<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY Two World Trade Center,
MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999 New York, New York 10048
DEAR SHAREHOLDER:
The U.S. economy, led by consumer demand, has continued to experience robust
growth this year. The fixed-income markets anticipated that the Federal Reserve
Board would remove the liquidity it provided during last year's international
economic crises. The Fed changed monetary policy and raised the federal-funds
rate 50 basis points, to 5.25 percent during the summer. By October long-term
interest rates had risen to levels last seen two years ago. Subsequently, the
Fed raised the federal-funds rate an additional 25 basis points to 5.50 percent
in November.
MUNICIPAL MARKET CONDITIONS
Long-term insured municipal index yields began 1999 near a record low of 5.05
percent. By the end of October, municipal index yields had increased 100 basis
points to 6.05 percent. Since bond prices move inversely to changes in interest
rates, these higher yields resulted in significantly lower bond prices. The
increase in yields translated into a 13 percent price decline for a generic
insured municipal bond with a 30-year maturity.
The municipal market outperformed U.S. Treasury bonds early in the year but
gradually gave ground. The ratio of long-term insured municipal index yields to
benchmark 30-year Treasury yields is a measure of relative performance. The
ratio declined from 99 percent at the end of 1998 to 91 percent in May before
rising to 98 percent by the end of October. A declining ratio means that
municipals have outperformed Treasuries. Over the past five years the ratio has
ranged from a high of 99 percent, to a low of 82 percent.
Higher interest rates led to a reduction in municipal market underwriting this
year. New issue volume declined 20 percent in the first ten months of 1999.
Refunding activity, the most interest rate sensitive component of supply, was
down 50 percent.
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
30-YEAR BOND YIELDS 1994-1999
AAA AAA
Date Ins Tsy % Relationship Date Ins Tsy % Relationship
12/31/93 5.40% 6.34% 85.17% 11/29/96 5.50 6.35 86.61%
01/31/94 5.40 6.24 86.54% 12/31/96 5.60 6.63 84.46%
02/28/94 5.80 6.66 87.09% 01/31/97 5.70 6.79 83.95%
03/31/94 6.40 7.09 90.27% 02/28/97 5.65 6.80 83.09%
04/29/94 6.35 7.32 86.75% 03/31/97 5.90 7.10 83.10%
05/31/94 6.25 7.43 84.12% 04/30/97 5.75 6.94 82.85%
06/30/94 6.50 7.61 85.41% 05/30/97 5.65 6.91 81.77%
07/29/94 6.25 7.39 84.57% 06/30/97 5.60 6.78 82.60%
08/31/94 6.30 7.45 84.56% 07/30/97 5.30 6.30 84.13%
09/30/94 6.55 7.81 83.87% 08/31/97 5.50 6.61 83.21%
10/31/94 6.75 7.96 84.80% 09/30/97 5.40 6.40 84.38%
11/30/94 7.00 8.00 87.50% 10/31/97 5.35 6.15 86.99%
12/30/94 6.75 7.88 85.66% 11/30/97 5.30 6.05 87.60%
01/31/95 6.40 7.70 83.12% 12/31/97 5.15 5.92 86.99%
02/28/95 6.15 7.44 82.66% 01/31/98 5.15 5.80 88.79%
03/31/95 6.15 7.43 82.77% 02/28/98 5.20 5.92 87.84%
04/28/95 6.20 7.34 84.47% 03/31/98 5.25 5.93 88.53%
05/31/95 5.80 6.66 87.09% 04/30/98 5.35 5.95 89.92%
06/30/95 6.10 6.62 92.15% 05/29/98 5.20 5.80 89.66%
07/31/95 6.10 6.86 88.92% 06/30/98 5.20 5.65 92.04%
08/31/95 6.00 6.66 90.09% 07/31/98 5.18 5.71 90.72%
09/29/95 5.95 6.48 91.82% 08/31/98 5.03 5.27 95.45%
10/31/95 5.75 6.33 90.84% 09/30/98 4.95 5.00 99.00%
11/30/95 5.50 6.14 89.58% 10/31/98 5.05 5.16 97.87%
12/29/95 5.35 5.94 90.07% 11/30/98 5.00 5.06 98.81%
01/31/96 5.40 6.03 89.55% 12/31/98 5.05 5.10 99.02%
02/29/96 5.60 6.46 86.69% 01/31/99 5.00 5.09 98.23%
03/29/96 5.85 6.66 87.84% 02/28/99 5.10 5.58 91.40%
04/30/96 5.95 6.89 86.36% 03/31/99 5.15 5.63 91.47%
05/31/96 6.05 6.99 86.55% 04/30/99 5.20 5.66 91.87%
06/28/96 5.90 6.89 85.63% 05/31/99 5.30 5.83 90.91%
07/31/96 5.85 6.97 83.93% 06/30/99 5.47 5.96 91.78%
08/30/96 5.90 7.11 82.98% 07/31/99 5.55 6.10 90.98%
09/30/96 5.70 6.93 82.25% 08/31/99 5.75 6.06 94.88%
10/31/96 5.65 6.64 85.09% 09/30/99 5.85 6.05 96.69%
10/31/99 6.03 6.16 97.89%
Source: Municipal Market Data-A Division of Thomson Financial Municipal Group
and Bloomberg L.P.
