<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST Two World Trade Center,
LETTER TO THE SHAREHOLDERS October 31, 1995 New York, New York 10048
DEAR SHAREHOLDER:
Bonds have rallied significantly since late last year. Progressive tightening
of monetary policy by the Federal Reserve Board over the 12 months through
February 1995 led to slower economic growth and caused bonds to advance. The
trend toward lower long-term interest rates this year was also aided in July
by a 25 basis point reduction in the federal-funds rate (the interest rate
banks charge each other for overnight loans).
MUNICIPAL MARKET CONDITIONS
Long-term municipal bond yields declined from a high of 7.37 percent in
November 1994 to 6.02 percent at the end of October 1995, as tracked by The
Bond Buyer Revenue Bond Index*. This 135 basis point decline in yield
corresponded to an 11 percent price increase for callable municipal bonds
with 30-year maturities. Similarly, yields on 1-year municipal notes moved
from 4.51 percent to 3.82 percent. The yield pickup for extending maturity
from 1-to 30-years was 220 basis points.
Tax-exempt bonds began the year by outperforming U.S. Treasury bonds, but
then deteriorated on a relative basis. The ratio of the Revenue Bond Index
yield to the 30-year U.S. Treasury bond yield moved from 89 percent in
December 1994 to 84 percent by the end of February 1995. A declining ratio
means that municipal bond prices have been stronger than U.S. Treasury
prices. In the spring the municipal market began to discount the risk of
comprehensive changes in the tax code created by flat tax rhetoric from
Washington. This caused the yield ratio to reach a high of 95 percent during
the summer. Over the past 10 years, long municipal yields have averaged 89
percent of U.S. Treasury yields.
The municipal market continued to experience consolidation in 1995. Municipal
underwriting in the first 10 months of the year was down 16 percent from the
same period in 1994. This change followed a
- ------------
* The Bond Buyer Revenue Bond Index is an arithmetic average of the yields of
25 selected municipal revenue bonds with 30-year maturities. Credit ratings
of these bonds range from Aa1 to Baa1 by Moody's Investors Service, Inc., and
AA+ to A- by Standard & Poor's Corp.
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
LETTER TO THE SHAREHOLDERS October 31, 1995, continued
44 percent drop in volume for all of 1994. The effect of lower volume and
profitability was also apparent in the decisions of several major dealers to
withdraw from the municipal business.
TAX REFORM
Flat-tax advocates have generated increased publicity for their proposals and
have affected the municipal market since early 1995. Most of the discussion
on proposed tax-reform measures is based on theoretical concepts, containing
broad assumptions and lacking specific details. Basically, the various plans
raise questions about the fairness of changing from a progressive to a
regressive tax structure. Low flat-tax rate plans call for the elimination of
deductions of mortgage interest, charitable contributions, property taxes,
and state and local income taxes. Should politicians make tax reform a
central issue in the 1996 elections, media coverage will expand from the
financial page to the front page. If that happens, municipal bonds could come
under further pressure. For example, when major tax reform turmoil occurred
in 1986, municipal yields briefly exceeded taxable yields.
In addition to the market risk associated with the flat-tax proposals,
municipal credits would also be negatively affected. If mortgage interest and
property tax deductions were eliminated, municipalities would experience a
decline in their property tax base. The loss of state and local income tax
deductions would increase the relative economic disadvantage that high-tax
states already face. The flat tax represents a shift in tax accountability
from the federal to local governments. Taxpayer recognition of the extent of
changes under consideration may impede the passage of comprehensive tax
reform.
FUND PERFORMANCE
The net asset value (NAV) of InterCapital Quality Municipal Investment Trust
(IQT) rose from $14.09 to $15.31 per share during the fiscal year ended
October 31, 1995. Based on this NAV change plus reinvestment of tax-free
dividends totaling $1.08 per share, the Trust's total return was 17.24
percent. Over the same period, IQT's market price on the New York Stock
Exchange appreciated 14.71 percent from $12.75 to $14.625 per share. Based on
this market price change and reinvestment of tax-free dividends, the Trust's
total return was 23.76 percent. IQT began the fiscal year trading at a 9.5
percent discount to NAV and closed at a 4.5 percent discount. Undistributed
net investment income totaled $0.062 per share on October 31, 1995 versus
$0.139 per share a year ago. Since the amount of IQT's undistributed net
investment income continued to shrink during the summer, the Trustees voted
to reduce the monthly dividend from $0.09 to $0.085 per share beginning with
the November 1995 payment. This revised dividend rate more accurately
reflects the Trust's current earnings.
