INTERCAPITAL QUALITY MUNICIPAL SECURITIES TRUST, N-30D, 1995-06-26

INTERCAPITAL QUALITY MUNICIPAL SECURITIES TRUST
N-30D, 1995-06-26

Previous: CONRAIL INC, SC 13D, 1995-06-26

Next: VORNADO REALTY TRUST, 8-K, 1995-06-26

<PAGE>
INTERCAPITAL QUALITY MUNICIPAL SECURITIES
Two World Trade Center
New York, New York 10048

DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------

Fixed-income market conditions have steadily improved since late last year.
Bonds began to rally in November 1994 on signs of slower economic growth in the
wake of a progressively tighter Federal Reserve monetary policy. The recent
trend toward lower long-term interest rates is in marked contrast to most of
1994 when rapidly rising rates created one of the most severe bear markets for
bonds in recent history.

MUNICIPAL MARKET CONDITIONS

Long-term municipal bond yields, as tracked by THE BOND BUYER Revenue Bond
Index*, dropped from a high of 7.37 percent in November 1994 to 6.29 percent at
the end of April 1995. This 108 basis point decline in yield corresponded to a
13 percent price increase for 30-year municipal bonds. Short-term municipal
interest rates remained basically unchanged over the past six months. Thus, the
yield spread or difference between short-term and long-term municipal bond
interest rates narrowed as long rates declined.

The seasonal demand for municipals in December more than offset the
uncertainty caused by the Orange County, California bankruptcy filing. The
market anticipated cash inflows from the reinvestment of coupons and the
proceeds from bond calls and maturities in January at a time of scarce supply.
Tax-exempt bonds outperformed U.S. Treasury bonds through February 1995. The
ratio of the Revenue Bond Index yield to the 30-year U.S. Treasury yield fell
from a high of 92 percent in November to 84 percent at the end of February. A
declining ratio means that municipal bond prices have been stronger than U.S.
Treasury prices. Tax reform proposals that advanced the concept of a flat tax
were partially responsible for municipals underperforming Treasuries in March
and April. By the end of April, the Revenue/Treasury yield ratio had risen to 86
percent.

The pace of new-issue underwriting over the first four months of 1995 was 40
percent below the same period last year. With bond maturities and calls
estimated to exceed new issues coming to market in 1995 the outstanding supply
of municipal securities is expected to decline. This imbalance should continue
to strengthen municipal market conditions.

PERFORMANCE

The net asset value (NAV) of InterCapital Quality Municipal Securities (IQM)
increased from $10.83 to $12.09 per share during the six month period ended
April 30, 1995. Based on this NAV change plus reinvestment of tax-free dividends
totaling $0.38 per share, the Trust's total NAV return for the period was 15.94
percent. Concurrently, the Trust's market price on the New York Stock Exchange
rose from $9.50 to $10.375 per share. Based on this stock price change and
reinvestment of dividends, the Trust's total market return for the period was
13.42 percent. The Trust began the period trading at a 12.3 percent discount to
NAV and closed at a 14.2 percent discount.

- --------------

*THE BOND BUYER Revenue Bond Index is an arithmetic average of the yields of 25
selected municipal revenue bonds with 30-year maturities. Credit ratings of
these bonds range from Aa1 to Baa1 by Moody's and AA+ to A- by Standard &
Poor's.
<PAGE>
PORTFOLIO STRUCTURE

As of April 30, 1995, the IQM's long-term investments were diversified among
12 specific municipal sectors and 49 issuers. The four largest sectors --
industrial development/pollution control revenue, general obligation, water and
sewer revenue and public facilities revenue -- represented 51 percent of net
assets. The average maturity and call protection of the Trust's long-term
holdings were 23 years and 9 years, respectively. At the end of the period, the
Trust's net assets totaled $361 million. The credit-quality ratings of the
Trust's long-term portfolio are summarized below:

<TABLE>
<CAPTION>
MOODY'S OR STANDARD & POOR'S RATING PERCENT
- ------------------------------------------------------------------------------------ -------------
<S> <C>
Aaa or AAA.......................................................................... 23%
Aa or AA............................................................................ 31
A or A.............................................................................. 46
</TABLE>