PERFORMANCE
In this interest rate environment, the net asset value (NAV) of Morgan Stanley
Dean Witter Quality Municipal Income Trust (IQI) declined from $16.26 to $14.88
per share for the fiscal year ended October 31, 1999. Based on this change plus
reinvestment of tax-free dividends totaling $0.93 per share and a long-term
capital gain distribution of $0.04722 per share paid on December 18, 1998, the
Trust's total NAV return was -2.26 percent. IQI's value on the New York Stock
Exchange (NYSE) fell from $15.75 to $13.25 per share during the same period.
Based on this change plus reinvestment of distributions, IQI's total market
return was -10.21 percent. On October 31, 1999, IQI's NYSE market price
represented an 11 percent discount to its NAV.
Monthly dividends for the fourth quarter of 1999, declared in September, were
unchanged at $0.0775 per share. The dividend rate reflects the Trust's estimated
earnings over the next 6 - 12 months and its $0.090 per share cushion of
undistributed net investment income on October 31, 1999.
2
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
PORTFOLIO STRUCTURE
The Trust's investments were diversified among 14 long-term sectors and 73
credits. At the end of October, the portfolio's average maturity was 14 years.
Average duration, a measure of sensitivity to interest rate changes, was 5.1
years. Issues in the refunded bond category comprised 27 percent of net assets.
These bonds have been refinanced and will be redeemed on the dates shown in the
portfolio. The accompanying charts provide current information on the portfolios
credit quality, sector distribution and geographic diversification. Optional
call provisions by year with their respective cost (book) yields are also
charted.
THE IMPACT OF LEVERAGING
As discussed in previous shareholder reports, the total income available for
distribution to common shareholders includes incremental income provided by the
Trust's outstanding Auction Rate Preferred shares (ARPS). ARPS dividends reflect
prevailing short-term interest rates on maturities normally ranging from one
week to one year. Incremental income to common shareholders depends on two
factors. The first factor is the amount of ARPS outstanding, while the second is
the spread between the portfolio's cost yield and ARPS expenses (ARPS auction
rate and expenses). The greater the spread and amount of ARPS outstanding, the
greater the amount of incremental income available for distribution to common
shareholders. The level of net investment income available for distribution to
common shareholders varies with the level of short-term interest rates. ARPS
leverage also increases the price volatility of common shares and has the effect
of extending portfolio duration.
During the 12-month period, ARPS leverage contributed approximately $0.13 per
share to common share earnings. Weekly ARPS yields ranged between 2.70 and 4.875
percent. In comparison, the yield on 1-year municipal notes increased from 3.04
percent at the end of 1998, to 3.77 percent at the end of October 1999. The
Trusts' five ARPS series totaled $208 million and represented 30 percent of net
assets.
LOOKING AHEAD
The Federal Reserve Board raised interest rates twice in the summer and again in
November 1999. This confirmed its previously disclosed bias of becoming less
accommodative in the face of continued strong domestic economic growth.
Depending on the impact of tight labor markets and higher commodity prices on
inflation, the central bank may raise short-term interest rates further.
However, we believe municipal bonds continue to offer long-term investors good
value especially in relationship to Treasuries.
The Trust's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps
support the market value of the Trust's shares. In
3
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
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. The Trust may
also utilize procedures to reduce or eliminate the amount of outstanding ARPS,
including their purchase in the open market or in privately negotiated
transactions. During the fiscal year ended October 31, 1999 the Trust purchased
and retired 631,700 shares of common stock at a weighted average market discount
of 8.66 percent.
