[ANNOTATED FORM N-Q] UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-Q QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY Investment Company Act file number: 811-06591 Morgan Stanley Quality Municipal Income Trust (Exact name of registrant as specified in charter) 1221 Avenue of the Americas, New York, New York 10020 (Address of principal executive offices) (Zip code) Ronald E. Robison 1221 Avenue of the Americas, New York, New York 10020 (Name and address of agent for service) Registrant's telephone number, including area code: 212-762-4000 Date of fiscal year end: October 31, 2004 Date of reporting period: July 31, 2004 ITEM 1. SCHEDULE OF INVESTMENTS. The Trust's schedule of investments as of the close of the reporting period prepared pursuant to Rule 12-12 of Regulation S-X is as follows: MORGAN STANLEY QUALITY MUNICIPAL INCOME TRUST PORTFOLIO OF INVESTMENTS | July 31, 2004 (unaudited) PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE ---------------------------------------------------------------------------------------------------------------------------- TAX-EXEMPT MUNICIPAL BONDS (146.3%) General Obligation (22.4%) $5,000 California, Various Purpose Dtd 05/01/03 5.25% 02/01/19 $5,280,750 4,000 Los Angeles, California, Ser A (WI) 5.00 09/01/24 4,100,200 2,700 Adams & Arapahoe Counties Joint School District # 32, Colorado, Ser 2003A (FSA) 5.125 12/01/21 2,837,187 3,500 Denver School District # 1, Colorado, Ser 1999 (FGIC) 5.25 12/01/16 3,792,145 2,000 Connecticut, 2002 Ser B 5.50 06/15/20 2,180,260 5,000 Florida Board of Education, Capital Outlay Refg 2002 Ser C (MBIA) 5.00 06/01/20 5,222,950 Hawaii, 5,000 1992 Ser BZ 6.00 10/01/10 5,717,750 8,000 1992 Ser BZ 6.00 10/01/11 9,200,560 5,000 Honolulu City & County, Hawaii, ROLS RR II R 237-3 (MBIA) 9.298[+/+] 03/01/26 5,338,100 10,000 Chicago, Illinois, Neighborhoods Alive 21 Ser 2001 A (FGIC) 5.50 01/01/36 10,370,100 4,000 Cook County, Illinois, Ser 1992 C (FGIC) 6.00 11/15/09 4,531,640 6,000 Illinois, First Ser 2002 (MBIA) 5.375 07/01/20 6,430,920 Pennsylvania, 5,000 First Ser 2003 RITES PA - 1112 A (MBIA) 8.451[+/+] 01/01/18 5,551,200 5,000 First Ser 2003 RITES PA - 1112 B (MBIA) 8.451[+/+] 01/01/19 5,500,550 3,235 Charleston County School District, South Carolina, Ser 2004 A 5.00 02/01/22 3,347,546 5,000 Houston, Independent School District, Texas, Refg Ser 1999 A (PSF) 5.25 02/15/18 5,348,150 5,000 Northside Independant School District, Texas, Bldg & Refg Ser 2001 (PSF) 5.00 02/15/26 5,015,100 175 Texas, Houston, Pub Improvement 5.75 03/01/18 195,242 ------ ------------ 83,610 89,960,350 ------ ------------ Educational Facilities Revenue (3.7%) 3,700 University of Alabama Ser A 5.25 07/01/22 3,927,550 Arizona Board of Regents, 1,650 University of Arizona Ser 2001 A COPs (Ambac) 5.50 06/01/15 1,811,139 1,740 University of Arizona Ser 2001 A COPs (Ambac) 5.50 06/01/16 1,904,465 1,835 University of Arizona Ser 2001 A COPs (Ambac) 5.50 06/01/17 2,008,444 940 University of Arizona Ser 2001 A COPs (Ambac) 5.50 06/01/18 1,028,849 2,000 Ohio State University, General Receipts Ser 2002 A 5.125 12/01/31 2,025,980 2,000 Pennsylvania State University, Refg Ser 2002 5.25 08/15/14 2,208,360 ------ ------------ 13,865 14,914,787 ------ ------------ Electric Revenue (16.6%) 6,000 Salt River Project Agricultural Improvement & Power District, Arizona, 2002 Ser B 5.00 01/01/31 6,022,260 5,000 California Department of Water Resources, Power Supply Ser 2002 A 5.75 05/01/17 5,521,450 3,300 Jacksonville Electric Authority, Florida, St Johns Power Park Refg Issue 2 Ser 17 5.00 10/01/18 3,423,486 2,000 Orlando Utilities