELECTRIC REVENUE (10.9%)
6,000 Indiana Municipal Power Agency, 1990 Ser A (Prerefunded).............. 7.10 1/ 1/15 6,630,360
7,600 North Carolina Municipal Power Agency #1, Catawba Ser 1992............ 6.25 1/ 1/15 7,454,764
2,500 South Carolina Public Service Authority, 1991 Refg & Impr Ser B
(Prerefunded)....................................................... 7.10 7/ 1/21 2,802,875
12,000 San Antonio, Texas, Electric & Gas Refg Ser 1994...................... 5.00 2/ 1/14 10,298,040
4,500 Intermountain Power Agency, Utah, Refg Fifth Crossover Ser............ 7.20 7/ 1/19 4,788,360
13,000 Washington Public Power Supply System, Proj #1 Refg Ser 1991 A........ 6.875 7/ 1/17 13,286,130
- - - - - ----------- -------------
45,600 45,260,529
- - - - - ----------- -------------
HOSPITAL REVENUE (16.0%)
10,000 Wichita, Kansas, CSJ Health System of Wichita Inc Ser 1991............ 7.00 11/15/18 10,250,900
Massachusetts Health & Educational Facilities Authority,
10,000 Brigham & Women's Hospital Ser D.................................... 6.75 7/ 1/24 10,203,900
5,000 St Elizabeth's Hospital of Boston Ser E LevRRS (FSA Insured).......... 10.63 + 8/15/21 5,337,500
7,000 Charlotte-Mecklenburg Hospital Authority, North Carolina, Ser 1992.... 6.25 1/ 1/20 6,850,410
9,000 Lorain County, Ohio, Humility of Mary Health Care Corp Ser 1991 B..... 7.20 12/15/11 9,457,650
11,000 Middleburg Heights, Ohio, Southwest General Hospital Ser 1991......... 7.20 8/15/19 11,815,100
2,300 Tulsa Industrial Development Authority, Oklahoma, St Francis Hospital
Ser 1991 (Prerefunded).............................................. 6.75 12/15/18 2,527,332
6,000 Salt Lake City, Utah, IHC Hospitals Inc Refg Ser 1991 Special Linked
INFLOS & PARS (AMBAC Insured)....................................... 6.61 5/15/20 6,084,420
3,500 Arlington County, Virginia, The Arlington Hospital Ser 1991-A
(Prerefunded)....................................................... 7.125 9/ 1/21 3,931,515
- - - - - ----------- -------------
63,800 66,458,727
- - - - - ----------- -------------
INDUSTRIAL DEVELOPMENT / POLLUTION CONTROL REVENUE (7.8%)
5,000 Valdez, Alaska, BP Pipelines Inc Refg Ser 1993 B...................... 5.50 10/ 1/28 4,309,400
1,000 St Lucie County, Florida, Florida Power & Light Co Ser 1991 (AMT)..... 7.15 2/ 1/23 1,044,080
4,500 Hawaii Department of Budget & Finance, Citizen Utilities Co 1991 Ser B
RIBS (AMT).......................................................... 10.308+ 11/ 1/21 4,550,625
5,000 Chicago, Illinois, Chicago-O'Hare Int'l Airport/Lufthansa German
Airlines Inc Ser 1990 (AMT)......................................... 7.125 5/ 1/18 5,193,150
2,650 Ashland, Kentucky, Ashland Oil Inc Ser 1991 (AMT)..................... 7.20 10/ 1/20 2,741,266
2,000 New York State Energy Research & Development Authority, Brooklyn Union
Gas Co 1991 Ser B RIBS (AMT)........................................ 11.034+ 7/15/26 2,155,000
12,000 Richland County, South Carolina, Union Camp Corp Ser 1991 B (AMT)..... 7.125 9/ 1/21 12,637,560
- - - - - ----------- -------------
32,150 32,631,081
- - - - - ----------- -------------
MORTGAGE REVENUE--MULTI-FAMILY (6.4%)
10,000 Illinois Housing Development Authority, 1991 Ser A.................... 8.25 7/ 1/16 10,889,900
15,000 New Jersey Housing & Mortgage Finance Agency, Presidential Plaza at
Newport -- FHA Insured Mortgages Refg 1991 Ser 1.................... 7.00 5/ 1/30 15,590,100