We appreciate your ongoing support of Morgan Stanley Dean Witter Quality
Municipal Income Trust and look forward to continuing to serve your investment
needs.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN
- -------------------------- ---------------------
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
4
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
LARGEST SECTORS (BAR CHART) AS OF OCTOBER 31, 1999
(% OF NET ASSETS)
REFUNDED 27%
WATER & SEWER 11%
MORTGAGE 11%
GENERAL OBLIGATION 10%
IDR/PCR* 8%
HOSPITAL 7%
ELECTRIC 7%
TRANSPORTATION 7%
* INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CREDIT RATINGS (PIE CHART) AS OF OCTOBER 31, 1999
(% OF TOTAL LONG-TERM PORTFOLIO)
Aa or AA 30%
A or A 19%
Baa or BBB 3%
Ba or BB 1%
Aaa or AAA 47%
AS MEASURED BY MOODY'S INVESTORS SERVICE, INC. OR STANDARD & POOR'S CORP.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
GEOGRAPHIC SUMMARY OF INVESTMENTS
BASED ON MARKET VALUE AS A PERCENT OF NET ASSETS
OCTOBER 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C>
ALABAMA ....................... 1.2% INDIANA ....................... 1.1% PENNSYLVANIA .................. 3.9%
ALASKA ........................ 1.2 MAINE ......................... 1.3 PUERTO RICO ................... 1.7
ARIZONA ....................... 0.6 MASSACHUSETTS ................. 8.1 SOUTH CAROLINA ................ 5.2
CALIFORNIA .................... 2.9 MICHIGAN ...................... 2.4 SOUTH DAKOTA .................. 0.8
COLORADO ...................... 3.6 MINNESOTA ..................... 2.9 TEXAS ......................... 4.6
CONNECTICUT ................... 2.5 MISSOURI ...................... 5.9 UTAH .......................... 0.8
DISTRICT OF COLUMBIA .......... 1.5 NEBRASKA ...................... 0.7 VIRGINIA ...................... 2.8
FLORIDA ....................... 7.3 NEVADA ........................ 3.7 WASHINGTON .................... 4.8
GEORGIA ....................... 4.4 NEW JERSEY .................... 1.3 WEST VIRGINIA ................. 1.4
HAWAII ........................ 2.0 NEW MEXICO .................... 0.9 ----
IDAHO ......................... 0.2 NEW YORK ...................... 6.3 TOTAL ......................... 98.2%
ILLINOIS ...................... 8.1 OHIO .......................... 2.1 ====
</TABLE>
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
5
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE
PURPOSE OF EDGAR FILING.]
CALL AND COST (BOOK) YIELD STRUCTURE
OCTOBER 31, 1999
WEIGHTED AVERAGE CALL PROTECTION: 4 YEARS
PERCENT CALLABLE* (BAR GRAPH)
1999 2%
2000 1%
2001 10%
2002 57%
2003 13%
2004 0%
2005 1%
2006 0%
2007 1%
2008 6%
2009 6%
2010+ 3%
YEARS BONDS CALLABLE
WEIGHTED AVERAGE BOOK YIELD: 6.4%
COST (BOOK) YIELD** BAR GRAPH
1999 6.7%
2000 6.7%
2001 6.6%
2002 6.6%
2003 6.5%
2004 0.0%
2005 6.0%
2006 0.0%
2007 6.1%
2008 6.1%
2009 5.4%
2010+ 5.9%
* % BASED ON LONG-TERM PORTFOLIO.
** COST OR "BOOK" YIELD IS THE ANNUAL INCOME EARNED ON A PORTFOLIO INVESTMENT
BASED ON ITS ORIGINAL PURCHASE PRICE BEFORE TRUST OPERATING EXPENSES. FOR
EXAMPLE, THE TRUST EARNED A BOOK YIELD OF 6.6% ON 10% OF THE LONG-TERM
PORTFOLIO THAT IS CALLABLE IN 2001.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
6
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On October 28, 1999, an annual meeting of the Trust's shareholders was held for
the purpose of voting on four separate matters, the results of which were as
follows:
(1) ELECTION OF TRUSTEE BY ALL SHAREHOLDERS:
Michael Bozic
For ........................................... 26,691,296
Withheld ...................................... 602,589
(2) ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS:
Charles A. Fiumefreddo
For ........................................... 3,580
Withheld ...................................... 0
The following Trustees were not standing for reelection at this meeting:
Edwin J. Garn, Wayne E. Hedien, Dr. Manuel H. Johnson, Michael E. Nugent,
Philip J. Purcell and John L. Schroeder.
(3) RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS:
For ........................................... 26,299,317
Against ....................................... 304,988
Abstain ....................................... 689,580
In addition, a shareholder proposal to amend the Trust's Declaration of Trust to
require each Trustee, within 30 days of election, to become a shareholder of the
Trust failed to obtain the necessary quorum of a majority of each of the common
and preferred shares outstanding and entitled to vote at the meeting. Although
no quorum was obtained, the following represents the total of the shares whose
votes were returned to the Trust prior to the meeting.
