<PAGE> 1
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST Two World Trade Center,
New York, New York 10048
LETTER TO THE SHAREHOLDERS April 30,1998
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of
InterCapital Quality Municipal Investment Trust (IQT) for the period ended April
30, 1998.
Since last fall domestic economic growth has been tempered by the deflationary
impact of the Asian financial crisis. U.S. employment conditions strengthened
and the unemployment rate declined to its lowest level since 1970. Inflation
remained subdued despite the robust economy. In part this was the result of
productivity gains and the lower costs of oil and other imports. Foreign
currency turmoil strengthened the value of the U.S. dollar and created demand
for U.S. Treasury securities. Municipal bonds followed the trend of Treasuries
and yields declined to levels last seen 20 years ago. The bond market rally was
also aided by prospects of the first federal budget surplus in more than two
decades.
MUNICIPAL MARKET CONDITIONS
Long-term insured index yields ended April 1998 at 5.35 percent after reaching a
low of 5.15 percent in December and January. Over the past
BOND YIELDS 1994-1998
<TABLE>
<CAPTION>
Insured Municipal
30-Year 30-Year U.S. Revenue Yields
Insured Municipal Treasury as a Percentage of U.S.
Yields Yields Treasury Yields
<S> <C> <C> <C>
Dec '93 5.4 6.34 85.17%
5.4 6.24 86.54%
5.8 6.66 87.09%
6.4 7.09 90.27%
6.35 7.32 86.75%
6.25 7.43 84.12%
Jun '94 6.5 7.61 85.41%
6.25 7.39 84.57%
6.3 7.45 84.56%
6.55 7.81 83.87%
6.75 7.96 84.80%
7 8 87.50%
Dec '94 6.75 7.88 85.66%
6.4 7.7 83.12%
6.15 7.44 82.66%
6.15 7.43 82.77%
6.2 7.34 84.47%
5.8 6.66 87.09%
Jun '95 6.1 6.62 92.15%
6.1 6.86 88.92%
6 6.66 90.08%
5.95 6.48 91.82%
5.75 6.33 90.84%
5.5 6.14 89.56%
Dec '95 5.35 5.94 90.07%
5.4 6.03 89.55%
5.8 6.46 86.69%
5.85 6.66 87.84%
5.95 6.89 86.36%
6.05 6.99 86.55%
Jun '96 5.9 6.89 85.63%
5.85 6.97 83.93%
5.9 7.11 82.98%
5.7 6.93 82.25%
5.65 6.64 85.09%
5.5 6.35 86.61%
Dec '96 5.6 6.63 84.46%
5.7 6.79 83.95%
5.65 6.8 83.08%
5.9 7.1 83.10%
5.75 6.94 82.85%
5.65 6.91 81.77%
Jun '97 5.6 6.78 82.60%
5.3 6.3 84.00%
5.5 6.61 83.00%
5.4 6.4 84.40%
5.35 6.15 86.90%
5.3 6.05 87.60%
Dec '97 5.15 5.92 86.90%
Jan '98 5.15 5.8 88.80%
Feb.'98 5.2 5.92 87.80%
Mar '98 5.25 5.93 88.50%
Apr '98 5.35 5.95 89.90%
</TABLE>
Source: Municipal Market Data
<PAGE> 2
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
LETTER TO THE SHAREHOLDERS April 30, 1998, continued
12 months the insured index yield has declined from 5.75 percent. The yield on
one-year notes was 3.75 percent at the end of April 1998. Thus, the yield pickup
for extending maturities from 1 to 30 years was 160 basis points.
The overall decline in interest rates led to an increase in new-issue municipal
volume. In contrast, the federal deficit has shrunk and the U.S. Treasury's
borrowing needs have declined. Under these conditions, the municipal rally
lagged the rally in Treasuries. The ratio of municipal yields to Treasury yields
improved from 87 percent in October to almost 90 percent in April. A year ago
the ratio was a relatively rich 83 percent. A rising ratio means that municipals
have underperformed Treasuries but have become relatively more attractive.
Total municipal volume increased 20 percent in 1997. New-issue supply totaled
$220 billion last year, with half the underwritings enhanced with bond
insurance. Overall, refundings represented one-quarter of total new issues. For
the year-to-date, municipal underwriting is up 60 percent with refunding issues
comprising one-third of the total.