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
LETTER TO THE SHAREHOLDERS October 31, 1995, continued
PORTFOLIO STRUCTURE
On October 31, 1995, IQT's long-term portfolio was diversified among 13
long-term municipal sectors and 51 credits. The three largest sectors --
mortgage revenue -- single family, hospital and industrial
development/pollution control revenue bonds -- represented 41 percent of the
portfolio. The average maturity and call protection of the Trust's long-term
holdings were 22 and 7 years, respectively. Net assets exceeded $383 million.
The credit-quality ratings of the Trust's long-term portfolio are illustrated
on the right.
[The chart below represents information which appears as a graphic in the
printed Annual Report]
A Pie chart reflecting the bonds in the portfolio as they are rated by Moody's
Investor Service, Inc. and Standard & Poor's Corporation:
PERCENTAGE MOODY'S CREDIT S&P'S CREDIT
OF BONDS RATINGS RATINGS
__________________________________________________________________________
39% Aaa AAA
__________________________________________________________________________
31% A A
___________________________________________________________________________
29% Aa AA
___________________________________________________________________________
1% Baa BBB
___________________________________________________________________________
THE IMPACT OF LEVERAGING
As discussed in previous reports, the total income available for distribution
to common shareholders includes incremental income provided by Auction Rate
Preferred Share (ARPS) leverage. ARPS dividends reflect prevailing short-term
interest rates on maturities normally ranging from one week to one year.
Incremental income to common shares depends on two factors: first, the spread
between the interest earned on the long-term bonds in the established
portfolio of investments and the ARPS auction rate plus ARPS expenses;
second, the amount of ARPS outstanding. The greater the amount of ARPS
outstanding, the greater the amount of incremental income available for
distribution to common shareholders.
The profitability of ARPS declined in 1994 and the first half of 1995. ARPS
yields have moved somewhat lower since the Federal Reserve Board's initial
easing in July 1995. A reduction in the amount of ARPS outstanding -- to
control the portfolio's price volatility last year -- also diminished
incremental income to common shares. Currently, $105 million in ARPS are
outstanding. This represents 27 percent of net assets.
LOOKING AHEAD
The slower pace of economic growth in 1995 and the Federal Reserve Board's
previous interest rate moves have improved bond-market expectations. The
decreasing supply of new issues, combined with significant maturities and
calls for redemption, should continue to be positive for the municipal
market. However,
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
LETTER TO THE SHAREHOLDERS October 31, 1995, continued
tax-reduction proposals are likely to continue to receive publicity and may
cloud the outlook for tax-exempt bonds. With long-term municipal securities
yielding more than 90 percent of the yield on U.S. Treasuries, the market has
already begun the process of discounting the risk that a flat tax might
eventually become law.
The Trust's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps to
support the market value of the Trust's shares. In addition, we would like to
remind you that the Trustees have approved a procedure whereby the Trust,
when appropriate, may purchase shares in the open market or in privately
negotiated transactions at a price not above market value or net asset value,
whichever is lower at the time of purchase. During the fiscal year ended
October 31, 1995, the Trust purchased and retired 228,200 shares of common
stock at a weighted average market discount of 7.94 percent. The Trust may
also utilize procedures to reduce or eliminate the amount of outstanding
ARPS, including their purchase in the open market or in privately negotiated
transactions.