- - - - - ----------- -------------
25,000 26,480,000
- - - - - ----------- -------------
</TABLE>
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS APRIL 30, 1994 (UNAUDITED) (CONTINUED)
- - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - - - - ----------- ----------- --------- -------------
<C> <S> <C> <C> <C>
MORTGAGE REVENUE--SINGLE FAMILY (14.4%)
$ 6,685 California Housing Finance Agency, Home 1991 Ser G (AMT)...... 7.05% 8/ 1/27 $ 6,829,529
12,775 Colorado Housing Finance Authority, Refg 1991 Ser A........... 7.25 11/ 1/31 13,029,223
1,125 District of Columbia Housing Finance Agency, GNMA
Collateralized Ser 1990 B (AMT)............................. 7.10 12/ 1/24 1,156,354
4,635 Maine Housing Authority, Purchase 1988 Series D-6 (AMT)....... 7.25 11/15/19 4,740,307
3,000 Michigan Housing Development Authority, 1991 Ser B............ 6.95 12/ 1/20 3,071,340
10,200 Nebraska Investment Finance Authority, GNMA-Backed Ser A & B
Special Linked RIBS & SAVRS (AMT)........................... 6.88 9/19/23 10,404,714
5,000 New Hampshire Housing Finance Authority, Residential 1991 Ser
D (AMT)..................................................... 7.25 7/ 1/15 5,133,850
2,950 Ohio Housing Finance Agency, GNMA-Backed 1991 Ser A-2 RIBS
(AMT)....................................................... 10.855+ 3/24/31 3,012,688
4,000 Tennessee Housing Development Agency, Homeownership Issue T
(AMT)....................................................... 7.375 7/ 1/23 4,118,720
5,000 Virginia Housing Development Authority, 1992 Ser A............ 7.15 1/ 1/33 5,164,800
3,000 Wyoming Community Development Authority, Federally
Insured/Guaranteed Loans 1988 Ser G (AMT)................... 7.25 6/ 1/21 3,082,200
- - - - - ----------- ------------
58,370 59,743,725
- - - - - ----------- ------------
NURSING & LIFE CARE REVENUE (7.1%)
New York State Medical Care Facilities Finance Agency,
2,700 Mental Health 1991 Ser C.................................... 7.30 2/15/21 2,913,003
9,300 Mental Health 1991 Ser C (Prerefunded)........................ 7.30 2/15/21 10,605,906
15,000 Emmaus General Authority, Pennsylvania, Local Government Ser
1988 H (FGIC Insured)....................................... 7.00 5/15/18 15,845,700
- - - - - ----------- ------------
27,000 29,364,609
- - - - - ----------- ------------
PUBLIC FACILITIES REVENUE (2.9%)
Regional Convention & Sports Complex Authority, Missouri,
6,000 St Louis County Ser 1991 B (Prerefunded).................... 7.00 8/15/21 6,670,500
5,000 State Ser 1991 A (Prerefunded)................................ 6.90 8/15/21 5,503,500
- - - - - ----------- ------------
11,000 12,174,000
- - - - - ----------- ------------
RESOURCE RECOVERY REVENUE (6.0%)
3,750 Broward County, Florida, SES Broward Co South Ser 1984........ 7.95 12/ 1/08 4,145,063
Detroit Economic Development Corporation, Michigan,
5,000 Ser 1991 A (AMT) (FSA Insured)................................ 6.60 5/ 1/02 5,259,750
5,000 Ser 1991 A (AMT) (FSA Insured)................................ 6.875 5/ 1/09 5,244,200
10,000 Montgomery County Industrial Development Authority,
Pennsylvania, Ser 1989...................................... 7.50 1/ 1/12 10,518,400
- - - - - ----------- ------------
23,750 25,167,413
- - - - - ----------- ------------
STUDENT LOAN REVENUE (1.7%)
6,500 Pennsylvania Higher Education Assistance Agency, 1991 Ser B