THE IMPACT OF LEVERAGING

The Trust's common shares continue to be leveraged. As reported previously,
leverage is created through the issuance of auction rate preferred shares
(ARPS). The ARPS auction periods normally range between one week and one year.
Proceeds from ARPS underwritings are used to purchase additional long-term
municipal bonds. Following the payment of ARPS dividends, the common shares earn
incremental income when the portfolio yield is higher than the cost of the
preferred shares (dividend plus operating and remarketing expenses). Although
higher short-term interest rates have narrowed the yield spread this year, ARPS
continue to provide positive incremental income to common shareholders.

Leverage also impacts NAV. ARPS normally account for one-third of a
leveraged fund's underwritten capital structure. This produces a volatility
factor for common shares of 1.5 times the price change of bonds held in the
portfolio. Since the value of the preferred shares does not fluctuate, the NAV
of the common shares reflects the full market price change of the portfolio's
investments.

As bond prices eroded in 1994 the degree of leverage and volatility
increased. The purchase and retirement of ARPS mitigated the impact of leverage.
However, as bonds rallied in 1995, leverage improved performance. Over the last
six months, the Trust purchased and retired $40 million in par amount of ARPS.
Currently, $97 million ARPS are outstanding. Additional ARPS purchases may occur
if ARPS become unprofitable (negative yield spread) or the degree of leverage
increases beyond its normal range.

DIVIDEND RESERVES

To more accurately reflect the income being earned by the Trust, on January
27, 1995 the monthly dividend was reduced from $0.07 to $0.06 per share. At the
end of April 1995, the Trust had undistributed net investment income of $0.044
per share available for future distributions. This dividend reserve or "cushion"
helps sustain the Trust's current monthly dividend. Higher yields in future ARPS
auctions and ARPS retirements may further erode the cushion. Declines in this
cushion may cause the Trust to adjust the common-share dividend.

LOOKING AHEAD

Slower economic growth in 1995 and the extent of the Federal Reserve Board's
previous interest rate moves have improved bond market expectations. Investor
demand for municipal securities should also be sustained by significant bond
maturities, calls for redemption and diminished new-issue supply. Changing
market conditions and the profitability of ARPS are among the factors that will
continue to determine the Trust's future level of income and influence its
market price.
<PAGE>
The Trust's procedure for reinvestment of all dividends and distributions on
common shares is through purchase in the open market. This method helps to
support the market value of the Trust's shares. In addition, we would like to
remind you that the Trustees have approved a procedure whereby the Trust, when
appropriate, may purchase shares in the open market or in privately negotiated
transactions at a price not above market value or net asset value, whichever is
lower at the time of purchase. During the six-month period ended April 30, 1995,
the Trust purchased 753,700 shares of common stock at a weighted average
discount of 10.77 percent. The Trust may also utilize procedures to reduce or
eliminate the amount of outstanding ARPS, including their purchase in the open
market or in privately negotiated transactions.

We appreciate your ongoing support of InterCapital Quality Municipal
Securities and look forward to continuing to serve your investment needs.