Vote:
Number of Common Shares Number of Preferred Shares
For ............. 4,458,151 For .............. 158
Against ......... 10,640,797 Against .......... 163
Abstain ......... 1,576,782 Abstain .......... 20
7
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (97.1%)
General Obligation (10.3%)
$ 4,000 Denver City & County School Dist No 1, Colorado, Ser 1999 (FGIC) ............ 5.25 % 12/01/16 $ 3,730,400
Hawaii,
5,000 1992 Ser BZ ................................................................ 6.00 10/01/10 5,232,250
8,000 1992 Ser BZ ................................................................ 6.00 10/01/11 8,346,000
4,000 Cook County, Illinois, Ser 1992 C (FGIC) .................................... 6.00 11/15/09 4,222,160
1,275 New York City, New York, 1992 Ser B ......................................... 7.00 02/01/20 1,349,664
South Carolina,
14,000 Highway Ser 1999 A ......................................................... 4.60 05/01/18 11,913,580
10,000 Highway Ser 1999 A ......................................................... 4.60 05/01/19 8,441,800
5,000 Houston Independent School District, Texas, PSF Gtd School
& Refg Ser 1999 A .......................................................... 5.25 02/15/18 4,581,250
9,035 San Antonio, Texas, Refg Ser 1992 ........................................... 5.75 08/01/13 9,068,249
15,000 Washington, Ser 1993 A ...................................................... 5.75 10/01/17 14,719,799
--------- ------------
75,310 71,605,152
--------- ------------
Education Facilities Revenue (1.9%)
2,500 University of Illinois, Auxiliary Ser 1991 .................................. 5.75 04/01/22 2,408,475
5,000 Massachusetts Health & Educational Facilities Authority, Brandeis
University 1998 Ser I (MBIA) ............................................... 4.75 10/01/28 4,064,700
Scranton-Lackawanna Health & Welfare Authority, Pennsylvania,
3,000 University of Scranton 1992 Ser A .......................................... 6.40 03/01/07 3,153,000
3,300 University of Scranton 1992 Ser A .......................................... 6.50 03/01/13 3,408,834
--------- ------------
13,800 13,035,009
--------- ------------
Electric Revenue (7.1%)
3,000 Los Angeles Department of Water & Power, California, Issue of 1992 .......... 6.375 02/01/20 3,110,970
9,500 Orlando Utilities Commission, Florida, Ser 1991 A ........................... 5.50 10/01/26 8,857,040
10,000 Municipal Electric Authority of Georgia, Power 1992 Ser B
(Secondary MBIA) ........................................................... 6.375 01/01/16 10,402,000
5,000 Hastings, Nebraska, Refg Ser 1992 ........................................... 6.30 01/01/19 5,201,650
10,000 Hamilton!, Ohio, Refg 1992 Ser A (FGIC) ..................................... 6.00 10/15/23 10,020,900
2,000 Intermountain Power Agency, Utah, Refg 1996 Ser D (Secondary FSA) ........... 5.00 07/01/21 1,711,560
Grant County Public Utility District #2, Washington,
8,220 Priest Rapids Hydro Second Ser 1992 A ...................................... 5.00 01/01/23 7,114,492
2,645 Wanapum Hydro Second Ser 1992 B (AMT) ...................................... 6.75 01/01/23 2,760,243
--------- ------------
50,365 49,178,855
--------- ------------
Hospital Revenue (7.5%)
5,000 Birmingham-Carraway Special Care Facilities Financing Authority, Alabama,
Carraway Methodist Health Ser 1995 A (Connie Lee) .......................... 5.875 08/15/15 4,891,400
9,250 Massachusetts Health & Educational Facilities Authority, Massachusetts
General Hospital Ser F (AMBAC) ............................................. 6.00 07/01/15 9,467,375
10,000 Missouri Health & Educational Facilities Authority, Health Midwest
Ser 1992 B (MBIA) .......................................................... 6.25 02/15/22 10,069,800
10,000 New York State Medical Care Facilities Finance Agency, The Mount Sinai
Hospital - FHA Insured Mortgage 1992 Ser C ................................. 5.75 08/15/19 9,734,200
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 4,500 Cuyahoga County, Ohio, Cleveland Clinic Foundation Refg Ser 1992 .............. 5.50 % 11/15/11 $ 4,460,805
5,000 Dauphin County General Authority, Pennsylvania, HAPSO Group Inc/
The Western Pennsylvania Hospital Refg 1992 Ser A (MBIA) ..................... 6.25 07/01/16 5,045,700
3,000 Philadelphia Hospitals & Higher Education Facilities Authority, Pennsylvania,
Chestnut Hill Hospital Ser of 1992 ........................................... 6.375 11/15/11 3,024,900
5,000 South Dakota Health & Educational Facilities Authority, Queen of Peace
Hospital Ser 1992 (MBIA) ..................................................... 6.70 07/01/17 5,287,000
--------- ------------
51,750 51,981,180
--------- ------------