RIBS (AMT) (AMBAC Insured).................................. 10.586+ 9/ 3/26 6,881,875
------------
TRANSPORTATION FACILITIES REVENUE (9.8%)
4,500 Metropolitan Atlanta Rapid Transit Authority, Georgia, Sales
Tax Ser I (Prerefunded)..................................... 7.00 7/ 1/16 4,749,345
12,000 Hawaii, Airport Second Ser of 1991 (AMT)...................... 6.90 7/ 1/12 12,690,600
6,000 Chicago, Illinois, Chicago-O'Hare Int'l Airport Refg 1993 Ser
A........................................................... 5.00 1/ 1/16 4,997,460
10,000 Port Authority of New York & New Jersey, Cons Ser 60
(AMT)**..................................................... 8.25 4/ 1/23 10,502,000
3,000 Puerto Rico Highway & Transportation Authority, Refg Ser X.... 5.25 7/ 1/21 2,537,610
5,000 Houston, Texas, Airport Sub Lien Ser 1991 A (AMT) (FGIC
Insured).................................................... 6.75 7/ 1/21 5,108,950
- - - - - ----------- ------------
40,500 40,585,965
- - - - - ----------- ------------
</TABLE>
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS APRIL 30, 1994 (UNAUDITED) (CONTINUED)
- - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - - - - ----------- ----------- --------- -------------
<C> <S> <C> <C> <C>
WATER AND SEWER REVENUE (6.8%)
Massachusetts Water Resources Authority,
$ 7,000 1991 Ser A (Prerefunded)...................................... 6.875% 12/ 1/11 $ 7,784,490
3,500 1990 Ser A (Prerefunded)...................................... 7.00 4/ 1/18 3,867,150
5,000 New York City Municipal Water Finance Authority, New York,
1991 Ser C
(Prerefunded)............................................... 7.375 6/15/14 5,702,050
10,000 Seattle, Washington, Drainage & Wastewater Utility 1990....... 7.125 12/ 1/20 10,774,200
- - - - - ----------- ------------
25,500 28,127,890
- - - - - ----------- ------------
OTHER REVENUE (1.3%)
5,000 New York Local Government Assistance Corporation, Ser 1991 C
(Prerefunded)............................................... 7.00 4/ 1/21 5,590,450
- - - - - ----------- ------------
374,865 TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $375,449,571)............................ 389,478,667
------------
SHORT-TERM MUNICIPAL OBLIGATIONS (4.1%)
5,000 Dade County, Florida, Water & Sewer Ser 1994 (FGIC Insured)
(Tender 5/4/94)............................................. 2.80* 10/ 5/22 5,000,000
12,000 Gulf Coast Waste Disposal Authority, Texas, Amoco Oil Co Ser
1992 (Tender 5/2/94)........................................ 2.90* 10/ 1/17 12,000,000
- - - - - ----------- ------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS
(IDENTIFIED COST $17,000,000)......................................... 17,000,000
17,000
-------------
$ 391,865 TOTAL INVESTMENTS (IDENTIFIED COST $392,449,571) (A)...................... 97.8% 406,478,667
- - - - - -----------
- - - - - -----------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................ 2.2 9,301,052
---------- -------------
NET ASSETS................................................................ 100.0 % $ 415,779,719
---------- -------------
---------- -------------
<FN>
- - - - - ---------------
+ CURRENT COUPON RATE FOR RESIDUAL INTEREST BONDS. THIS RATE RESETS
PERIODICALLY AS THE AUCTION RATE ON THE RELATED SHORT-TERM SECURITIES
FLUCTUATES.
* VARIABLE OR FLOATING RATE SECURITIES. COUPON RATE SHOWN REFLECTS CURRENT
RATE.