Very truly yours,

[SIG]
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS APRIL 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ---------- ---------- --------- --------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (96.9%)
GENERAL OBLIGATION (13.8%)
$ 10,000 Florida Board of Education, Cap Outlay Refg 1993 Ser D................ 5.125% 06/01/18 $ 8,766,400
5,000 De Kalb County, Georgia, Refg 1993.................................... 5.25 01/01/20 4,420,400
10,000 Washington Suburban Sanitation District, Maryland, Gen Constr Refg
1993 Second Ser..................................................... 5.25 06/01/14 9,175,000
New York City, New York, .75
10,000 1994 Ser D.......................................................... 5 08/15/08 9,304,200
5,000 1994 Ser C............................................................ 5.50 10/01/10 4,432,550
15,000 Seattle, Washington, Refg Ser 1993.................................... 5.65 01/01/20 13,785,600
--------------
- ----------
49,884,150
55,000
--------------
- ----------
EDUCATIONAL FACILITIES REVENUE (7.3%)
3,500 Georgetown University, District of Columbia, Ser 1993................. 5.25 04/01/13 2,994,320
Illinois Educational Facilities Authority, .70
4,695 Illinois Wesleyan University Ser 1993............................... 5 09/01/23 4,166,859
4,955 Northwestern University Refg Ser 1993................................. 5.375 12/01/21 4,361,193
Massachusetts Health & Educational Facilities Authority, .25
10,000 Boston College Ser K................................................ 5 06/01/18 8,852,400
3,000 Wentworth Institute of Technology Ser B (Connie Lee).................. 5.50 10/01/23 2,680,560
3,500 Pennsylvania Higher Educational Facilities Authority, Thomas
Jefferson University 1993 Ser A..................................... 5.30 11/01/15 3,155,845
--------------
- ----------
26,211,177
29,650
--------------
- ----------
ELECTRIC REVENUE (6.4%)
5,900 South Carolina Public Service Authority, 1993 Refg Ser A (MBIA)....... 5.50 07/01/21 5,382,157
10,000 Chelan County Public Utility District #1, Washington, Hydro
Refg Ser 1993 G..................................................... 5.375 06/01/18 8,695,800
10,000 Snohomish County Public Utilities District #1, Washington,
Ser 1993 B (AMT).................................................... 5.80 01/01/24 9,082,000
--------------
- ----------
23,159,957
25,900
--------------
- ----------
HOSPITAL REVENUE (8.8%)
8,000 Indiana Health & Educational Facilities Authority, Wellborn Memorial
Baptist Hospital Refg Ser 1993...................................... 5.50 07/01/14 7,057,600
3,500 Maine Health & Higher Educational Facilities Authority,
Ser 1993 D (FSA).................................................... 5.50 07/01/18 3,141,180
10,000 Missouri Health & Educational Facilities Authority, Barnes
Jewish Inc / Christian Health Services Ser 1993 A................... 5.25 05/15/14 8,946,200
10,000 Fairfax County Industrial Development Authority, Virginia, Inova
Health System Foundation Refg Ser 1993 A............................ 5.25 08/15/19 8,837,100
4,500 Wisconsin Health & Educational Facilities Authority, Catholic Health
Corp Ser 1993....................................................... 5.375 11/15/13 3,893,400
--------------
- ----------
31,875,480
36,000
--------------
- ----------
<PAGE>
</TABLE>