PERFORMANCE
During the six-month period ended April 30, 1998, the Trust's net asset value
(NAV) slipped from $15.50 to $15.42. Based on this NAV change plus reinvestment
of tax-free dividends and capital gains distributions totaling $0.49 per share,
the Trust's total NAV return was 2.67 percent. IQT's price on the New York Stock
Exchange declined from $15.3125 to $14.8125 per share. Based on this change in
market price plus reinvestment of dividends and distributions, the Trust's total
market return was -0.17 percent. On April 30, 1998, IQT was trading at a 3.94
percent discount to NAV. This means that the market price of the common stock
was lower than the NAV.
Monthly dividends for the second quarter of 1998 were declared in March and
remained unchanged at $0.08 per share. The level of undistributed net investment
income increased from $0.058 to $0.067 per share over the past six months.
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 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 Auction Rate Preferred Shares (ARPS),
including their purchase in the open market or in privately negotiated
transactions.
2
<PAGE> 3
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
LETTER TO THE SHAREHOLDERS April 30, 1998, continued
<TABLE>
<CAPTION>
LARGEST SECTORS as of April 30, 1998
(% Of Net Assets)
<S> <C>
REFUND 21%
MORTGAGE 23%
ALL OTHERS 17%
IDR/PCR* 9%
RESOURCE RECOVERY 7%
TRANSPORTATION 7%
HOSPITAL 6%
ELECTRIC 5%
GENERAL OBLIGATION 5%
</TABLE>
* Industrial Development/Pollution Control Revenue
Portfolio structure is subject to change.
<TABLE>
<CAPTION>
CREDIT RATINGS as of April 30, 1998
(% of Total Long-Term Portfolio)
<S> <C>
Aaa OR AAA 55%
A OR A 24%
Aa OR AA 21%
</TABLE>
As measured by Moody's Investors Service, Inc. or
Standard & Poor's Corp.
Portfolio structure is subject to change.
<TABLE>
<CAPTION>
CALL STRUCTURE AS OF APRIL 30, 1998
(% of Total Long-Term Portfolio) WEIGHTED AVERAGE
PERCENT CALLABLE CALL PROTECTIONS: 5 YEARS
YEARS BONDS CALLABLE
<S> <C>
1999 3%
2000 0%
2001 59%
2002 3%
2003 6%
2004 1%
2005 11%
2006 5%
2007 3%
2008 2%
2009+ 7%
</TABLE>
Portfolio structure is subject to change.
3
<PAGE> 4
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
LETTER TO THE SHAREHOLDERS April 30, 1998, continued
PORTFOLIO STRUCTURE
The Trust remained fully invested in long-term municipal bonds during the
period. Investments were diversified among 14 long-term sectors and 55 credits.
As illustrated in the accompanying chart, refunded bonds that will be called
within 10 years comprised 21 percent of the portfolio. IQT's weighted average
maturity was 20 years. The distribution of call dates in the portfolio produced
5 years of weighted average call protection. Throughout the fiscal period, high
credit quality was maintained, with 76 percent of its long-term holdings rated
double or triple "A."
THE IMPACT OF LEVERAGING
As discussed in previous reports, the total income available for distribution to
common shareholders includes incremental income provided by the Trust's
outstanding Auction Rate Preferred Shares (ARPS). ARPS dividends reflect
prevailing short-term interest rates on maturities normally ranging from one
week to one year. Incremental income to common shareholders depends on two
factors. The first is the amount of ARPS outstanding, the second the spread
between the portfolio's cost yield and ARPS expenses (ARPS auction rate and
expenses). The greater the spread and the 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.
During the six-month period, ARPS leverage contributed approximately $0.07 per
share to common share earnings. Weekly ARPS yields ranged between 3.11 and 4.25
percent. IQT's two ARPS series totaled $105 million and represented 27 percent
of net assets.
LOOKING AHEAD
The economic fundamentals are in place for another year of solid, albeit less
spectacular, domestic growth in 1998. Events in Asia have strengthened the U.S.
dollar and contributed to lower interest rates. The Asian financial crisis seems
likely to moderate U.S. economic growth and inflationary pressures. While this
outlook is favorable for municipal bonds it is possible that the Federal Reserve
Board may begin to tighten monetary policy if capacity and labor constraints
cause cost pressures to mount.