We appreciate your ongoing support of InterCapital Quality Municipal
Investment Trust and look forward to continuing to serve your investment
needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On October 31, 1995, an annual meeting of the Trust's shareholders was held
for the purpose of voting on three separate matters, the results of which
were as follows:
(1) ELECTION OF TRUSTEES BY ALL SHAREHOLDERS:
Edwin J. Garn
<TABLE>
<CAPTION>
<S> <C>
For ........ 11,588,981
Withheld .. 255,187
</TABLE>
Michael E. Nugent
<TABLE>
<CAPTION>
<S> <C>
For ........ 11,594,499
Withheld .. 249,669
</TABLE>
Philip J. Purcell
<TABLE>
<CAPTION>
<S> <C>
For ........ 11,597,699
Withheld .. 246,469
</TABLE>
ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS:
John R. Haire
<TABLE>
<CAPTION>
<S> <C>
For .......... 1,153
Withheld ..... 26
</TABLE>
The following Trustees were not standing for reelection at this meeting:
Jack F. Bennett, Michael Bozic, Charles A. Fiumefreddo, Dr. Manuel H.
Johnson, Paul Kolton,
and John L. Schroeder.
(2) CONTINUANCE OF THE CURRENTLY EFFECTIVE INVESTMENT MANAGEMENT AGREEMENT:
<TABLE>
<CAPTION>
<S> <C>
For ....... 11,155,788
Against .. 204,508
Abstain .. 483,872
</TABLE>
(3) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS:
<TABLE>
<CAPTION>
<S> <C>
For ....... 11,425,092
Against .. 76,515
Abstain .. 342,561
</TABLE>
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS October 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (97.6%)
General Obligation (1.8%)
$ 5,000 Oregon, Veterans' Welfare Ser 75 ............................... 6.00 % 04/01/27 $ 5,050,600
2,000 Seattle, Washington, Refg Ser 1993 ............................. 5.65 01/01/20 1,948,420
- ----------- --------------
7,000 6,999,020
- ----------- --------------
Educational Facilities Revenue (1.5%)
2,500 Auburn University, Alabama, Ser 1993 (MBIA) .................... 5.25 06/01/13 2,427,275
3,480 Indiana University, Student Fee Ser K (MBIA) ................... 5.875 08/01/20 3,489,883
- ----------- --------------
5,980 5,917,158
- ----------- --------------
Electric Revenue (7.7%)
5,000 North Carolina Municipal Power Agency #1, Catawba Ser 1992 ..... 6.25 01/01/17 5,020,200
10,000 San Antonio, Texas, Electric & Gas Refg Ser 1994-A ............. 5.00 02/01/14 9,232,700
4,500 Intermountain Power Agency, Utah, Refg Fifth Crossover Ser ..... 7.20 07/01/19 4,750,020
10,000 Washington Public Power Supply System, Proj #1 Refg Ser 1991 A . 6.875 07/01/17 10,568,000
- ----------- --------------
29,500 29,570,920
- ----------- --------------
Hospital Revenue (14.6%)
10,000 Wichita, Kansas, CSJ Health System of Wichita Inc Ser 1991 ..... 7.00 11/15/18 10,410,300
Massachusetts Health & Educational Facilities Authority,
10,000 Brigham & Women's Hospital Ser D .............................. 6.75 07/01/24 10,473,200
7,000 St Elizabeth's Hospital of Boston Ser D & E (FSA) ............. 6.70 08/15/21 7,491,400
5,000 Charlotte-Mecklenburg Hospital Authority, North Carolina, Ser
1992 .......................................................... 6.25 01/01/20 5,118,100
9,000 Lorain County, Ohio, Humility of Mary Health Care Corp Ser 1991 B 7.20 12/15/11 9,796,770
11,000 Middleburg Heights, Ohio, Southwest General Hospital Ser 1991 .. 7.20 08/15/19 12,643,510
- ----------- --------------
52,000 55,933,280
- ----------- --------------
Industrial Development/Pollution Control Revenue (10.4%)
1,000 St Lucie County, Florida, Florida Power & Light Co Ser 1991
(AMT) ......................................................... 7.15 02/01/23 1,068,010
9,000 Hawaii Department of Budget & Finance, Citizens Utilities Co
1991 Ser A & B (AMT) .......................................... 6.66 11/01/21 9,418,860
5,000 Chicago, Illinois, Chicago-O'Hare Int'l Airport/Lufthansa German
Airlines Inc Ser 1990 (AMT) ................................... 7.125 05/01/18 5,261,850
7,000 Chicago, Illinois, Peoples Gas Light & Coke Co Refg 1995 Ser A . 6.10 06/02/25 6,999,580
4,000 New York State Energy Research & Development Authority, Brooklyn
Union Gas Co 1991 Ser A & B (AMT) ............................. 6.952 07/01/26 4,344,800
12,000 Richland County, South Carolina, Union Camp Corp Ser 1991 B
(AMT) ......................................................... 7.125 09/01/21 12,818,760
- ----------- --------------
38,000 39,911,860
- ----------- --------------
Mortgage Revenue - Multi-Family (7.0%)
10,000 Illinois Housing Development Authority, 1991 Ser A ............. 8.25 07/01/16 10,921,500