INTERCAPITAL QUALITY MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS APRIL 30, 1995 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ---------- ---------- --------- --------------
<C> <S> <C> <C> <C>
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (13.8%)
$ 10,000 Valdez, Alaska, BP Pipeline Inc Ser 1993 B............................ 5.50 % 10/01/28 $ 8,789,100
10,000 Hawaii Department of Budget & Finance, Hawaiian Electric Co Inc Ser
1993 (AMT) (MBIA)................................................... 5.45 11/01/23 8,844,900
4,000 Calvert County, Maryland, Baltimore Gas & Electric Co Refg Ser 1993... 5.55 07/15/14 3,731,160
10,000 New York State Energy Research & Development Authority, Consolidated
Edison Co of New York Inc Refg Ser 1993 B........................... 5.25 08/15/20 8,634,100
5,000 Brazos River Authority, Texas, Houston Lighting & Power Co Ser 1993
(MBIA).............................................................. 5.60 12/01/17 4,666,300
5,000 Marshall County, West Virginia, Ohio Power Co Ser B (MBIA)............ 5.45 07/01/14 4,598,000
10,000 Weston, Wisconsin, Wisconsin Public Service Co Refg Ser 1993 A........ 6.90 02/01/13 10,576,400
--------------
- ----------
49,839,960
54,000
--------------
- ----------
MORTGAGE REVENUE - MULTI-FAMILY (4.6%)
5,000 Illinois Housing Development Authority, 1993 Ser A.................... 5.90 07/01/12 4,832,050
13,310 Wisconsin Housing & Economic Development Authority, 1993 Ser A........ 5.55 11/01/15 11,943,729
--------------
- ----------
16,775,779
18,310
--------------
- ----------
MORTGAGE REVENUE - SINGLE FAMILY (5.7%)
10,000 Alaska Housing Finance Corporation, Insured 1993 First Ser............ 5.90 12/01/33 9,193,600
3,830 Connecticut Housing Finance Authority, 1993 Subseries F-1............. 5.60 05/15/11 3,620,614
8,700 Kentucky Housing Corporation, Federally Insured or Guaranteed Loans
1993 Ser B.......................................................... 5.40 07/01/14 7,888,377
--------------
- ----------
20,702,591
22,530
--------------
- ----------
PUBLIC FACILITIES REVENUE (9.9%)
12,000 California Public Works Board, Correctional 1993 Ser D COPs........... 5.375 06/01/18 10,473,720
4,000 Maine Municipal Bond Bank, 1993 Ser E................................. 5.30 11/01/13 3,647,880
5,000 St Paul Housing & Redevelopment Authority, Minnesota, Civic Center Ser
1993................................................................ 5.45 11/01/13 4,611,150
7,000 Kansas City School District Building Corporation, Missouri, Elementary
Ser 1993 D (FGIC)................................................... 5.00 02/01/14 6,210,260
Regional Convention & Sports Complex Authority, Missouri,
2,000 Refg Ser B 1993..................................................... 5.50 08/15/13 1,823,380
10,000 Refg Ser A 1993....................................................... 5.60 08/15/17 9,000,900
--------------
- ----------
35,767,290
40,000
--------------
- ----------
RESOURCE RECOVERY REVENUE (2.4%)
9,000 Northeast Maryland Waste Disposal Authority, Montgomery County Ser
1993 A (AMT)........................................................ 6.30 07/01/16 8,743,050
--------------
- ----------
TRANSPORTATION FACILITIES REVENUE (9.1%)
15,000 Chicago, Illinois, Chicago - O'Hare Intl Airport Refg 1993 Ser A...... 5.00 01/01/16 12,777,300
5,000 Wayne County, Michigan, Detroit Metropolitan Wayne County Airport Sub
Lien Ser 1993 C (MBIA).............................................. 5.25 12/01/13 4,536,100
4,000 Rhode Island Port Authority & Economic Development Corporation, TF
Green State Airport 1993 Ser A (AMT) (FSA).......................... 5.25 07/01/23 3,366,240
10,000 Texas Turnpike Authority, Dallas North Tollway Refg
Ser 1993 (MBIA)..................................................... 5.00 01/01/20 8,537,300
4,175 Virginia Transportation Board, US Route 58 Corridor Ser 1993 B........ 5.50 05/15/18 3,804,594
--------------
- ----------
33,021,534
38,175
--------------
- ----------
<PAGE>
</TABLE>

AMT ALTERNATIVE MINIMUM TAX.
COPS CERTIFICATES OF PARTICIPATION.
* VARIABLE OR FLOATING RATE SECURITY. COUPON RATE SHOWN REFLECTS CURRENT
RATE.
(A) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $386,981,535; THE
AGGREGATE GROSS AND NET UNREALIZED DEPRECIATION IS $32,121,497.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
APRIL 30, 1995 (UNAUDITED)

<TABLE>
<S> <C> <C> <C>
Alaska................... 5.0% Massachusetts............ 5.6%
Arizona.................. 1.2 Michigan................. 1.3
California............... 4.1 Minnesota................ 1.3
Connecticut.............. 1.0 Missouri................. 7.2
District of Columbia..... 0.8 New York................. 9.4
Florida.................. 2.4 Pennsylvania............. 3.5
Georgia.................. 2.4 Rhode Island............. 0.9
Hawaii................... 2.4 South Carolina........... 1.5
Illinois................. 7.2 Texas.................... 3.6
Indiana.................. 2.0 Virginia................. 4.7
Kentucky................. 4.2 Washington............... 8.7
Louisiana................ 1.1 West Virginia............ 1.3
Maine.................... 1.9 Wisconsin................ 7.3
Maryland................. 6.0 Total.................... 98.0%
</TABLE>
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL SECURITIES
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $386,981,535).......... $ 354,860,038
Cash...................................... 136,515
Interest receivable....................... 7,185,626
Deferred organizational expenses.......... 24,602
Prepaid expenses.......................... 86,581
-------------
TOTAL ASSETS...................... 362,293,362
-------------
LIABILITIES:
Payable for:
Common shares of beneficial interest
purchased............................. 166,480
Investment management fee............... 106,196
Accrued expenses.......................... 117,821
-------------
TOTAL LIABILITIES................. 390,497
-------------
NET ASSETS:
Preferred shares of beneficial interest,
(1,000,000 shares authorized of non-
participating $.01 par value, 1,940
shares outstanding)..................... 97,000,000
-------------
Common shares of beneficial interest,
(unlimited shares authorized of $.01 par
value, 21,909,413 shares outstanding)... 310,668,237
Net unrealized depreciation............... (32,121,497)
Accumulated undistributed net investment
income.................................. 967,935
Accumulated net realized loss............. (14,611,810)
-------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS.................... 264,902,865
-------------
TOTAL NET ASSETS.................. $ 361,902,865
-------------
-------------
NET ASSET VALUE PER COMMON SHARE,
($264,902,865 divided by 21,909,413
common shares outstanding)..............
$12.09
-------------
-------------
</TABLE>

STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 1995 (UNAUDITED)

<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME.......................... $ 10,889,405
------------
EXPENSES
Investment management fee.............. 612,329
Auction commission fees................ 132,903
Transfer agent fees and expenses....... 65,735
Professional fees...................... 56,317
Shareholder reports and notices........ 41,293
Auction agent fees..................... 41,224
Registration fees...................... 19,926
Trustees' fees and expenses............ 15,727
Organizational expenses................ 3,569
Other.................................. 21,141
------------
TOTAL EXPENSES....................... 1,010,164
------------
NET INVESTMENT INCOME................ 9,879,241
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss...................... (2,760,962)
Net change in unrealized
depreciation........................... 30,245,252
------------
NET GAIN............................. 27,484,290
------------
NET INCREASE......................... $ 37,363,531
------------
------------
</TABLE>

<PAGE>
INTERCAPITAL QUALITY MUNICIPAL SECURITIES
FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEAR
APRIL 30, 1995 ENDED
(UNAUDITED) OCTOBER 31, 1994
----------------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income............................................. $ 9,879,241 $ 23,266,284
Net realized loss................................................. (2,760,962) (11,850,848)
Net change in unrealized depreciation............................. 30,245,252 (61,511,487)
----------------------- ----------------
Net increase (decrease)....................................... 37,363,531 (50,096,051)
----------------------- ----------------
Dividends to shareholders from net investment income:
Common............................................................ (8,463,771) (18,002,867)
Preferred......................................................... (1,949,438) (4,439,878)
----------------------- ----------------
Total......................................................... (10,413,209) (22,442,745)
----------------------- ----------------
Transactions in shares of beneficial interest:
Common............................................................ (7,425,564) (16,066,208)
Preferred......................................................... (40,200,000) 137,200,000
----------------------- ----------------
Total transactions............................................ (47,625,564) 121,133,792
----------------------- ----------------
Total increase (decrease)..................................... (20,675,242) 48,594,996
NET ASSETS:
Beginning of period................................................. 382,578,107 333,983,111
----------------------- ----------------
END OF PERIOD (including undistributed net investment income of
$967,935 and $1,501,903, respectively)............................. $ 361,902,865 $ 382,578,107
----------------------- ----------------
----------------------- ----------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------

1. ORGANIZATION AND ACCOUNTING POLICIES -- InterCapital Quality Municipal
Securities (the "Trust") is registered under the Investment Company Act of 1940,
as amended, as a diversified, closed-end management investment company. The
Trust was organized as a Massachusetts business trust on March 3, 1993 and had
no operations until September 29, 1993 other than those relating to
organizational matters and the issuance of 7,113 common shares of beneficial
interest to Dean Witter InterCapital Inc. (the "Investment Manager").