4
<PAGE> 5
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
LETTER TO THE SHAREHOLDERS April 30, 1998, continued
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
5
<PAGE> 6
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (97.5%)
General Obligation (4.5%)
$ 2,000 Chicago, Illinois, Refg Ser 1995 B (FGIC)................... 5.125% 01/01/25 $ 1,922,580
10,000 Chicago School Reform Board, Illinois, Dedicated Tax Ser
1997 (AMBAC)............................................... 5.75 12/01/27 10,394,200
4,705 Oregon, Veterans' Welfare Ser 75............................ 6.00 04/01/27 4,893,435
- -------- -----------
16,705 17,210,215
- -------- -----------
Educational Facilities Revenue (0.9%)
3,480 Indiana University, Student Fee Ser K (MBIA)................ 5.875 08/01/20 3,640,080
- -------- -----------
Electric Revenue (5.1%)
5,000 North Carolina Municipal Power Agency #1, Catawba Ser
1992....................................................... 6.25 01/01/17 5,266,350
5,000 South Carolina Public Service Authority, Sante Cooper 1997
Refg Ser A (MBIA).......................................... 5.00 01/01/29 4,737,300
5,000 San Antonio, Texas, Electric & Gas Refg Ser 1994-A.......... 5.00 02/01/14 4,908,750
5,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary
FSA)....................................................... 5.00 07/01/21 4,762,400
- -------- -----------
20,000 19,674,800
- -------- -----------
Hospital Revenue (6.2%)
10,000 Wichita, Kansas, CSJ Health System of Wichita Inc Ser
1991....................................................... 7.00 11/15/18 10,840,000
7,000 Massachusetts Health & Educational Facilities Authority, St
Elizabeth's Hospital of Boston Ser D & E (FSA)............. 6.70 08/15/21 7,569,240
3,000 Missouri Health & Educational Facilities Authority, SSM
Healthcare Ser 1998 A (MBIA) (WI).......................... 5.00 06/01/22 2,846,940
2,180 Charlotte-Mecklenburg Hospital Authority, North Carolina,
Ser 1992................................................... 6.25 01/01/20 2,334,606
- -------- -----------
22,180 23,590,786
- -------- -----------
Industrial Development/Pollution Control Revenue (9.4%)
1,000 St Lucie County, Florida, Florida Power & Light Co Ser 1991
(AMT)...................................................... 7.15 02/01/23 1,082,240
9,000 Hawaii Department Budget & Finance, Citizen Utilities Co
1991 Ser A & B (AMT)....................................... 6.66 11/01/21 9,630,090
5,000 Chicago, Illinois, Chicago-O'Hare Int'l Airport/ Lufthansa
German Airlines Inc Ser 1990 (AMT)......................... 7.125 05/01/18 5,415,550
2,000 Chicago, Illinois, Peoples Gas Light & Coke Co Refg 1995 Ser
A.......................................................... 6.10 06/02/25 2,124,460
4,000 New York State Energy Research & Development Authority,
Brooklyn Union Gas Co 1991 Ser A & B (AMT)................. 6.952 07/01/26 4,579,280
12,000 Richland County, South Carolina, Union Camp Corp Ser 1991 B
(AMT)...................................................... 7.125 09/01/21 13,015,680
- -------- -----------
33,000 35,847,300
- -------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS April 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Mortgage Revenue - Multi-Family (7.6%)
$ 10,000 Illinois Housing Development Authority, 1991 Ser A.......... 8.25% 07/01/16 $10,838,400
15,000 New Jersey Housing & Mortgage Finance Agency, Presidential
Plaza at Newport - FHA Insured Mortgages Refg 1991 Ser 1... 7.00 05/01/30 16,225,500
1,970 New York State Housing Finance Agency, 1996 Ser A Refg
(FSA)...................................................... 6.10 11/01/15 2,122,852
- -------- -----------
26,970 29,186,752
- -------- -----------
Mortgage Revenue - Single Family (15.7%)
1,900 Alaska Housing Finance Agency, Housing GNMA Collateralized
1990 Ser A
Subser A-2................................................. 7.05 06/01/25 2,023,120
6,000 California Housing Finance Agency, Home 1991 Ser G (AMT).... 7.05 08/01/27 6,338,460
9,485 Colorado Housing Finance Authority, Refg 1991 Ser A......... 7.25 11/01/31 10,027,258
1,420 District of Columbia Housing Finance Agency, GNMA
Collateralized Ser 1990 B (AMT)............................ 7.10 12/01/24 1,495,430
4,635 Maine Housing Authority, Purchase 1988 Ser D-6 (AMT)........ 7.25 11/15/19 4,886,356
2,380 Michigan Housing Development Authority, 1991 Ser B.......... 6.95 12/01/20 2,510,852
8,200 Nebraska Investment Finance Authority, GNMA-Backed 1991 Ser
A & B (AMT)................................................ 7.025 09/15/23 8,686,342
4,045 New Hampshire Housing Finance Authority, Residential 1991
Ser D (AMT)................................................ 7.25 07/01/15 4,250,769
Ohio Housing Finance Agency,
4,500 GNMA-Backed Ser A 1 & 2 (AMT).............................. 6.903 03/01/31 4,768,245