Commission, Florida, Water & Electric Ser 2001 5.25 10/01/19 2,134,580 2,000 Western Minnesota Municipal Power Agency, 2003 Ser A (MBIA) 5.00 01/01/30 2,010,160 Long Island Power Authority, New York, 4,000 Ser 2003 B 5.25 06/01/13 4,319,400 5,325 Ser 2003 C 5.50 09/01/19 5,671,285 South Carolina Public Service Authority, 3,700 Refg Ser 2002 D (Ambac) 5.00 01/01/20 3,852,477 5,000 Refg Ser 2002 D (FSA) 5.00 01/01/20 5,196,500 7,000 Refg Ser 2003 A (Ambac) 5.00 01/01/22 7,200,130 7,000 Energy Northwest, Washington, Columbia Refg Ser 2001 C (MBIA) 5.75 07/01/18 7,800,100 Grant County Public Utility District # 2, Washington, 5,000 Electric Refg Ser 2001 H (FSA) 5.375 01/01/18 5,339,800 8,220 Priest Rapids Hydro Second Ser 1992 A 5.00 01/01/23 8,220,493 ------ ------------ 63,545 66,712,121 ------ ------------ Hospital Revenue (4.1%) 3,500 Birmingham-Carraway Special Care Facilities Financing Authority, Alabama, Carraway Methodist Hlth Ser 1995 A (Connie Lee) 5.875 08/15/15 3,681,230 Maryland Health & Higher Educational Facilities Authority, 5,000 University of Maryland Medical Ser 2001 5.25 07/01/28 5,012,700 1,500 University of Maryland Medical Ser 2002 6.00 07/01/32 1,570,575 3,000 Lorain County, Ohio, Catholic Healthcare Partners Ser 2001 A 5.625 10/01/17 3,197,010 3,000 Philadelphia Hospitals & Higher Education Facilities Authority, ------ Pennsylvania, Chestnut Hill Hospital Ser 1992 6.375 11/15/11 3,007,320 ------------ 16,000 16,468,835 ------ ------------ Industrial Development/Pollution Control Revenue (4.1%) 6,000 California Pollution Control Financing Authority, Keller Canyon Landfill Co/Browning-Ferris Industries Inc Ser 1992 (AMT) 6.875 11/01/27 5,902,800 5,000 Michigan Strategic Fund, Detroit Edison Co Ser 2001 C (AMT) 5.65 09/01/29 5,046,150 3,000 Brazos River Authority, Texas, TXU Electric Co Ser 1999 C (AMT) 7.70 03/01/32 3,450,750 2,000 Sabine River Authority, Texas, TXU Electric Co Refg Ser 2001 B ----- (AMT) (Mandatory Tender 11/01/11) 5.75 05/01/30 2,113,800 ------------ 16,000 16,513,500 ------ ------------ Mortgage Revenue - Multi-Family (1.9%) 7,000 Illinois Housing Development Authority, Ser I 6.625 09/01/12 7,067,830 Missouri Housing Development Commission, 230 Federally Insured Mortgage Loans Refg Ser 11/15/92 6.50 07/01/16 230,246 285 Federally Insured Mortgage Loans Refg Ser 11/15/92 6.60 07/01/24 285,251 ------ ------------ 7,515 7,583,327 ------ ------------ Mortgage Revenue - Single Family (3.3%) 440 Idaho Housing Agency, 1992 Ser E (AMT) 6.75 07/01/12 443,199 2,945 Idaho Housing & Finance Association, 2000 Ser E (AMT) 6.00 01/01/32 2,985,317 500 Missouri Housing Development Commission, Homeownership, Ser 2000 B-1 (AMT) 6.25 03/01/31 520,600 4,370 Montana Board of Housing, 2000 Ser B (AMT) 6.00 12/01/29 4,531,428 4,565 New Jersey Housing Mortgage Finance Authority, Home Buyer ------ Ser 2000 CC (AMT) (MBIA) 5.875 10/01/31 4,661,504 ------------ 12,820 13,142,048 ------ ------------ Public Facilities Revenue (9.5%) 4,000 Arizona School Facilities Board, Ser 2003A COPs (MBIA) 5.25 09/01/17 4,313,440 5,000 Phoenix Industrial Development Authority, Arizona, Capital Mall LLC Ser 2000 (Ambac) 5.50 09/15/27 5,233,200 2,000 Sacramento Financing Authority, California, City Hall 2002 Ser A (FSA) 5.00 12/01/32 1,992,660 2,000 Colorado Educational & Cultural Facilities Authority, Peak to Peak Charter School Refg & Impr Ser 2004 (XLCA) 5.25 08/15/34 2,035,100 3,000 Broward County School Board, Florida, Ser 2001 A COPs (FSA) 5.00 07/01/26 3,020,340 4,000 Orange County School Board, Florida, Ser 2001 A COPs (Ambac) 5.25 08/01/14 4,388,560 1,400 Marion