The following is a summary of significant accounting policies:

A. VALUATION OF INVESTMENTS -- Portfolio securities are valued for the
Trust by an outside independent pricing service approved by the Trustees.
The pricing service has informed the Trust that in valuing the Trust's
portfolio securities, it uses both a computerized matrix of tax-exempt
securities and evaluations by its staff, in each case based on information
concerning market transactions and quotations from dealers which reflect the
bid side of the market each day. The Trust's portfolio securities are thus
valued by reference to a combination of transactions and quotations for the
same or other securities believed to be comparable in quality, coupon,
maturity, type of issue, call provisions, trading characteristics and other
features deemed to be relevant. Short-term debt securities having a maturity
date of more than sixty days at time of purchase are valued on a mark-
to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt
securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.

B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. The Trust amortizes premiums and accretes discounts on securities
purchased over the life of the respective securities. Interest income is
accrued daily.

C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.

D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records
dividends and distributions to its shareholders on the ex-dividend date. The
amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such
amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent they
exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in-capital.

E. ORGANIZATIONAL EXPENSES AND OFFERING COSTS -- The Investment Manager
paid the organizational expenses and offering costs of the Trust's common
shares in the amounts of $36,000 and
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
- --------------------------------------------------------------------------------
$537,034, respectively. The organizational expenses have been deferred and
are being amortized by the straight-line method over a period not to exceed
five years from the commencement of operations. Offering costs were charged
to capital at the time of issuance of the Trust's respective shares.

2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement, the Trust pays its Investment Manager a management fee, calculated
weekly and payable monthly, by applying the annual rate of 0.35% to the Trust's
average weekly net assets.

Under the terms of the Agreement, 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, 1995 aggregated $-0- and
$14,847,196, respectively.

Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At April 30, 1995, the Trust had transfer agent fees and
expenses payable of approximately $14,000.

The Trust adopted 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 six months ended April
30, 1995 included in Trustees' fees and expenses in the Statement of Operations
amounted to $5,951. At April 30, 1995, the Trust had an accrued pension
liability of $15,753 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. On November 16,
1993, the Trust issued 3,500 shares of Auction Rate Preferred Shares ("Preferred
Shares") consisting of 700 shares each of Series One through Five for gross
total proceeds of $175,000,000. The preferred shares have a liquidation value of
$50,000 per share plus the redemption premium, if any, plus accumulated but
unpaid dividends, whether or not declared, thereon to the date of distribution.
The Trust may redeem such shares, in whole or in part, at the original purchase
price of $50,000 per share plus accumulated but unpaid dividends, whether or not
declared, thereon to the date of redemption.
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
- --------------------------------------------------------------------------------

During the six months ended April 30, 1995, the Trust purchased and retired
preferred shares as follows:

<TABLE>
<CAPTION>
SERIES SHARES AMOUNT
------ ----------- --------------
<S> <C> <C>
1 104 $ 5,200,000
2 300 15,000,000
3 100 5,000,000
5 300 15,000,000
</TABLE>

Dividends, which are cumulative, are reset through auction procedures.

<TABLE>
<CAPTION>
RESET RANGE OF DIVIDEND
SHARES* SERIES RATE* DATE RATES**
- ----------- ------ ----------- --------- -----------------
<S> <C> <C> <C> <C>
340 1 4.30% 5/01/95 2.88% - 5.88%
300 2 4.13 5/02/95 3.00 - 6.15
300 3 4.50 5/03/95 2.88 - 6.20
600 4 4.30 5/01/95 3.41 - 4.38
400 5 4.32 5/01/95 3.19 - 6.00
<FN>
- --------------
* AS OF APRIL 30, 1995.
** FOR THE SIX MONTHS ENDED APRIL 30, 1995.
</TABLE>

Subsequent to April 30, 1995 and up through May 9, 1995, the Trust paid
dividends to each of the Series 1, 2, 3, 4 and 5 at rates ranging from 4.03% to
4.45%, 3.90% to 4.40%, 4.00% to 4.50%, 4.10% to 4.38% and 4.125% to 4.339%,
respectively, in the aggregate amount of $474,641.

The Trust is subject to certain restrictions relating to the preferred
shares. Failure to comply with these restrictions could preclude the Trust from
declaring any distributions to common shareholders or purchasing common shares
and/or could trigger the mandatory redemption of preferred shares at liquidation
value.