1,990 Residential 1996 Ser B-2 (AMT)............................. 6.10 09/01/28 2,083,013
4,500 Tennessee Housing Development Agency, Homeownership Issue T
(AMT)...................................................... 7.375 07/01/23 4,744,935
5,000 Virginia Housing Development Authority, 1992 Ser A.......... 7.15 01/01/33 5,226,700
3,000 Wyoming Community Development Authority, Federally
Insured/Gtd Loans 1988 Ser G (AMT)......................... 7.25 06/01/21 3,207,690
- -------- -----------
57,055 60,249,170
- -------- -----------
Nursing & Health Related Facilities Revenue (0.3%)
940 New York State Medical Care Facilities Finance Agency,
- -------- Mental Health 1991 Ser C................................... 7.30 02/15/21 1,035,542
-----------
Resource Recovery Revenue (7.0%)
5,000 Northeast Maryland Waste Disposal Authority, Montgomery
County Ser 1993 A (AMT).................................... 6.30 07/01/16 5,306,800
Detroit Economic Development Corporation, Michigan,
5,000 Ser 1991 A (AMT) (FSA)..................................... 6.60 05/01/02 5,376,850
4,610 Ser 1991 A (AMT) (FSA)..................................... 6.875 05/01/09 4,955,842
10,000 Montgomery County Industrial Development Authority,
Pennsylvania, Ser 1989..................................... 7.50 01/01/12 11,010,300
- -------- -----------
24,610 26,649,792
- -------- -----------
Student Loan Revenue (3.6%)
13,000 Pennsylvania Higher Education Assistance Agency, 1991 Ser A
- -------- & B (AMT) (AMBAC).......................................... 6.854 09/01/26 13,982,020
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS April 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Transportation Facilities Revenue (7.3%)
$ 10,000 Hillsborough County Port District, Florida, Tampa Port
Authority, Spl & Refg Ser 1995 (AMT) (FSA)................. 6.00% 06/01/20 $ 10,499,100
4,000 Lee County, Florida, Ser 1995 (MBIA)........................ 5.75 10/01/22 4,152,960
7,000 Hawaii, Airports Second Ser of 1991 (AMT)................... 6.90 07/01/12 8,135,960
5,000 Houston, Texas, Airport Sub Lien Ser 1991 A (AMT) (FGIC).... 6.75 07/01/21 5,369,100
- -------- -----------
26,000 28,157,120
- -------- -----------
Water & Sewer Revenue (1.1%)
4,000 Cleveland, Ohio, Waterworks Improvements Refg Ser H 1996
(MBIA)..................................................... 5.75 01/01/21 4,152,880
- -------- -----------
Other Revenue (8.0%)
10,000 New York Local Government Assistance Corporation, Ser
1995 A..................................................... 6.00 04/01/24 10,586,600
15,000 Emmaus General Authority, Pennsylvania, Local Government Ser
1988 H (FGIC).............................................. 7.00 05/15/18 16,136,700
4,000 Houston, Texas, Sr Lien Hotel Occupancy Tax Refg Ser 1995
(FSA)...................................................... 5.50 07/01/15 4,060,120
- -------- -----------
29,000 30,783,420
- -------- -----------
Refunded (20.8%)
10,000 Massachusetts Health & Educational Facilities Authority,
Brigham & Woman's Hospital Ser D........................... 6.75 07/01/01+ 10,905,200
5,000 Massachusetts Water Resources Authority, 1991 Ser A**....... 6.875 12/01/01+ 5,519,850
5,000 New York City Municipal Water Finance Authority, New York,
1991 Ser C................................................. 7.375 06/15/01+ 5,521,900
5,000 New York Local Government Assistance Corporation, Ser 1991
C.......................................................... 7.00 04/01/01+ 5,467,800
2,805 Charlotte-Mecklenburg Hospital Authority, North Carolina,
Ser 1992................................................... 6.25 01/01/02+ 3,035,655
9,000 Lorain County, Ohio, Humility of Mary Health Care Corp Ser
1991 B (ETM)............................................... 7.20 12/15/11 10,000,980
10,000 Middleburg Heights, Ohio, Southwest General Hospital Ser
1991....................................................... 7.20 08/15/01+ 11,057,500
6,000 Salt Lake City, Utah, IHC Hospitals Inc Refg Ser 1991
(AMBAC) (ETM).............................................. 6.75 05/15/20 6,520,380
10,000 Seattle, Washington, Drainage & Wastewater Utility 1990..... 7.125 12/01/99+ 10,678,700
10,000 Washington Public Power Supply System, Proj #1 Refg Ser
1991 A..................................................... 6.875 07/01/01+ 10,923,100
- -------- -----------
72,805 79,631,065
- -------- -----------
349,745 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $347,649,427)................. 373,790,942
- -------- -----------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (1.4%)
Missouri Health & Education Facilities Authority,
3,300 Cox Health Systems Ser 1997 (Demand 05/01/98).............. 4.20* 06/01/15 3,300,000
2,000 Washington University Ser 1996 D (Demand 05/01/98)......... 4.20* 09/01/30 2,000,000
- -------- -----------
5,300 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost
- -------- $5,300,000).................................................................... 5,300,000
-----------
TOTAL INVESTMENTS (Identified Cost $352,949,427) (a)................... 98.9% 379,090,942
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 1.1 4,268,316
----- -----------
NET ASSETS.............................................................. 100.0% $383,359,258
===== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS April 30, 1998 (unaudited) continued
- ---------------------
<TABLE>
<S> <C>
AMT Alternative Minimum Tax.
ETM Escrowed to maturity.
WI Security purchased on a "when-issued" basis.
+ Prerefunded to call date shown.
* Current coupon of variable rate demand obligation.
** A portion of this security is segregated in connection with
the purchase of a "when-issued" security.
(a) The aggregate cost for federal income tax purposes
approximates identified cost. The aggregate gross unrealized
appreciation is $26,190,374 and the aggregate gross
unrealized depreciation is $48,859, resulting in net
unrealized appreciation of $26,141,515.
<CAPTION>
Bond Insurance:
- --------------
<S> <C>
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
April 30, 1998
<TABLE>
<S> <C>
Alaska................... 0.5%
California............... 1.7
Colorado................. 2.6
District of Columbia..... 0.4
Florida.................. 4.1
Hawaii................... 4.6
Illinois................. 8.0
Indiana.................. 1.0
Kansas................... 2.8
Maine.................... 1.3
Maryland................. 1.4%
Massachusetts............ 6.3
Michigan................. 3.4
Missouri................. 2.1
Nebraska................. 2.3
New Hampshire............ 1.1
New Jersey............... 4.2
New York................. 7.7
North Carolina........... 2.8
Ohio..................... 8.4
Oregon................... 1.3%
Pennsylvania............. 10.7
South Carolina........... 4.6
Tennessee................ 1.2
Texas.................... 3.7
Utah..................... 2.9
Virginia................. 1.4
Washington............... 5.6
Wyoming.................. 0.8
------
Total.................... 98.9%
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $352,949,427)............................. $379,090,942
Cash........................................................ 33,088
Receivable for:
Interest................................................ 6,743,863
Investments sold........................................ 620,000
Prepaid expenses............................................ 68,197
------------
TOTAL ASSETS............................................ 386,556,090
------------
LIABILITIES:
Payable for:
Investments purchased................................... 2,866,650
Investment management fee............................... 126,073
Dividends to preferred shareholders..................... 108,738
Accrued expenses............................................ 95,371
------------
TOTAL LIABILITIES....................................... 3,196,832
------------
NET ASSETS.............................................. $383,359,258
============
COMPOSITION OF 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, 18,049,013 shares
outstanding)............................................... 251,024,923
Net unrealized appreciation................................. 26,141,515
Accumulated undistributed net investment income............. 1,208,924
Accumulated net realized loss............................... (16,104)
------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS............ 278,359,258
------------
TOTAL NET ASSETS........................................ $383,359,258
============
NET ASSET VALUE PER COMMON SHARE
($278,359,258 divided by 18,049,013 common shares
outstanding)............................................... $15.42
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended April 30, 1998 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $11,723,608
-----------
EXPENSES
Investment management fee................................... 671,749
Auction commission fees..................................... 152,040
Professional fees........................................... 50,492
Transfer agent fees and expenses............................ 40,911
Shareholder reports and notices............................. 19,012
Registration fees........................................... 12,379
Trustees' fees and expenses................................. 8,852
Auction agent fees.......................................... 8,175
Custodian fees.............................................. 7,784
Servicing fees.............................................. 4,494
Other....................................................... 4,281
----------
TOTAL EXPENSES.......................................... 980,169
Less: expense offset........................................ (7,744)
----------
NET EXPENSES............................................ 972,425