15,000 New Jersey Housing & Mortgage Finance Agency, Presidential Plaza
at Newport - FHA Insured Mortgages Refg 1991 Ser 1 ............ 7.00 05/01/30 15,757,500
- ----------- --------------
25,000 26,679,000
- ----------- --------------
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS October 31, 1995, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Mortgage Revenue - Single Family (16.1%)
$ 6,535 California Housing Finance Agency, Home 1991 Ser G (AMT) ....... 7.05 % 08/01/27 $ 6,794,505
10,790 Colorado Housing Finance Authority, Refg 1991 Ser A ............ 7.25 11/01/31 11,378,055
1,100 District of Columbia Housing Finance Agency, GNMA Collateralized
Ser 1990 B (AMT) .............................................. 7.10 12/01/24 1,154,989
4,635 Maine Housing Authority, Purchase 1988 Ser D-6 (AMT) ........... 7.25 11/15/19 4,897,295
3,000 Michigan Housing Development Authority, 1991 Ser B ............. 6.95 12/01/20 3,141,150
9,600 Nebraska Investment Finance Authority, GNMA-Backed 1991 Ser A &
B (AMT) ....................................................... 7.025 09/15/23 10,025,664
4,795 New Hampshire Housing Finance Authority, Residential 1991 Ser D
(AMT) ......................................................... 7.25 07/01/15 5,065,054
5,750 Ohio Housing Finance Agency, GNMA-Backed Ser A 1 & 2 (AMT) ..... 6.903 03/01/31 5,971,835
4,500 Tennessee Housing Development Agency, Homeownership Issue T
(AMT) ......................................................... 7.375 07/01/23 4,775,985
5,000 Virginia Housing Development Authority, 1992 Ser A ............. 7.15 01/01/33 5,264,250
3,000 Wyoming Community Development Authority, Federally Insured/Gtd
Loans 1988 Ser G (AMT) ........................................ 7.25 06/01/21 3,185,910
- ----------- --------------
58,705 61,654,692
- ----------- --------------
Nursing & Health Related Facilities Revenue (0.8%)
2,700 New York State Medical Care Facilities Finance Agency, Mental
Health 1991 Ser C ............................................. 7.30 02/15/21 2,924,100
- ----------- --------------
Public Facilities Revenue (4.3%)
15,000 Emmaus General Authority, Pennsylvania, Local Government
Ser 1988 H (FGIC) ............................................. 7.00 05/15/18 16,485,150
- ----------- --------------
Resource Recovery Revenue (6.7%)
3,660 Broward County, Florida, SES Broward Co South Ser 1984 ......... 7.95 12/01/08 4,110,472
Detroit Economic Development Corporation, Michigan,
5,000 Ser 1991 A (AMT) (FSA) ........................................ 6.60 05/01/02 5,394,500
5,000 Ser 1991 A (AMT) (FSA) ........................................ 6.875 05/01/09 5,449,000
10,000 Montgomery County Industrial Development Authority,
Pennsylvania, Ser 1989 ........................................ 7.50 01/01/12 10,795,800
- ----------- --------------
23,660 25,749,772
- ----------- --------------
Student Loan Revenue (3.6%)
13,000 Pennsylvania Higher Education Assistance Agency, 1991 Ser A & B
(AMT) (AMBAC) ................................................. 6.854 09/01/26 13,794,820
- ----------- --------------
Transportation Facilities Revenue (7.1%)
10,000 Hillsborough County Port District, Florida, Tampa Port Authority
Special Rev & Refg Ser 1995 (AMT) (FSA) ....................... 6.00 06/01/20 10,141,100
4,250 Lee County, Florida, Ser 1995 (MBIA) ........................... 5.75 10/01/22 4,260,668
7,000 Hawaii, Airports Second Ser of 1991 (AMT) ...................... 6.90 07/01/12 7,681,380
5,000 Houston, Texas, Airport Sub Lien Ser 1991 A (AMT) (FGIC) ....... 6.75 07/01/21 5,343,500
- ----------- --------------
26,250 27,426,648
- ----------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS October 31, 1995, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Water & Sewer Revenue (2.8%)
$ 10,000 Seattle, Washington, Drainage & Wastewater Utility 1990 ........ 7.125% 12/01/20 $ 10,697,400
- ----------- --------------
Other Revenue (4.1%)
10,000 New York Local Government Assistance Corporation, Ser 1995 A ... 6.00 04/01/24 10,024,000
5,800 Houston, Texas, Sr Lien Hotel Occupancy Tax Refg Ser 1995 (FSA) 5.50 07/01/15 5,650,012
- ----------- --------------
15,800 15,674,012
- ----------- --------------
Refunded (9.1%)
5,000 Indiana Municipal Power Agency, 1990 Ser A ..................... 7.10 01/01/15 5,616,300
5,000 Massachusetts Water Resources Authority, 1991 Ser A ............ 6.875 12/01/11 5,716,250