The preferred shares, which are entitled to one vote per share, generally
vote with the common shares but vote separately as a class to elect two Trustees
and on any matters affecting the rights of the preferred shares.
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS (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 PAR
SHARES PAR VALUE VALUE
------------- ----------- ----------------
<S> <C> <C> <C>
Balance (Note 1).................................................... 7,113 $ 71 $ 99,938
Shares issued at close of public offering on September 29, 1993*.... 21,000,000 210,000 294,482,000
Shares issued on October 12, 1993 and October 27, 1993 to cover
over-allotment..................................................... 2,800,000 28,000 39,340,000
------------- ----------- ----------------
Balance, October 31, 1993........................................... 23,807,113 238,071 333,921,938
Adjustment to estimated offering costs associated with the initial
public offering of the common shares............................... -- -- 30,966
Offering costs and underwriting discounts associated with the
issuance of preferred shares....................................... -- -- (2,957,829)
Treasury shares purchased and retired (weighted average discount
6.36%)**........................................................... (1,144,000) (11,440) (13,127,905)
------------- ----------- ----------------
Balance, October 31, 1994........................................... 22,663,113 226,631 317,867,170
Treasury shares purchased and retired (weighted average discount
10.77%)**.......................................................... (753,700) (7,537) (7,418,027)
------------- ----------- ----------------
Balance, April 30, 1995............................................. 21,909,413 $ 219,094 $ 310,449,143
------------- ----------- ----------------
------------- ----------- ----------------
<FN>
- --------------
* NET OF ESTIMATED OFFERING COSTS OF $568,000.
** THE TRUSTEES HAVE VOTED TO RETIRE THE SHARES PURCHASED.
</TABLE>

6. FEDERAL INCOME TAX STATUS -- At October 31, 1994, the Trust had a net capital
loss carryover of approximately $11,851,000 which will be available through
October 31, 2002 to offset future capital gains to the extent provided by
regulations.

7. DIVIDENDS TO COMMON SHAREHOLDERS -- The Trust has declared the following
dividends from net investment income:

<TABLE>
<CAPTION>
AMOUNT PER
DECLARATION DATE SHARE RECORD DATE PAYABLE DATE
- ----------------- ----------- ----------------- -----------------
<S> <C> <C> <C>
April 25, 1995 $ 0.06 May 5, 1995 May 19, 1995
June 6, 1995 0.06 June 16, 1995 June 30, 1995
</TABLE>

<PAGE>
INTERCAPITAL QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
- --------------------------------------------------------------------------------

8. SELECTED QUARTERLY FINANCIAL DATA --

<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------
4/30/95 1/31/95
-------------------- --------------------
TOTAL* PER SHARE TOTAL* PER SHARE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total investment income................................................. $ 5,315 $ 0.24 $ 5,574 $ 0.25
Net Investment income................................................... 4,823 0.22 5,056 0.23
Net realized and unrealized gain........................................ 15,065 0.69 12,419 0.59
</TABLE>

<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------------------------------------
10/31/94 7/31/94 4/30/94 1/31/94
--------------------- -------------------- --------------------- --------------------
TOTAL* PER SHARE TOTAL* PER SHARE TOTAL* PER SHARE TOTAL* PER SHARE
---------- --------- --------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income............ $ 6,554 $ 0.28 $ 6,635 $ 0.28 $ 6,744 $ 0.29 $ 5,784 $ 0.24
Net investment income.............. 5,902 0.25 6,025 0.26 6,121 0.26 5,218 0.22
Net realized and unrealized gain
(loss)............................ (30,689) (1.31) 4,029 0.17 (57,675) (2.43) 10,973 0.46
</TABLE>

<TABLE>
<CAPTION>
QUARTER ENDED
--------------------
10/31/93+
--------------------
TOTAL* PER SHARE
--------- ---------
<S> <C> <C>
Total investment income..................................................................... $ 809 $ 0.03
Net investment income....................................................................... 678 0.03
Unrealized loss............................................................................. (855) (0.04)
<FN>
- --------------
* TOTALS EXPRESSED IN THOUSANDS.
+ FOR THE PERIOD SEPTEMBER 29, 1993 (COMMENCEMENT OF OPERATIONS) THROUGH
OCTOBER 31, 1993.
</TABLE>
<PAGE>
INTERCAPITAL QUALITY MUNICIPAL SECURITIES
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