** JOINTLY ISSUED BY NEW YORK AND NEW JERSEY.
(A) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $392,449,571; THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $17,454,438 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $3,425,342, RESULTING IN NET UNREALIZED
APPRECIATION OF $14,029,096.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- - - - - --------------------------------------------------------------------------------
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
APRIL 30, 1994 (UNAUDITED)
- - - - - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Alabama........... 0.5 %
Arkansas.......... 1.1
California........ 1.7
Colorado.......... 3.1
District of
Columbia......... 0.3
Florida........... 2.5
Georgia........... 1.1
Hawaii............ 4.2
Illinois.......... 5.1
Indiana........... 1.6 %
Kansas............ 2.5
Kentucky.......... 0.7
Maine............. 6.5
Massachusetts..... 1.1
Michigan.......... 3.3
Missouri.......... 2.9
North Carolina.... 3.4
Nebraska.......... 2.5
New Hampshire..... 1.2 %
New Jersey........ 3.8
New York.......... 7.9
Ohio.............. 5.8
Oklahoma.......... 0.6
Pennsylvania...... 8.0
Puerto Rico....... 0.6
South Carolina.... 3.7
Tennessee......... 1.0
Texas............. 6.6 %
Utah.............. 2.6
Virginia.......... 2.2
Washington........ 6.5
Wyoming........... 0.7
Joint Issuers..... 2.5
---
Total........... 97.8 %
---
---
</TABLE>
- - - - - --------------------------------------------------------------------------------
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
FINANCIAL STATEMENTS
- - - - - --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1994 (UNAUDITED)
- - - - - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $392,449,571) (Note
1).................................... $ 406,478,667
Cash.................................... 1,683,265
Interest receivable..................... 7,591,651
Deferred organizational expenses (Note
1).................................... 21,675
Prepaid expenses and other assets....... 215,814
-------------
TOTAL ASSETS.................... 415,991,072
-------------
LIABILITIES:
Investment management fee payable (Note
2).................................... 144,529
Accrued expenses (Note 3)............... 66,824
-------------
TOTAL LIABILITIES............... 211,353
-------------
NET ASSETS:
Preferred shares of beneficial interest
(1,000,000 shares authorized of non-
participating $.01 par value,
2,800 shares outstanding (Note 4)).... 140,000,000
-------------
Common shares of beneficial interest
(unlimited shares authorized of $.01
par value, 18,607,113 shares
outstanding (Note 5))................. 258,438,695
Accumulated undistributed net realized
gain on investments................... 984,263
Net unrealized appreciation on
investments........................... 14,029,096
Accumulated undistributed net investment
income................................ 2,327,665
-------------
NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS................ 275,779,719
-------------
TOTAL NET ASSETS................ $ 415,779,719
-------------
-------------
NET ASSET VALUE PER COMMON SHARE,
($275,779,719 divided by 18,607,113
common shares outstanding)............ $14.82
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1994 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME....................... $ 13,973,975
-------------
EXPENSES
Investment management fee (Note 2).. 759,114
Auction commission fees............. 265,919
Transfer agent fees and expenses.... 60,440
Professional fees................... 47,180
Auction agent fees.................. 16,593
Registration fees................... 14,660
Trustees' fees and expenses (Note
3)................................ 13,921
Shareholder reports and notices
(Note 3).......................... 5,420
Organizational expenses (Note 1).... 4,458
Other............................... 12,735
-------------
TOTAL EXPENSES.................. 1,200,440
-------------
NET INVESTMENT INCOME......... 12,773,535
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 1):
Net realized gain on investments.... 1,448,627
Net change in unrealized
appreciation on investments....... (31,246,514)
-------------
NET LOSS ON INVESTMENTS......... (29,797,887)
-------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS... $ (17,024,352)
-------------
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
APRIL 30, 1994 ENDED
(UNAUDITED) OCTOBER 31, 1993
--------------- -----------------
INCREASE (DECREASE) IN NET
ASSETS:
Operations:
Net investment income..... $ 12,773,535 $ 26,504,768
Net realized gain on
investments............. 1,448,627 (371,367)
Net change in unrealized
appreciation on
investments............. (31,246,514) 38,463,827
--------------- -----------------
Net increase
(decrease) in net
assets resulting from
operations........... (17,024,352) 64,597,228
--------------- -----------------
Dividends to preferred
shareholders from net
investment income.......... (1,934,645) (4,049,024)
Dividends to common
shareholders from net
investment income.......... (12,838,864) (22,886,316)
--------------- -----------------
Total dividends....... (14,773,509) (26,935,340)
--------------- -----------------
Total increase
(decrease)............ (31,797,861) 37,661,888
NET ASSETS:
Beginning of period......... 447,577,580 409,915,692
--------------- -----------------
END OF PERIOD (including
undistributed net
investment income of
$2,327,665 and $4,327,639,
respectively).............. $415,779,719 $447,577,580
--------------- -----------------
--------------- -----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- - - - - --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- InterCapital Quality Municipal
Investment Trust (the "Trust") is registered under the Investment Company Act of
1940, as amended, as a diversified closed-end management investment company. It
was organized on July 2, 1991 as a Massachusetts business trust and commenced
operations on September 27, 1991.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued for the
Trust by an outside independent pricing service approved by the Trustees.