Industrial Development/Pollution Control Revenue (7.6%)
6,000 California Pollution Control Financing Authority, Keller Cannon Landfill Co/
Browning-Ferris Industries Inc Ser 1992 (AMT) ................................ 6.875 11/01/27 5,919,300
5,000 Citrus County, Florida, Florida Power Corp Refg Ser 1992 B .................... 6.35 02/01/22 5,059,350
5,000 Washoe County, Nevada, Sierra Pacific Power Co Ser 1987 (AMT) (MBIA) .......... 6.65 06/01/17 5,264,550
15,000 Berkeley County, South Carolina, South Carolina Electric & Gas Co Ser 1984..... 6.50 10/01/14 15,625,350
10,000 Brazos River Authority, Texas, Houston Lighting & Power Co Ser 1992 B
(MBIA) ....................................................................... 6.375 04/01/12 10,601,700
10,000 Mason County, West Virginia, Appalachian Power Co Ser J ....................... 6.60 10/01/22 10,083,900
--------- ------------
51,000 52,554,150
--------- ------------
Mortgage Revenue - Multi-Family (5.6%)
7,000 Illinois Housing Development Authority, Ser I ................................. 6.625 09/01/12 7,257,950
15,705 Michigan Housing Development Authority, Rental 1992 Ser A
(Bifurcated FSA) ............................................................. 6.50 04/01/23 16,460,253
Missouri Housing Development Commission,
6,505 Federally Insured Mortgage Loans Refg Ser 11/15/92 ........................... 6.50 07/01/16 6,610,121
8,270 Federally Insured Mortgage Loans Refg Ser 11/15/92 ........................... 6.60 07/01/24 8,429,611
--------- ------------
37,480 38,757,935
--------- ------------
Mortgage Revenue - Single Family (4.9%)
16,495 Connecticut Housing Finance Authority, 1992 Ser B ............................. 6.70 11/15/12 17,355,213
6,080 Georgia Housing & Finance Authority, Home Ownership 1992 Ser C ................ 6.50 12/01/11 6,227,258
1,125 Idaho Housing Agency, 1992 Ser E (AMT) ........................................ 6.75 07/01/12 1,157,400
Minnesota Housing Finance Agency,
2,780 Ser 1992 D-1 ................................................................. 6.50 01/01/17 2,846,915
6,020 Ser 1992 CD-1 (AMT) .......................................................... 6.75 07/01/23 6,150,574
--------- ------------
32,500 33,737,360
--------- ------------
Nursing & Health Related Facilities Revenue (1.6%)
11,250 Minneapolis & Saint Paul Housing & Redevelopment Authority, Minnesota,
--------- Group Health Plan Inc Ser 1992 ................................................ 6.90 10/15/22 11,369,813
------------
Public Facilities Revenue (3.1%)
10,000 Atlanta Downtown Development Authority, Georgia, Underground Atlanta
Refg Ser 1992 ................................................................ 6.25 10/01/16 10,301,700
3,645 Illinois, Civic Center Ser 1990 A (AMBAC) ..................................... 6.00 12/15/15 3,645,875
7,370 Indianapolis Local Public Improvement Bond Bank, Indiana, Ser 1992 D .......... 6.75 02/01/20 7,784,268
--------- ------------
21,015 21,731,843
--------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Resource Recovery Revenue (1.9%)
$ 12,930 Broward County, Florida, Broward Waste Energy Co North Ser 1984 ............. 7.95 % 12/01/08 $ 13,351,001
--------- ------------
Transportation Facilities Revenue (6.6%)
Dade County, Florida,
3,000 Aviation 1992 Ser B (AMT) (MBIA) ........................................... 6.55 10/01/13 3,184,350
5,000 Aviation 1992 Ser B (AMT) (MBIA) ........................................... 6.60 10/01/22 5,263,550
13,000 Chicago, Illinois, Chicago-O'Hare Int'l Terminal Ser 1992 (AMT) (MBIA) ...... 6.75 01/01/12 13,664,950
4,000 Regional Transportation Authority, Illinois, Refg Ser 1999 (FSA) ............ 5.75 06/01/21 3,912,720
2,000 Massachusetts Turnpike Authority, Metropolitan Highway 1997
Ser A (MBIA) ............................................................... 5.00 01/01/37 1,665,700
2,390 St Louis, Missouri, Lambert-St Louis Int'l Airport Ser 1992 (AMT) (FGIC) .... 6.00 07/01/08 2,475,204
New Jersey Transportation Trust Fund Authority,
5,000 1998 Ser A (FSA) ........................................................... 4.50 06/15/19 4,131,350
5,000 1999 Ser A ................................................................. 5.75 06/15/20 4,951,950
6,000 Puerto Rico Highway & Transportation Authority, Refg Ser V .................. 6.625 07/01/12 6,322,800
--------- ------------
45,390 45,572,574
--------- ------------
Water & Sewer Revenue (11.1%)
4,000 Birmingham, Alabama, Water & Sewer Ser 1998 A ............................... 4.75 01/01/21 3,349,960
6,000 Tampa Bay Water, Florida, Utility Ser 1998 B (FGIC) ......................... 4.75 10/01/27 4,940,640
5,000 Douglasville - Douglas County Water & Sewer Authority, Georgia,