5,000 New York City Municipal Water Finance Authority, New York, 1991
Ser C ......................................................... 7.375 06/15/14 5,797,600
5,000 New York Local Government Assistance Corporation, Ser 1991 C ... 7.00 04/01/21 5,704,450
5,000 New York State Medical Care Facilities Finance Agency, Mental
Health 1991 Ser C ............................................. 7.30 02/15/21 5,816,800
6,000 Salt Lake City, Utah, IHC Hospitals Inc Refg Ser 1991 (AMBAC)
(ETM) ......................................................... 6.75 05/15/20 6,418,740
- ----------- --------------
31,000 35,070,140
- ----------- --------------
353,595 TOTAL MUNICIPAL BONDS (Identified Cost $353,082,573) ................................. 374,487,972
- ----------- --------------
SHORT-TERM MUNICIPAL OBLIGATION (0.6%)
2,400 Massachusetts, Dedicated Income Tax Ser 1990 B (Demand 11/01/95)
(Identified Cost $2,400,000) .................................. 3.70* 12/01/97 2,400,000
- ----------- --------------
$355,995 TOTAL INVESTMENTS (Identified Cost $355,482,573) (a) ...................... 98.2% 376,887,972
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ............................ 1.8 7,031,873
----- --------------
NET ASSETS ................................................................ 100.0% $383,919,845
===== ==============
</TABLE>
- ------------
AMT Alternative Minimum Tax.
ETM Escrowed to Maturity.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes is $355,482,573;
the aggregate gross unrealized appreciation is $21,906,476 and the
aggregate gross unrealized depreciation is $501,077, resulting in
net unrealized appreciation of $21,405,399.
Bond Insurance:
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS October 31, 1995, continued
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
October 31, 1995
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Alabama ............. 0.6%
California .......... 1.8
Colorado ............ 3.0
District of Columbia 0.3
Florida ............. 5.1
Hawaii .............. 4.5
Illinois ............ 6.0
Indiana ............. 2.4
Kansas .............. 2.7
Maine ............... 2.6
Massachusetts ....... 6.8
Michigan ............ 3.6
Nebraska ............ 2.6
New Hampshire ....... 1.3
New Jersey .......... 4.1
New York ............ 9.0
North Carolina ...... 1.3
Ohio ................ 7.4
Oregon .............. 1.3
Pennsylvania ........ 10.7
South Carolina ...... 3.3
Tennessee ........... 1.3
Texas ............... 5.3
Utah ................ 2.9
Virginia ............ 1.4
Washington .......... 6.1
Wyoming ............. 0.8
------
Total ............... 98.2%
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $355,482,573) ......... $376,887,972
Cash .................................... 266,454
Receivable for:
Interest ............................... 6,938,081
Investments sold ....................... 143,835
Deferred organizational expenses ....... 8,153
Prepaid expenses and other assets ...... 25,097
--------------
TOTAL ASSETS .......................... 384,269,592
--------------
LIABILITIES:
Payable for:
Investment management fee .............. 117,528
Dividends to preferred shareholders ... 153,909
Accrued expenses and other payables .... 78,310
--------------
TOTAL LIABILITIES ..................... 349,747
--------------
NET ASSETS:
Preferred shares of beneficial interest
(1,000,000 shares authorized of
non-participating $.01 par value, 2,100
shares outstanding) .................... 105,000,000
--------------
Common shares of beneficial interest
(unlimited shares authorized of $.01
par value, 18,212,813 shares
outstanding) ........................... 253,363,310
Net unrealized appreciation ............. 21,405,399
Accumulated undistributed net investment
income ................................. 1,138,188
Accumulated undistributed net realized
gain ................................... 3,012,948
--------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS .......................... 278,919,845
--------------
TOTAL NET ASSETS ...................... $383,919,845
==============
NET ASSET VALUE PER COMMON SHARE
($278,919,845 divided by 18,212,813
common shares outstanding) ............. $ 15.31
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1995
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ........................ $24,270,201
-------------
EXPENSES
Investment management fee .............. 1,309,098
Auction commission fees ................ 288,808