The pricing service has informed the Trust that in valuing the Trust's
portfolio securities, it uses both a computerized grid matrix of tax-exempt
securities and evaluations by its staff, in each case based on information
concerning market transactions and quotations from dealers which reflect the
bid side of the market each day. The Trust's portfolio securities are thus
valued by reference to a combination of transactions and quotations for the
same or other securities believed to be comparable in quality, coupon,
maturity, type of issue, call provisions, trading characteristics and other
features deemed to be relevant.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). In computing net
investment income, the Trust amortizes premiums and original issue discounts
on fixed income securities. Additionally, with respect to market discount on
bonds purchased after April 30, 1993, a portion of any capital gain realized
upon disposition is recharacterized as taxable investment income. Realized
gains and losses on security transactions are determined on the identified
cost method. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records
dividends and distributions to its shareholders on the ex-dividend date. The
amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent that 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 reclassifications.
Dividends and distributions which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent that
they exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in-capital.
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- - - - - --------------------------------------------------------------------------------
E. ORGANIZATIONAL EXPENSES -- The Trust's Investment Manager paid the
organizational expenses of the Trust's common shares in the amount of
$45,000 and are being amortized by the straight-line method over a period
not to exceed five years from the commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement (the "Agreement") with Dean Witter InterCapital Inc., the Trust pays
its Investment Manager a management fee, calculated weekly and payable monthly,
by applying the annual rate of 0.35% to the Trust's average weekly net assets.
Under the terms of the Agreement, in addition to managing the Trust's
investments, the Investment Manager maintains certain of the Trust's books and
records and furnishes office space and facilities, equipment, clerical,
bookkeeping and certain legal services, and pays the salaries of all personnel,
including officers of the Trust who are employees of the Investment Manager. The
Investment Manager also bears the cost of telephone services, heat, light, power
and other utilities provided to the Trust.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and the proceeds from sales of portfolio securities for the six months
ended April 30, 1994, excluding short-term investments, aggregated $22,893,195
and $43,194,113, respectively.
Effective January 1, 1994, the Trust adopted an unfunded noncontributory
defined pension plan covering all independent Trustees of the Trust who will
have served as an independent Trustee 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 cost for
the six months ended April 30, 1994, included in Trustees' fees and expenses in
the Statement of Operations, amounted to $3,945. At April 30, 1994, the Trust
had an accrued pension liability of $3,889 which is included in accrued expenses
and other payables in the Statement of Assets and Liabilities.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At April 30, 1994, the Trust had transfer agent fees and
expenses payable of approximately $12,000.
Bowne & Co., Inc. is an affiliate of the Trust by virtue of a common Trustee
and Director of Bowne & Co., Inc. During the six months ended April 30, 1994,
the Trust paid Bowne & Co., Inc. $8,318 for printing of shareholders reports.
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 the approval of the common shareholders. On November 5,
1991, the Trust issued 2,800 shares of Auction Rate Preferred Shares ("Preferred
Shares") consisting of 1,400 shares each of Series A and Series B for gross
total proceeds of $140,000,000. The preferred shares have a liquidation value of
$50,000 per share plus any accumulated but unpaid dividends plus the redemption
premium, if any, and are redeemable (in whole or in part) on any dividend
payment date.