Selected ratios and per share data for a common share of beneficial interest
outstanding throughout each period:

<TABLE>
<CAPTION>
FOR THE
FOR THE SIX PERIOD
MONTHS ENDED FOR THE YEAR SEPTEMBER 29,
APRIL 30, ENDED 1993* THROUGH
1995** OCTOBER 31, OCTOBER 31,
(UNAUDITED) 1994** 1993
------------- ------------- -------------
<S> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period................ $ 10.83 $ 14.03 $ 14.06
------------- ------------- -------------
Net investment income..... 0.45 0.99 0.03
Net realized and
unrealized gain (loss)... 1.28 (3.11) (0.04)
------------- ------------- -------------
Total from investment
operations............... 1.73 (2.12) (0.01)
------------- ------------- -------------
Less dividends and
distributions from:
Net investment income... (0.38) (0.77) --
Common share equivalent
of dividends paid to
preferred
shareholders........... (0.09) (0.19) --
------------- ------------- -------------
Total dividends and
distributions............ (0.47) (0.96) --
Offering costs charged
against capital.......... -- (0.12) (0.02)
------------- ------------- -------------
Net asset value, end of
period................... $ 12.09 $ 10.83 $ 14.03
------------- ------------- -------------
------------- ------------- -------------
Market value, end of
period................... $ 10.375 $ 9.50 $ 15.125
------------- ------------- -------------
------------- ------------- -------------
TOTAL INVESTMENT
RETURN+.................. 13.42%(1) (32.98)% 0.83%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)........... $361,903 $382,578 $333,983
Ratios to average net
assets of common
shareholders:
Total expenses.......... 0.81%(2) 0.83% 0.48%(2)
Net investment income
before preferred stock
dividends.............. 7.90%(2) 7.85% 2.51%(2)
Preferred stock
dividends.............. 1.56%(2) 1.50% N/A
Net investment income
available to common
shareholders........... 6.34%(2) 6.35% 2.51%(2)
Asset coverage on
preferred shares at end
of period................ 373% 278% N/A
Portfolio turnover rate... 0% 21% 0%
</TABLE>

<TABLE>
<C> <S>
- --------------
* COMMENCEMENT OF OPERATIONS.
** THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ TOTAL INVESTMENT RETURN IS BASED UPON THE CURRENT MARKET VALUE ON THE LAST
DAY OF EACH PERIOD REPORTED. DIVIDENDS AND DISTRIBUTIONS ARE ASSUMED TO BE
REINVESTED AT THE PRICES OBTAINED UNDER THE TRUST'S DIVIDEND REINVESTMENT
PLAN. TOTAL INVESTMENT RETURN DOES NOT REFLECT SALES CHARGES OR BROKERAGE
COMMISSIONS.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

- --------------------------------------------------------------------------------

THE FINANCIAL STATEMENTS INCLUDED HEREIN HAVE BEEN TAKEN FROM THE RECORDS OF THE
TRUST WITHOUT EXAMINATION BY THE INDEPENDENT ACCOUNTANTS AND ACCORDINGLY THEY DO
NOT EXPRESS AN OPINION THEREON.
<PAGE>
(This page has been left blank intentionally.)
<PAGE>

INTERCAPITAL
QUALITY
MUNICIPAL
SECURITIES

SEMIANNUAL REPORT
APRIL 30, 1995

TRUSTEES
- ---------------------------------------
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder

OFFICERS
- ---------------------------------------
Charles A. Fiumefreddo
CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Sheldon Curtis
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL

James F. Willison
VICE PRESIDENT

Thomas F. Caloia
TREASURER

TRANSFER AGENT
- ---------------------------------------
Dean Witter Trust Company
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311

INDEPENDENT ACCOUNTANTS
- ---------------------------------------
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036

INVESTMENT MANAGER
- ---------------------------------------
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048

INTERCAPITAL QUALITY MUNICIPAL SECURITIES

SEMIANNUAL REPORT
APRIL 30, 1995