Professional fees ...................... 108,884
Transfer agent fees and expenses ...... 99,110
Shareholder reports and notices ....... 45,541
Trustees' fees and expenses ............ 33,389
Auction agent fees ..................... 29,859
Registration fees ...................... 23,906
Custodian fees ......................... 17,666
Organizational expenses ................ 8,990
Other .................................. 24,359
-------------
TOTAL EXPENSES BEFORE EXPENSE OFFSET 1,989,610
LESS: EXPENSE OFFSET ................. (17,631)
-------------
TOTAL EXPENSES AFTER EXPENSE OFFSET 1,971,979
-------------
NET INVESTMENT INCOME ................ 22,298,222
-------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ...................... 4,480,093
Net change in unrealized appreciation . 18,873,753
-------------
NET GAIN ............................. 23,353,846
-------------
NET INCREASE ........................... $45,652,068
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED OCTOBER ENDED OCTOBER
31, 1995 31, 1994
- ---------------------------------------------- ---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ......................... $ 22,298,222 $ 25,125,115
Net realized gain (loss) ...................... 4,480,093 (1,002,781)
Net change in unrealized appreciation ........ 18,873,753 (42,743,964)
---------------- ----------------
NET INCREASE (DECREASE) ..................... 45,652,068 (18,621,630)
---------------- ----------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Preferred ..................................... (4,027,874) (4,001,354)
Common ........................................ (19,705,004) (22,878,556)
---------------- ----------------
TOTAL ....................................... (23,732,878) (26,879,910)
---------------- ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Preferred ..................................... (15,000,000) (20,000,000)
Common ........................................ (2,885,611) (2,189,774)
---------------- ----------------
TOTAL ....................................... (17,885,611) (22,189,774)
---------------- ----------------
TOTAL INCREASE (DECREASE) ................... 4,033,579 (67,691,314)
NET ASSETS:
Beginning of period ........................... 379,886,266 447,577,580
---------------- ----------------
END OF PERIOD
(Including undistributed net investment
income
of $1,138,188 and $2,572,844, respectively) . $383,919,845 $379,886,266
================ ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1995
1. Organization And Accounting Policies
InterCapital Quality Municipal Investment Trust (the "Trust") is registered
under the Investment Company Act of 1940, as amended, as a diversified,
closed-end management investment company. The Trust was organized as a
Massachusetts business trust on July 2, 1991 and commenced operations on
September 27, 1991.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued for the Trust
by an outside independent pricing service approved by the Trustees. The
pricing service has informed the Trust that in valuing the Trust's portfolio
securities, it uses both a computerized matrix of tax-exempt securities and
evaluations by its staff, in each case based on information concerning market
transactions and quotations from dealers which reflect the bid side of the
market each day. The Trust's portfolio securities are thus valued by
reference to a combination of transactions and quotations for the same or
other securities believed to be comparable in quality, coupon, maturity, type
of issue, call provisions, trading characteristics and other features deemed
to be relevant. Short-term debt securities having a maturity date of more
than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity
date of sixty days or less at the time of purchase are valued at amortized
cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. The Trust amortizes premiums and accretes discounts over the life of
the respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature,
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued
such amounts are reclassified within the capital accounts based on their
federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but
not for tax purposes are reported as dividends in excess of net investment
income or distributions in excess of net realized capital gains. To the
extent they exceed net investment income and net realized capital gains for
tax purposes, they are reported as distributions of paid-in-capital.
E. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Trust's common shares in
the amount of $45,000 which have been reimbursed for the full amount thereof.
Such expenses have been deferred and are being amortized by the straight-line
method over a period not to exceed five years from the commencement of
operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Trust pays a management
fee, calculated weekly and payable monthly, by applying the annual rate of
0.35% to the Trust's average weekly net assets.
Under the terms of the Agreement, in addition to managing the Trust's
investments, the Investment Manager maintains certain of the Trust's books
and records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Trust who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Trust.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended October 31, 1995
aggregated $44,951,626 and $62,951,467, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At October 31, 1995, the Trust had transfer agent
fees and expenses payable of approximately $9,500.
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, 1995 included in Trustees' fees and expenses in the
Statement of Operations amounted to $11,965. At October 31, 1995, the Trust
had an accrued pension liability of $20,967 which is included in accrued
expenses in the Statement of Assets and Liabilities.
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued
4. PREFERRED SHARES OF BENEFICIAL INTEREST
The Trust is authorized to issue up to 1,000,000 non-participating preferred
shares of beneficial interest having a par value of $.01 per share, in one or
more series, with rights as determined by the Trustees, without approval of
the common shareholders. On November 5, 1991, the Trust issued 2,800 shares
of Auction Rate Preferred Shares ("Preferred Shares") consisting of 1,400
shares each of Series A and Series B for gross total proceeds of
$140,000,000. The preferred shares have a liquidation value of $50,000 per
share plus the redemption premium, if any, plus accumulated but unpaid
dividends, whether or not declared, thereon to the date of distribution. The
Trust may redeem such shares, in whole or in part, at the original purchase
price of $50,000 per share plus accumulated but unpaid dividends, whether or
not declared, thereon to the date of redemption.
For the year ended October 31, 1995, the Trust purchased and retired 300
shares of Series B in the amount of $15,000,000.
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
RANGE OF
SHARES* SERIES RATE* RESET DATE DIVIDEND RATES**
- --------- -------- --------- ---------- --------------------
<S> <C> <C> <C> <C>
1,400 A 3.75 % 10/31/95 2.92% - 4.45%
700 B 3.60 03/07/96 3.055 - 5.25
</TABLE>
- ------------
* As of October 31, 1995.
** For the period ended October 31, 1995.
Subsequent to October 31, 1995 and up through December 7, 1995, the Trust
paid dividends to each of the Series A and B at rates ranging from 3.70% to
3.79% and 3.60%, respectively, in the aggregate amount of $354,319.
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.
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued
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, 1993 .............................................. 18,607,113 $186,071 $258,252,624
Treasury shares purchased and retired (weighted average discount
8.02%)* ............................................................... (166,100) (1,661) (2,188,113)
------------ ---------- ---------------
Balance, October 31, 1994 .............................................. 18,441,013 184,410 256,064,511
Treasury shares purchased and retired (weighted average discount
7.94%)* ............................................................... (228,200) (2,282) (2,883,329)
------------ ---------- ---------------
Balance, October 31, 1995 .............................................. 18,212,813 $182,128 $253,181,182
============ ========== ===============
</TABLE>
- ------------
* The Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS
During the year ended October 31, 1995, the Trust utilized its net capital
loss carryover of approximately $1,467,000.