Ser 1998 (FGIC) ............................................................ 4.50 06/01/23 3,937,900
15,000 Massachusetts Water Pollution Abatement Trust, MWRA Loan Ser 1998 A.......... 4.75 08/01/18 12,754,650
Massachusetts Water Resources Authority,
10,000 1992 Ser B ................................................................. 5.50 11/01/15 9,609,300
10,000 1998 Ser A (FSA) ........................................................... 4.50 08/01/22 8,002,700
3,335 Rio Rancho, New Mexico, Water & Wastewater Refg Ser 1999 (AMBAC) ............ 5.25 05/15/19 3,042,153
20,000 New York City Municipal Water Finance Authority, New York, Ser 1993 A........ 6.00 06/15/17 20,006,200
7,510 Houston, Texas, Water & Sewer Jr Lien Refg Ser 1991 C (AMBAC) ............... 6.375 12/01/17 7,721,557
3,895 Fairfax County Water Authority, Virginia, Refg Ser 1992 ..................... 6.00 04/01/22 3,900,336
--------- ------------
84,740 77,265,396
--------- ------------
Other Revenue (0.7%)
3,360 Albuquerque, New Mexico, Gross Receipts Refg Ser 1999 C ..................... 5.25 07/01/17 3,101,213
2,500 Philadelphia, Pennsylvania, Gas Works First Ser 1998 B (FSA) ................ 5.00 07/01/28 2,108,725
--------- ------------
5,860 5,209,938
--------- ------------
Refunded (27.2%)
7,500 Alaska Housing Finance Corporation, Gen Hsg 1992 Ser A ...................... 6.60 12/01/02+ 8,082,075
10,000 Central Coast Water Authority, California, Ser 1992 (AMBAC) ................. 6.50 10/01/02+ 10,826,100
20,000 Jefferson County School District #R-1, Colorado, Ser 1992 (AMBAC) ........... 6.00 12/15/02+ 21,099,000
10,000 District of Columbia, Howard University Refg Ser 1992 A ..................... 6.75 10/01/02+ 10,802,000
9,800 Orlando, Florida, Cap Impr Refg Ser 1992 .................................... 6.00 10/01/01+ 10,304,896
20,000 Illinois Toll Highway Authority, Priority 1992 Ser A ........................ 6.375 01/01/03+ 21,424,400
8,550 Maine Municipal Bond Bank, 1992 Ser E ....................................... 6.25 11/01/02+ 9,150,808
10,000 Massachusetts Water Resources Authority, 1990 Ser A ......................... 6.50 12/01/01+ 10,640,400
12,610 St Louis, Missouri, Lambert - St Louis Int'l Airport Ser 1992 (AMT) (FGIC)... 6.00 07/01/02+ 13,323,852
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1999 , continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 19,700 Clark County, Nevada, Las Vegas - McCaran Int'l Airport Passenger
Facility Charge 1992 Ser B (AMT) ..................................... 6.25 % 07/01/02+ $ 20,840,630
12,000 New York Local Government Assistance Corporation, Ser 1991 C .......... 7.00 04/01/01+ 12,686,520
10,000 Allegheny County Hospital Development Authority, Pennsylvania,
Presbyterian University Health Ser 1992 A (MBIA) ..................... 6.25 11/01/02+ 10,509,800
5,000 Puerto Rico Highway & Transportation Authority, Ser T ................. 6.625 07/01/02+ 5,376,800
15,000 Fredericksburg Industrial Development Authority, Virginia,
MWH Medicorp Ser 1991 A & B (FGIC) ................................... 6.60 08/15/01+ 15,828,450
8,000 Grant County Public Utility District #2, Washington, Wanapum Hydro
--------- Second Ser 1992 A ..................................................... 6.375 01/01/02+ 8,465,440
------------
178,160 189,361,171
--------- ------------
671,550 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $646,444,964)................................. 674,711,377
--------- ------------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (1.1%)
4,000 Maricopa County, Arizona, Arizona Public Service Co Ser 1994 E
(Demand 11/01/99) .................................................... 3.50* 05/01/29 4,000,000
4,000 Salt Lake County, Utah, Service Station Holdings British Petroleum Co
--------- Ser 1994 B (Demand 11/01/99) ......................................... 3.60* 08/01/07 4,000,000
------------
8,000 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost $8,000,000) ................. 8,000,000
--------- ------------
$ 679,550 TOTAL INVESTMENTS (Identified Cost $654,444,964) (a)............................ 98.2% 682,711,377
=========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ................................. 1.8 12,467,715
----- ------------
NET ASSETS ..................................................................... 100.0% $695,179,092
===== ============
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
+ Prerefunded to call date shown.
* Current coupon of variable rate demand obligation.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $33,291,062 and the
aggregate gross unrealized depreciation is $5,024,649, resulting in net
unrealized appreciation of $28,266,413.
Bond Insurance:
- ---------------
AMBAC AMBAC Assurance Corporation.