----------
NET INVESTMENT INCOME................................... 10,751,183
----------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss........................................... (16,101)
Net change in unrealized appreciation....................... (1,356,895)
----------
NET LOSS................................................ (1,372,996)
----------
NET INCREASE................................................ $9,378,187
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 1998 OCTOBER 31, 1997
- --------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $10,751,183 $ 21,763,966
Net realized gain (loss)............................. (16,101) 195,281
Net change in unrealized appreciation................ (1,356,895) 6,054,065
----------- ------------
NET INCREASE..................................... 9,378,187 28,013,312
----------- ------------
Dividends to preferred shareholders from net
investment income................................... (1,932,990) (3,950,695)
----------- ------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS
FROM:
Net investment income................................ (8,663,383) (17,354,713)
Net realized gain.................................... (195,290) (964,357)
----------- ------------
TOTAL............................................ (8,858,673) (18,319,070)
----------- ------------
Decrease from transactions in common shares of
beneficial interest................................. -- (1,458,787)
----------- ------------
NET INCREASE (DECREASE).......................... (1,413,476) 4,284,760
NET ASSETS:
Beginning of period.................................. 384,772,734 380,487,974
----------- ------------
END OF PERIOD
(Including undistributed net investment income of
$1,208,924 and $1,054,114, respectively)......... $383,359,258 $384,772,734
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
InterCapital Quality Municipal Investment Trust (the "Trust") is registered
under the Investment Company Act of 1940, as amended, as a diversified,
closed-end management investment company. The Trust'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 July 2, 1991 and commenced
operations on September 27, 1991.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued by an outside
independent pricing service approved by the Trustees. The pricing service has
informed the Trust that in valuing the portfolio securities, it uses both a
computerized matrix of tax-exempt securities and evaluations by its staff, in
each case based on information concerning market transactions and quotations
from dealers which reflect the bid side of the market each day. The portfolio
securities are thus valued by reference to a combination of transactions and
quotations for the same or other securities believed to be comparable in
quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. Short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
The Trust amortizes premiums and accretes discounts over the life of the
respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net
13
<PAGE> 14
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (unaudited) continued
investment income and net realized capital gains are determined in accordance
with federal income tax regulations which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment; 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.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Trust pays a management fee, calculated
weekly and payable monthly, by applying the annual rate of 0.35% to the Trust's
weekly net assets.
Under the terms of the Agreement, in addition to managing the Trust's
investments, the Investment Manager maintains certain of the Trust's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Trust who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Trust.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended April 30, 1998 aggregated
$3,205,050 and $2,881,650, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is
the Trust's transfer agent.
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
14
<PAGE> 15
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (unaudited) continued
five years of service. Aggregate pension costs for the six months ended April
30, 1998 included in Trustees' fees and expenses in the Statement of Operations
amounted to $1,811. At April 30, 1998, the Trust had an accrued pension
liability of $37,814 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 A and Series B 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.
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
AMOUNT IN RESET RANGE OF
SERIES SHARES* THOUSANDS* RATE* DATE DIVIDEND RATES**
- ------ ------- ---------- ----- -------- ----------------
<S> <C> <C> <C> <C> <C>
A 1,400 $70,000 4.01% 05/06/98 3.11% - 4.25%
B 700 35,000 3.78 09/04/98 3.78
</TABLE>
- ---------------------
<TABLE>
<S> <C>
* As of April 30, 1998.