County Convention & Recreational Facilities Authority, Indiana, Refg Ser 2003 A (Ambac) 5.00 06/01/21 1,438,668 2,655 Kentucky State Property & Buildings Commission, Project # 79 (MBIA) 5.00 10/01/22 2,730,561 3,000 Albuquerque, New Mexico, Gross Receipts Refg Ser 1999 C 5.25 07/01/17 3,220,560 3,000 Pennsylvania Public School Building Authority, Philadelphia School District Ser 2003 (FSA) 5.00 06/01/33 2,979,390 4,000 Puerto Rico Public Bldgs Authority, Ser J 5.00 07/01/36 4,309,880 2,500 Milwaukee Redevelopment Authority, Wisconsin, Ser 2003 A ------- (Ambac) 5.125 08/01/23 2,580,425 36,555 ------------ 38,242,784 ------ ------------ Resource Recovery Revenue (0.8%) 3,000 Northeast Maryland Waste Disposal Authority, Montgomery County ------ Ser 2003 (AMT) (Ambac) 5.50 04/01/16 3,218,760 ------------ Transportation Facilities Revenue (30.9%) 3,000 Alaska International Airports, Ser 2002 B (Ambac) 5.25 10/01/27 3,067,560 2,000 Arizona Transportation Board, Highway Refg Ser 2002 A 5.25 07/01/19 2,168,240 3,000 Phoenix Civic Improvement Corporation, Arizona, Airport Ser 2002 B (AMT) (FGIC) 5.25 07/01/32 3,020,130 5,000 California Infrastructure & Economic Development Bank, Bay Area Toll Bridges Seismic Retrofit First Lien Ser 2003 A (Ambac) 5.00 07/01/36 5,002,650 1,900 Orange County Transportation Authority, California, Toll Road Refg Ser 2003 A (Ambac) 5.00 08/15/20 1,986,412 4,000 Port of Oakland, California, Ser 2002 L (AMT) (FGIC) 5.00 11/01/32 3,921,400 2,000 Mid-Bay Bridge Authority, Florida, Refg Ser 1993 A (Ambac) 5.95 10/01/22 2,206,960 Georgia State, 6,000 Road & Tollway Authority 5.00 10/01/22 6,243,600 9,000 Road & Tollway Authority 5.00 10/01/23 9,310,590 4,000 Chicago, Illinois, O' Hare Int'l Airport 3rd Lien Ser 2003 B-2 (AMT) (FSA) 5.75 01/01/23 4,292,920 4,000 Regional Transportation Authority, Illinois, Refg Ser 1999 (FSA) 5.75 06/01/21 4,613,880 7,500 Indiana Transportation Finance Authority, Ser 2000 5.375 12/01/25 7,803,750 3,400 Maine Turnpike Authority, Ser 2000 (FGIC) 5.50 07/01/30 3,548,138 3,000 Wayne County, Michigan, Detroit Metropolitan Wayne County Airport Refg Ser 2002 D (AMT) (FGIC) 5.50 12/01/17 3,228,660 Clark County, Nevada, 1,000 Jet Aviation Fuel Tax Ser 2003 C (AMT) (Ambac) 5.375 07/01/19 1,051,130 1,100 Jet Aviation Fuel Tax Ser 2003 C (AMT) (Ambac) 5.375 07/01/20 1,152,162 2,000 Jet Aviation Fuel Tax Ser 2003 C (AMT) (Ambac) 5.375 07/01/22 2,078,440 4,000 Sub Lien Ser 2004 A (AMT) (FGIC) (WI) 5.50 07/01/20 4,256,120 5,000 New Jersey Transportation Trust Fund Authority, 1999 Ser A 5.75 06/15/20 5,712,550 12,000 New Jersey Turnpike Authority, Ser 2003 A (FGIC)++ 5.00 01/01/27 12,150,240 10,000 Metropolitan Transportation Authority, New York, Transportation Refg Ser 2002 A (FGIC) 5.00 11/15/25 10,158,700 4,000 Port Authority of New York & New Jersey, Cons 135th Ser (MBIA)** 5.00 09/15/29 4,005,000 Triborough Bridge & Tunnel Authority, New York, 5,000 Refg 2002 E (MBIA) 5.25 11/15/22 5,290,500 6,000 Ser 2001 A 5.00 01/01/32 5,951,100 Houston, Texas, 6,000 Airport Sub Lien Ser 2000 A (AMT) (FSA) 5.875 07/01/17 6,564,420 5,000 Airport Sub Lien Ser 2000 A (AMT) (FSA) 5.625 07/01/30 5,134,000 ------- ------------ 118,900 123,919,252 ------- ------------ Water & Sewer Revenue (36.8%) 3,800 Phoenix Civic Improvment Corporation, Arizona, Jr Lien Water Ser 2002 5.00 07/01/26 3,840,698 3,000 East Bay Municipal Utility District, California, Water Ser 2001 (MBIA) 5.00 06/01/26 3,019,650 3,720 San Diego County Water Authority, California, Ser 2002 A COPs (MBIA) 5.00 05/01/27 3,728,854 3,500 Broward County, Florida, Water & Sewer Utility Ser 