7. DIVIDENDS TO COMMON SHAREHOLDERS
The Trust has declared the following dividends from net investment income:
<TABLE>
<CAPTION>
AMOUNT PER RECORD PAYABLE
DECLARATION DATE SHARE DATE DATE
- ----------------- ----------- ------------------- -------------------
<S> <C> <C> <C>
October 31, 1995 $0.085 November 10, 1995 November 24, 1995
November 28, 1995 $0.085 December 8, 1995 December 22, 1995
</TABLE>
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued
8. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------------
10/31/95 7/31/95 4/30/95 1/31/95
----------------- ----------------- ----------------- -----------------
PER PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ......... $6,070 $0.33 $6,101 $0.34 $5,924 $0.33 $6,175 $0.33
Net investment income ........... 5,578 0.30 5,601 0.31 5,441 0.30 5,678 0.31
Net realized and unrealized gain 6,484 0.35 4,584 0.26 6,969 0.39 5,317 0.30
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------------------
10/31/94 7/31/94 4/30/94 1/31/94
-------------------- ----------------- -------------------- -----------------
PER PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
---------- -------- -------- ------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ................ $ 6,693 $ 0.36 $6,791 $0.37 $ 6,776 $ 0.36 $7,198 $0.39
Net investment income .................. 6,120 0.33 6,231 0.34 6,195 0.33 6,579 0.35
Net realized and unrealized gain (loss) (16,393) (0.87) 2,444 0.13 (33,353) (1.79) 3,555 0.19
</TABLE>
- ------------
* Amounts in thousands.
<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 YEAR ENDED OCTOBER 31 SEPTEMBER 27, 1991*
---------------------------------- THROUGH
1995** 1994** 1993** 1992** OCTOBER 31, 1991**
- ------------------------------------ -------- ---------- ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $ 14.09 $ 16.53 $ 14.51 $14.09 $14.06
-------- ---------- ---------- ---------- -------
Net investment income .................... 1.22 1.35 1.42 1.41 0.06
Net realized and unrealized gain (loss) .. 1.30 (2.34) 2.05 0.38 (0.01)
-------- ---------- ---------- ---------- -------
Total from investment operations ......... 2.52 (0.99) 3.47 1.79 0.05
-------- ---------- ---------- ---------- -------
Less dividends from:
Net investment income ................... (1.08) (1.23) (1.23) (0.97) --
Common share equivalent of dividends paid
to preferred shareholders ............... (0.22) (0.22) (0.22) (0.25) --
-------- ---------- ---------- ---------- -------
Total dividends .......................... (1.30) (1.45) (1.45) (1.22) --
Offering costs charged against capital ... -- -- -- (0.15) (0.02)
-------- ---------- ---------- ---------- -------
Net asset value, end of period ........... $ 15.31 $ 14.09 $ 16.53 $14.51 $14.09
======== ========== ========== ========== =======
Market value, end of period .............. $14.625 $ 12.75 $16.625 $15.00 $15.25
======== ========== ========== ========== =======
TOTAL INVESTMENT RETURN + ................ 23.76% (16.77)% 19.68% 4.83% 1.67%(1)
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS:
Total expenses before expense offset ..... 0.74% 0.82% 0.81% 0.79% 0.49%(2)
Net investment income before preferred
stock dividends ........................ 8.31% 8.80% 9.05% 9.64% 5.01%(2)
Preferred stock dividends ................ 1.50% 1.40% 1.38% 1.70% N/A
Net investment income available to common
shareholders ........................... 6.81% 7.40% 7.67% 7.94% 5.01%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .. $383,920 $379,886 $447,578 $409,916 $262,146
Asset coverage on preferred shares at end
of period ................ 365% 316% 320% 293% N/A
--
Portfolio turnover rate .................. 12% 10% 3% 9% -- %(1)
</TABLE>
- ------------
* Commencement of operations.
** The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total investment return is based upon the current market value on the
last day of each period reported. Dividends are assumed to be
reinvested at the prices obtained under the Trust's dividend
reinvestment plan. Total investment return does not reflect brokerage
commissions.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of InterCapital
Quality Municipal Investment Trust (the "Trust") at October 31, 1995, 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 four years in the period then ended and for the
period September 27, 1991 (commencement of operations) through October 31,
1991, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material mistatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 8, 1995
1995 FEDERAL TAX NOTICE (unaudited)
During the year ended October 31, 1995, the Trust paid the following per
share amounts from tax-exempt income: $1.80 to common shareholders, $1,855
to series A preferred shareholders and $1,986 to series B preferred
shareholders.
<PAGE>
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
INTERCAPITAL
QUALITY
MUNICIPAL
INVESTMENT
TRUST
ANNUAL REPORT
OCTOBER 31, 1995