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- - - - - --------------------------------------------------------------------------------
Dividends, which are cumulative, are reset through auction procedures:
<TABLE>
<CAPTION>
RANGE OF
SHARES SERIES RATE* RESET DATE DIVIDEND RATE**
- - - - - ------ ------ ------- ---------- ---------------
<S> <C> <C> <C> <C>
1,400 "A" 2.92 % 1/31/95 2.92% to 3.42 %
1,400 "B" 3.125% 5/ 5/94 2.08% to 3.125%
<FN>
- - - - - ------------
* AS OF APRIL 30, 1994.
** FOR THE PERIOD ENDED APRIL 30, 1994.
</TABLE>
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 repurchasing 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>
PAR VALUE CAPITAL PAID
OF IN EXCESS OF
SHARES SHARES PAR VALUE
---------- --------- ------------
<S> <C> <C> <C>
Balance, October 31, 1992, October 31,
1993 and April 30, 1994............... 18,607,113 $ 186,071 $258,252,624
---------- --------- ------------
---------- --------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS -- At October 31, 1993, the Trust had net capital
loss carryovers of approximately $464,000 of which $4,000 will be available
through October 31, 1999, $89,000 will be available through October 31, 2000 and
$371,000 will be available through October 31, 2001, to offset future capital
gains, to the extent provided by regulations. To the extent that these carryover
losses are used to offset future capital gains, it is probable that the gains so
offset will not be distributed to shareholders since any such distributions may
be taxable to shareholders as ordinary income. For the six months ended April
30, 1994 the Trust had approximately $1,449,000 in net realized gains.
7. DIVIDENDS TO COMMON SHAREHOLDERS -- The Trust has declared the following
dividends from net investment income:
<TABLE>
<CAPTION>
DECLARATION AMOUNT RECORD PAYABLE
DATE PER SHARE DATE DATE
- - - - - -------------- ------------ ------------- -------------
<S> <C> <C> <C>
April 26, 1994 $ 0.09 May 6, 1994 May 20, 1994
May 31, 1994 $ 0.09 June 10, 1994 June 24, 1994
</TABLE>
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- - - - - --------------------------------------------------------------------------------
8. SELECTED QUARTERLY FINANCIAL DATA --
<TABLE>
<CAPTION>
QUARTERS ENDED*
-------------------------------------
4/30/94 1/31/94
----------------- -----------------
PER PER
TOTAL SHARE TOTAL SHARE
------- -------- ------- --------
<S> <C> <C> <C> <C>
Total investment income.............. $ 7,198 $ 0.39 $ 6,776 $ 0.36
Net investment income................ 6,579 0.35 6,195 0.33
Net realized and unrealized gain
(loss) on investments............... 3,555 0.19 (33,353) (1.79)
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED*
-----------------------------------------------------------------------------
10/31/93 7/31/93 4/30/93 1/31/93
----------------- ----------------- ----------------- -----------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
------- -------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment
income.................. $ 7,320 $ 0.39 $ 7,186 $ 0.39 $ 7,276 $ 0.39 $ 7,093 $ 0.38
Net investment income.... 6,686 0.36 6,591 0.35 6,674 0.36 6,554 0.35
Net realized and
unrealized gain on
investments............. 8,711 0.47 5,165 0.28 11,117 0.60 13,099 0.70
<CAPTION>
QUARTERS ENDED*
-----------------------------------------------------------------------------
10/31/92 7/31/92 4/30/92 1/31/92
----------------- ----------------- ----------------- -----------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
------- -------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net total investment
income.................. $ 7,285 $ 0.39 $ 7,201 $ 0.39 $ 7,081 $ 0.38 $ 6,728 $ 0.36
Net investment income.... 6,723 0.36 6,659 0.36 6,556 0.35 6,206 0.34
Net realized and
unrealized gain (loss)
on investments.......... (19,667) (1.05) 22,654 1.22 224 0.01 3,729 0.20
<FN>
- - - - - ------------
* TOTALS EXPRESSED IN THOUSANDS OF DOLLARS.