** For the six months ended April 30, 1998.
</TABLE>
Subsequent to April 30, 1998 and up through June 5, 1998 the Trust paid
dividends to Series A and B at rates ranging from 3.75% to 3.95% in the
aggregate amount of $481,950.
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.
15
<PAGE> 16
INTERCAPITAL QUALITY MUNICIPAL INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (unaudited) continued
5. COMMON SHARES OF BENEFICIAL INTEREST
Transactions in common shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL
PAID IN
EXCESS OF
SHARES PAR VALUE PAR VALUE
---------- --------- ------------
<S> <C> <C> <C>
Balance, October 31, 1996................................... 18,151,913 $181,519 $252,302,191
Treasury shares purchased and retired (weighted average
discount 5.71%)*........................................... (102,900) (1,029) (1,457,758)
---------- -------- ------------
Balance, October 31, 1997 and April 30, 1998................ 18,049,013 $180,490 $250,844,433
========== ======== ============
</TABLE>
- ---------------------
* The Trustees have voted to retire the shares purchased.
6. DIVIDENDS TO COMMON SHAREHOLDERS
On March 24, 1998, the Trust declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
- --------- ------------ -------------
<S> <C> <C>
$0.0775 May 8, 1998 May 22, 1998
$0.0775 June 5, 1998 June 19, 1998
</TABLE>
16
<PAGE> 17
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 SIX FOR THE YEAR ENDED OCTOBER 31*
MONTHS ENDED ----------------------------------------------------
APRIL 30, 1998* 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................. $ 15.50 $ 15.18 $ 15.31 $ 14.09 $16.53 $ 14.51
------- ------- ------- ------- ------ -------
Net investment income................................. 0.60 1.20 1.21 1.22 1.35 1.42
Net realized and unrealized gain (loss)............... (0.08) 0.34 0.06 1.30 (2.34) 2.05
------- ------- ------- ------- ------ -------
Total from investment operations...................... 0.52 1.54 1.27 2.52 (0.99) 3.47
------- ------- ------- ------- ------ -------
Less dividends and distributions from:
Net investment income.............................. (0.48) (0.96) (1.02) (1.08) (1.23) (1.23)
Common share equivalent of dividends paid to
preferred shareholders............................ (0.11) (0.22) (0.22) (0.22) (0.22) (0.22)
Net realized gain.................................. (0.01) (0.05) (0.16) -- -- --
------- ------- ------- ------- ------ -------
Total dividends and distributions..................... (0.60) (1.23) (1.40) (1.30) (1.45) (1.45)
------- ------- ------- ------- ------ -------
Anti-dilutive effect of acquiring treasury shares..... -- 0.01 -- -- -- --
------- ------- ------- ------- ------ -------
Net asset value, end of period........................ $ 15.42 $ 15.50 $ 15.18 $ 15.31 $14.09 $ 16.53
======= ======= ======= ======= ====== =======
Market value, end of period........................... $14.813 $15.313 $14.625 $14.625 $12.75 $16.625
======= ======= ======= ======= ====== =======
TOTAL INVESTMENT RETURN+.............................. (0.17)%(1) 12.16% 8.44% 23.76% (16.77)% 19.68%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses........................................ 0.70%(2) 0.71% 0.72% 0.74% 0.82% 0.81%
Net investment income before preferred stock
dividends............................................ 7.69%(2) 7.93% 8.02% 8.31% 8.80% 9.05%
Preferred stock dividends............................. 1.38%(2) 1.44% 1.45% 1.50% 1.40% 1.38%
Net investment income available to common
shareholders......................................... 6.31%(2) 6.49% 6.57% 6.81% 7.40% 7.67%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............... $383,359 $384,773 $380,488 $383,920 $379,886 $447,578
Asset coverage on preferred shares at end of period... 365% 366% 362% 365% 316% 320%
Portfolio turnover rate............................... 1%(1) 5% 7% 12% 10% 3%
</TABLE>
- ---------------------
* 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
17
<PAGE> 18
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<PAGE> 19
(This Page Intentionally Left Blank)
<PAGE> 20
TRUSTEES
- -------------------------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
- -------------------------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- -------------------------------------------------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- -------------------------------------------------
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- -------------------------------------------------
Dean Whitter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been taken from the records of the
Trust without examination by the independent accountants and accordingly they
do not express an opinion thereon.
INTERCAPITAL
QUALITY
MUNICIPAL
INVESTMENT
TRUST
Semiannual Report
April 30, 1998