Connie Lee Connie Lee Insurance Company - A wholly owned subsidiary of AMBAC
Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
ASSETS:
Investments in securities, at value
(identified cost $654,444,964).................. $682,711,377
Cash .............................................. 304,868
Receivable for:
Interest ..................................... 11,489,967
Investment sold .............................. 1,648,734
Prepaid expenses .................................. 414,958
------------
TOTAL ASSETS .................................. 696,569,904
------------
LIABILITIES:
Payable for:
Dividends to preferred shareholders .......... 570,922
Shares of beneficial interest repurchased..... 447,900
Investment management fee .................... 249,378
Accrued expenses .................................. 122,612
------------
TOTAL LIABILITIES ............................. 1,390,812
------------
NET ASSETS .................................... $695,179,092
============
COMPOSITION OF NET ASSETS:
Preferred shares of beneficial interest
(1,000,000 shares authorized of
non-participating $.01 par value, 4,160
shares outstanding) ............................ $208,000,000
------------
Common shares of beneficial interest
(unlimited shares authorized of
$.01 par value, 32,730,413 shares
outstanding) ................................... 457,103,006
Net unrealized appreciation ....................... 28,266,413
Accumulated undistributed net investment
income ......................................... 2,931,853
Accumulated net realized loss ..................... (1,122,180)
------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS .................................. 487,179,092
------------
TOTAL NET ASSETS .............................. $695,179,092
============
NET ASSET VALUE PER COMMON SHARE
($487,179,092 divided by 32,730,413
common shares outstanding) ....................... $14.88
======
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
NET INVESTMENT INCOME:
INTEREST INCOME ............................... $42,284,627
-----------
EXPENSES
Investment management fee ..................... 2,569,508
Auction commission fees ....................... 755,056
Transfer agent fees and expenses .............. 144,714
Professional fees ............................. 129,190
Shareholder reports and notices ............... 77,391
Auction agent fees ............................ 36,772
Registration fees ............................. 33,083
Custodian fees ................................ 30,845
Trustees' fees and expenses ................... 18,110
Other ......................................... 52,267
-----------
TOTAL EXPENSES ............................ 3,846,936
Less: expense offset .......................... (30,720)
-----------
NET EXPENSES .............................. 3,816,216
-----------
NET INVESTMENT INCOME ..................... 38,468,411
-----------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss ............................. (1,122,180)
Net change in unrealized appreciation ......... (43,771,021)
-----------
NET LOSS .................................. (44,893,201)
-----------
NET DECREASE .................................. $(6,424,790)
===========
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 38,468,411 $ 39,678,571
Net realized gain (loss) .............................. (1,122,180) 1,575,250
Net change in unrealized appreciation ................. (43,771,021) 10,150,568
------------- -------------
NET INCREASE (DECREASE) ............................ (6,424,790) 51,404,389
------------- -------------
Dividends to preferred shareholders from net investment
income .............................................. (7,437,084) (7,814,424)
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON
SHAREHOLDERS FROM:
Net investment income ................................. (30,960,584) (31,143,053)
Net realized gain ..................................... (1,575,210) (998,640)
------------- -------------
TOTAL DIVIDENDS AND DISTRIBUTIONS .................. (32,535,794) (32,141,693)
------------- -------------
Decrease from transactions in common shares of
beneficial interest ................................. (8,751,946) (3,623,524)
------------- -------------
NET INCREASE (DECREASE) ............................ (55,149,614) 7,824,748
NET ASSETS:
Beginning of period ................................... 750,328,706 742,503,958
------------- -------------
END OF PERIOD
(Including undistributed net investment income of
$2,931,853 and $2,861,110, respectively) ........... $ 695,179,092 $ 750,328,706
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Quality Municipal Income Trust (the "Trust") is
registered under the Investment Company Act of 1940, as amended, as a
diversified, closed-end management investment company. The Trust's investment
objective is to provide current income which is exempt from federal income tax.
The Trust was organized as a Massachusetts business trust on March 12, 1992 and
commenced operations on September 29, 1992.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS - Portfolio securities are valued by an outside
independent pricing service approved by the Trustees. The pricing service has
informed the Trust that in valuing the portfolio securities, it uses both a
computerized matrix of tax-exempt securities and evaluations by its staff, in
each case based on information concerning market transactions and quotations
from dealers which reflect the bid side of the market each day. The portfolio
securities are thus valued by reference to a combination of transactions and
quotations for the same or other securities believed to be comparable in
quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. Short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS - Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
The Trust amortizes premiums and accretes discounts over the life of the
respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS - It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - The Trust records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations
14
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1999, continued
which may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for 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 Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), the Trust pays the Investment Manager
a management fee, calculated weekly and payable monthly, by applying the annual
rate of 0.35% to the Trust's weekly net assets.
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, 1999 aggregated
$152,331,572 and $167,153,736, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is
the Trust's transfer agent. At October 31, 1999, the Trust had transfer agent
fees and expenses payable of approximately $3,000.
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, 1999 included
in Trustees' fees and expenses in the Statement of Operations amounted to
$5,543. At October 31, 1999, the Trust had an accrued pension liability of
$38,990 which is included in accrued expenses in the Statement of Assets and
Liabilities.
15
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1999, 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. The Trust has issued Series 1 through 5 Auction Rate
Preferred Shares ("Preferred Shares") which have a liquidation value of $50,000
per share plus the redemption premium, if any, plus accumulated but unpaid
dividends, whether or not declared, thereon to the date of distribution. The
Trust may redeem such shares, in whole or in part, at the original purchase
price of $50,000 per share plus accumulated but unpaid dividends, whether or not
declared, thereon to the date of redemption.
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>
1 1,120 $56,000 3.925% 09/06/00 3.56% - 3.925%
2 400 20,000 3.20 02/03/00 3.20 - 3.689
3 1,120 56,000 3.65 07/06/00 3.65 - 3.70
4 1,120 56,000 3.349 01/13/00 3.349 - 3.65
5 400 20,000 3.35 11/05/99 2.70 - 4.875
</TABLE>
- ---------------
* As of October 31, 1999.