2003 (MBIA) 5.00 10/01/24 3,583,825 10,000 Augusta, Georgia, Water and Sewerage Ser 2000 (FSA) 5.25 10/01/30 10,166,400 10,000 Indiana Bond Bank, Revolving Fund Ser 2001 A 5.00 02/01/23 10,239,300 5,000 Louisville & Jefferson County Metropolitan Sewer District, Kentucky, Ser 1999 A (FGIC) 5.75 05/15/33 5,373,550 5,000 Massachusetts Water Resources Authority, 2000 Ser A (FGIC) 5.75 08/01/39 5,351,050 5,345 Las Vegas Vallley Water District, Nevada, Water Impr Refg Ser 2003 A (FGIC) 5.25 06/01/20 5,679,918 10,000 Passaic Valley Sewerage Commissioners, New Jersey, Ser F (FGIC) 5.00 12/01/20 10,482,100 3,000 Rio Rancho, New Mexico, Water & Wastewater Refg Ser 1999 (Ambac) 5.25 05/15/19 3,207,450 New York City Municipal Water Finance Authority, New York, 3,500 2003 Ser A 5.375 06/15/19 3,767,085 18,000 2001 Ser B 5.00 06/15/26 18,108,179 10,000 2004 Ser A 5.00 06/15/35 9,912,400 4,500 Charlotte, North Carolina, Water & Sewer Ser 2001 5.125 06/01/26 4,605,480 4,000 Western Carolina Regional Sewer Authority, South Carolina, Ser 2001 (FSA) 5.375 03/01/18 4,332,160 10,000 Austin, Texas, Water & Wastewater Refg Ser 2001 A (FSA) 5.125 05/15/27 10,119,300 15,000 Houston, Texas, Water & Sewer Refg Ser 2002 (FSA) 5.25 05/15/23 15,766,650 13,960 San Antonio, Texas, Water & Refg Ser 2001 (FGIC) 5.00 05/15/26 14,002,857 2,000 Fairfax County Water Authority, Virginia, Refg Ser 1992 6.00 04/01/22 2,185,320 -------- ------------ 143,325 147,472,226 -------- ------------ Other Revenue (7.3%) 10,000 California Economic Recovery, Ser 2004 A 5.00 07/01/16 10,503,300 Boulder County, Colorado, 1,750 University Corp for Atmospheric Research Ser 2002 (MBIA) 5.375 09/01/18 1,899,415 1,750 University Corp for Atmospheric Research Ser 2002 (MBIA) 5.375 09/01/21 1,870,505 2,000 New York City Transitional Finance Authority, New York, Refg 2003 Ser A 5.50 11/01/26 2,214,980 10,000 Tobacco Settlement Financing Corp, New York, Ser 2004 B-1C 5.50 06/01/17 10,670,100 2,000 Philadelphia, Pennsylvania, Gas Works First Ser 1998 B (FSA) 5.00 07/01/28 2,002,940 -------- ------------ 27,500 29,161,240 -------- ------------ Refunded (4.9%) 5,000 Atlanta, Georgia, Airport Ser 2000 A (FGIC) 5.50 01/01/10+ 5,619,300 5,000 Dauphin County General Authority, Pennsylvania, HAPSO Group Inc/The Western Pennsylvania Hospital Refg 1992 Ser A (MBIA) (ETM) 6.25 07/01/16 5,811,250 5,200 San Antonio, Texas, Electric & Gas Ser 2000 A 5.75 02/01/10+ 5,869,240 1,825 Houston, Texas, Pub Improvement 5.75 09/01/10+ 2,061,173 ------- ------------ 17,025 19,360,963 -------- ------------ 559,660 TOTAL TAX-EXEMPT MUNICIPAL OBLIGATIONS (Cost $563,144,181) 586,670,193 -------- ------------ SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (6.1%) 900 Idaho Health Facilities Authority, St Luke's Regional Medical Center Ser 2000 (FSA) (Demand 08/02/04) 1.12* 07/01/30 900,000 2,015 Indiana Health Facility Financing Authority, Clarian Health Ser 2000 B (Demand 08/02/04) 1.12* 03/01/30 2,015,000 Missouri Health & Educational Facilities Authority, 9,600 Cox Health Ser 1997 (MBIA) (Demand 08/02/04) 1.10* 06/01/15 9,600,000 9,700 Washington University Ser 1996 C (Demand 08/02/04) 1.10* 09/01/30 9,700,000 2,300 Cuyahoga County, Ohio, Cleveland Clinic Health System -------- Series 2003 B-1 (Demand 08/02/04) 1.10* 01/01/35 2,300,000 ------------ 24,515 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Cost $24,515,000) 24,515,000 -------- ------------ $584,175 TOTAL INVESTMENTS (Cost $587,659,181) (a) (b) 152.4% 611,185,193 ======== LIABILITIES IN EXCESS OF OTHER ASSETS (0.4) (1,791,310) PREFERRED SHARES OF BENEFICIAL INTEREST (52.0) (208,281,795) ----- ------------ NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS 100.0% $401,112,088 ===== ============ --------------- Note: The categories of investments are shown as a percentage of net assets applicable to common shareholders. AMT Alternative Minimum Tax. COPs Certificates of Participation. ETM Escrowed to maturity. PSF Texas Permanent School Fund Guarantee Program. RITES Residual Interest Tax-Exempt Securities. ROLS Reset Option Longs. WI Security purchased on a when-issued basis. + Prerefunded to call date shown. ++ A portion of this security has been physically segregated in connection with open futures contracts in the amount of $1,440,000. [+/+] Current coupon rate for inverse floating rate municipal obligation. This rate resets periodically as the auction rate on the related security changes. Positions in inverse floating rate municipal obligations have a total value of $16,389,850 which represents 4.1% of net assets applicable to common shareholders. * Current coupon of variable rate demand obligation. ** Joint exemption in locations shown. (a) Securities have been designated as collateral in an amount equal to $164,300,036 in connection with open futures contracts and the purchase of when-issued securities. (b) The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $24,000,925 and the aggregate gross unrealized depreciation is $474,913, resulting in net unrealized appreciation of $23,526,012. 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. XLCA XL Capital Assurance Inc. Futures Contracts Open at July 31, 2004: DESCRIPTION, NUMBER OF DELIVERY MONTH UNDERLYING FACE UNREALIZED CONTRACTS LONG/SHORT AND YEAR AMOUNT AT VALUE DEPRECIATION --------- ---------- -------- --------------- ------------ 400 Short U.S. Treasury Note 5Yr $(43,800,000) $(719,648) September/2004 1,200 Short U.S. Treasury Note 10Yr (132,862,500) (3,547,056) September/2004 ------------ Total unrealized depreciation ........... $(4,266,704) =========== Geographic Summary of Investments Based on Market Value as a Percent of Total Investments Alabama...... 1.3% Idaho......... 0.7% Missouri....... 3.3% Puerto Rico... 0.7% Alaska....... 0.5 Illinois...... 6.1 Montana........ 0.7 South Arizona...... 5.1 Indiana....... 3.5 Nevada......... 2.3 Carolina ..... 3.9 California... 8.3 Kentucky...... 1.3 New Jersey..... 6.1 Texas ........ 12.4 Colorado..... 2.0 Maine......... 0.6 New Mexico..... 1.1 Virginia ..... 0.4 Connecticut.. 0.4 Maryland ..... 1.6 New York....... 13.1 Washington.... 3.5 Florida...... 3.9 Massachusetts. 0.9 North Carolina. 0.8 Wisconsin .... 0.4 Georgia...... 5.1 Michigan...... 1.4 Ohio.......... 1.2 Joint Hawaii....... 3.3 Minnesota..... 0.3 Pennsylvania.. 4.4 exemptions* (0.6) ----- 100.0% ===== -------------- * Joint exemptions have been included in each geographic location. ITEM 2. CONTROLS AND PROCEDURES. (a) The Trust's principal executive officer and principal financial officer have concluded that the Trust's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust's in this Form N-Q was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. (b) There were no changes in the Trust's internal control over financial reporting that occurred during the registrant's fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting. ITEM 3. EXHIBITS. (a) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Morgan Stanley Quality Municipal Income Trust /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer September 20, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer September 20, 2004 /s/ Francis Smith Francis Smith Principal Financial Officer September 20, 2004 3