</TABLE>
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
FINANCIAL HIGHLIGHTS
- - - - - --------------------------------------------------------------------------------
Selected ratios and per share data for a common share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE
PERIOD
FOR THE SIX SEPTEMBER 27,
MONTHS ENDED FOR THE YEAR ENDED OCTOBER 31, 1991*
APRIL 30, THROUGH
1994 --------------------------------- OCTOBER 31,
(UNAUDITED) 1993 1992 1991
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $16.53 $14.51 $14.09 $14.06
------------- ------------- ------------- -------------
Net investment income................. 0.68 1.42 1.41 0.06
Net realized and unrealized gain
(loss) on investments................ (1.60) 2.05 0.38 (0.01)
------------- ------------- ------------- -------------
Total from investment operations........ (0.92) 3.47 1.79 0.05
------------- ------------- ------------- -------------
Less dividends and other charges:
Dividends from net investment
income............................... (0.69) (1.23) (0.97) -0-
Common share equivalent of dividends
paid to preferred shareholders....... (0.10) (0.22) (0.25) -0-
Offering costs charged against
capital.............................. -0- -0- (0.15) (0.02)
------------- ------------- ------------- -------------
Total dividends and other charges....... (0.79) (1.45) (1.37) (0.02)
------------- ------------- ------------- -------------
Net asset value, end of period.......... $14.82 $16.53 $14.51 $14.09
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Market value, end of period............. $14.625 $16.625 $15.00 $15.25
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL INVESTMENT RETURN+.................. (8.14)%(1) 19.68% 4.83% 1.67%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)............................. $415,780 $447,578 $409,916 $262,146
Ratio to average net assets of common
shareholders:
Total expenses........................ 0.82%(2) 0.81% 0.79% 0.49%(2)
Net investment income before preferred
stock dividends...................... 8.67%(2) 9.05% 9.64% 5.01%(2)
Preferred stock dividends............. 1.31%(2) 1.38% 1.70% N/A
Net investment income available to
common shareholders.................. 7.36%(2) 7.67% 7.94% 5.01%(2)
Asset coverage on preferred shares at
end of period.......................... 297%(2) 320% 293% N/A
Portfolio turnover rate................. 5% 3% 9% 0%
<FN>
- - - - - -------------
* COMMENCEMENT OF OPERATIONS.
+ TOTAL INVESTMENT RETURN IS BASED UPON THE CURRENT MARKET VALUE ON THE FIRST
AND LAST DAY OF EACH PERIOD REPORTED. DIVIDENDS AND DISTRIBUTIONS ARE
ASSUMED TO BE REINVESTED AT THE PRICES OBTAINED UNDER THE TRUST'S DIVIDEND
REINVESTMENT PLAN. TOTAL INVESTMENT RETURN DOES NOT REFLECT SALES CHARGES
OR BROKERAGE COMMISSIONS.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
- - - - - --------------------------------------------------------------------------------
THE FINANCIAL STATEMENTS INCLUDED HEREIN HAVE BEEN TAKEN FROM THE RECORDS OF THE
TRUST WITHOUT EXAMINATION BY THE INDEPENDENT ACCOUNTANTS AND ACCORDINGLY THEY DO
NOT EXPRESS AN OPINION THEREON.
<PAGE>
TRUSTEES
- - - - - ---------------------------------------
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
- - - - - ---------------------------------------
Charles A. Fiumefreddo
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Sheldon Curtis
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
James F. Willison
VICE PRESIDENT
Thomas F. Caloia
TREASURER
TRANSFER AGENT
- - - - - ---------------------------------------
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
LEGAL COUNSEL
- - - - - ---------------------------------------
Sheldon Curtis
Two World Trade Center
New York, New York 10048
INDEPENDENT ACCOUNTANTS
- - - - - ---------------------------------------
Price Waterhouse
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- - - - - ---------------------------------------
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
INTERCAPITAL
QUALITY
MUNICIPAL
INVESTMENT
TRUST
SEMIANNUAL REPORT
APRIL 30, 1994