** For the year ended October 31, 1999.
Subsequent to October 31, 1999 and up through December 3, 1999, the Trust paid
dividends to each of the Series 1 through 5 at rates ranging from 3.20% to
3.925% in the aggregate amount of $1,195,755.
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.
16
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1999, 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, 1997 ............................................... 33,602,513 $336,025 $469,142,451
Treasury shares purchased and retired (weighted average discount 5.89%)* (240,400) (2,404) (3,621,120)
---------- -------- ------------
Balance, October 31, 1998 ............................................... 33,362,113 333,621 465,521,331
Treasury shares purchased and retired (weighted average discount 8.66%)* (631,700) (6,317) (8,745,629)
---------- -------- ------------
Balance, October 31, 1999 ............................................... 32,730,413 $327,304 $456,775,702
========== ======== ============
</TABLE>
- ---------------
* The Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS
At October 31, 1999, the Trust had a net capital loss carryover of approximately
$1,122,000, which will be available through October 31, 2007 to offset future
capital gains to the extent provided by regulations.
7. DIVIDENDS TO COMMON SHAREHOLDERS
On September 28, 1999, the Trust declared the following dividends from net
investment income:
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
- -------------- ------------------ ------------------
$ 0.0775 November 5, 1999 November 19, 1999
$ 0.0775 December 3, 1999 December 17, 1999
17
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a common share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31*
---------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ...................... $ 16.26 $ 15.91 $ 15.44 $ 15.33 $ 13.62
-------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income .................................... 1.16 1.19 1.20 1.19 1.18
Net realized and unrealized gain (loss) .................. (1.36) 0.34 0.51 0.13 1.66
-------- -------- -------- -------- --------
Total income (loss) from investment operations ............ (0.20) 1.53 1.71 1.32 2.84
-------- -------- -------- -------- --------
Less dividends and distributions from:
Net investment income .................................... (0.93) (0.93) (0.99) (0.99) (0.99)
Common share equivalent of dividends paid to preferred
shareholders ............................................ (0.22) (0.23) (0.23) (0.22) (0.22)
Net realized gain ........................................ (0.05) (0.03) (0.03) (0.04) -
-------- -------- -------- -------- --------
Total dividends and distributions ......................... (1.20) (1.19) (1.25) (1.25) (1.21)
-------- -------- -------- -------- --------
Anti-dilutive effect of acquiring treasury shares ......... 0.02 0.01 0.01 0.04 0.08
-------- -------- -------- -------- --------
Net asset value, end of period ............................ $ 14.88 $ 16.26 $ 15.91 $ 15.44 $ 15.33
======== ======== ======== ======== ========
Market value, end of period ............................... $ 13.25 $ 15.75 $ 14.875 $ 14.625 $ 13.75
======== ======== ======== ======== ========
TOTAL RETURN+ ............................................. (10.21)% 12.66% 8.84% 14.27% 24.77%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses ............................................ 0.73% 0.71% (1) 0.70% (1) 0.69% (1) 0.72% (1)
Net investment income before preferred stock dividends .... 7.32% 7.35% 7.68% 7.73% 8.05%
Preferred stock dividends ................................. 1.42% 1.45% 1.47% 1.41% 1.53%
Net investment income available to common shareholders .... 5.90% 5.90% 6.21% 6.32% 6.52%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................... $695,179 $750,329 $742,504 $734,799 $752,840
Asset coverage on preferred shares at end of period ....... 333% 360% 356% 353% 361%
Portfolio turnover rate ................................... 21% 2% 2% - 1%
</TABLE>
- -------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total return is based upon the current market value on the last day of each
period reported. Dividends and distributions are assumed to be reinvested
at the prices obtained under the Trust's dividend reinvestment plan. Total
return does not reflect brokerage commissions.
(1) Does not reflect the effect of the expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER QUALITY MUNICIPAL INCOME 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 Morgan Stanley Dean Witter Quality
Municipal Income Trust (the "Trust") at October 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with 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 misstatement. 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, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
December 9, 1999
1999 FEDERAL TAX NOTICE (unaudited)
During the year ended October 31, 1999, the Trust paid the following per
share amounts from tax-exempt income: $0.94 to common shareholders,
$1,746 to Series 1 preferred shareholders, $1,640 to Series 2 preferred
shareholders, $1,805 to Series 3 preferred shareholders, $1,677 to
Series 4 preferred shareholders and $1,564 to Series 5 preferred
shareholders. For the year ended October 31, 1999, the Trust paid the
following per share amounts from long-term capital gains: $0.04 to
common shareholders, $82 to Series 1 preferred shareholders, $79 to
Series 2 preferred shareholders, $77 to Series 3 preferred shareholders,
$74 to Series 4 preferred shareholders and $72 to Series 5 preferred
shareholders.
19
<PAGE>
TRUSTEES
- -------------------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
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
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- -------------------------------------------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- -------------------------------------------
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- -------------------------------------------
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
MORGAN STANLEY
DEAN WITTER
QUALITY
MUNICIPAL
INCOME TRUST
ANNUAL REPORT
OCTOBER 31, 1999
