<PAGE> 1
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- - - - - --------------------------------------------------------------------------------
When InterCapital California Quality Municipal Securities (NYSE symbol:
IQC) began its new fiscal year in November 1993, municipal yields had reached
record lows in a trend that began six years ago. Strong economic growth in the
fourth quarter of 1993 prompted concern about inflation and caused interest
rates to rise. This induced the Federal Reserve Board to tighten monetary policy
by raising the federal-fund rate -- the interest rate that banks charge each
other for overnight loans -- from 3.00 percent to 3.75 percent in three separate
moves between early February and April. This action was presented as a
preemptive strike against inflation. However, the fixed-income markets
interpreted the change in Fed policy as the beginning of a trend toward higher
interest rates. In mid-May, the Federal Reserve Board initiated another round of
tightening with a 50 basis point increase in both the federal-funds rate and the
discount rate -- the interest rate the Federal Reserve charges member banks for
loans.
By the end of April the bond market was battered. Interest rates were at
levels not seen in over a year. Long-term municipal bond yields as measured by
The Bond Buyer Revenue Bond Index* increased by 86 basis points from 5.56
percent to 6.42 percent between November and April. This corresponded to a price
decline of more than 11 percent.
New-issue underwriting totaled $290 billion in 1993, a 23 percent increase
over the previous high of $235 billion set in 1992. Refunding issues, which are
used by state and local governments to refinance higher-coupon debt, represented
66 percent of total volume last year. It is estimated that 1994's underwriting
volume will decline by 30 percent to about $200 billion and that approximately
$260 billion in bonds will either mature or be called. Thus, the amount of
municipal debt outstanding will be reduced. In line with these projections,
new-issue volume for the first four months of 1994 declined by 34 percent and
totaled $59 billion. Refunding activity, the catalyst of last year's record
underwriting, dropped even more sharply.
PERFORMANCE
For the six-month period ended April 30, 1994, the Trust paid shareholders
tax-free income dividends totaling $0.34 per share. IQC's total return for this
period was -19.70 percent. This calculation is based on a change in the Trust's
New York Stock Exchange market price from $15.00 on October 31, 1993 to $11.75
per share on April 30, 1994 and includes the reinvestment of all dividends and
distributions. Over the same period, the Trust's net asset value (NAV) declined
by roughly 16 percent from $13.96 to $11.70 per share. The current-coupon bonds
purchased by the Trust in 1993 declined in line with the Revenue Bond Index.
However, the preferred stock leverage (as discussed below) caused the Trust's
NAV to decline 1.4 times more than the unleveraged Revenue Bond Index. As of
April 30, 1994, the Trust was trading at a 0.43 percent premium to NAV.
- - - - - ---------------
*The Bond Buyer Revenue Bond Index is an arithmetic average of the yields of 25
selected municipal revenue bonds
with 30-year maturities. Ratings of these bonds range from Aaa to Baa1 by
Moody's and AAA to A- by S&P.
<PAGE> 2
PORTFOLIO STRUCTURE
The portfolio's long-term investments were diversified among 12 specific
municipal sectors and 33 credits. The three largest sectors were water and
sewer, educational and public facilities revenue bonds, representing 53 percent
of net assets. The average maturity and call protection of the Trust's long-term
holdings were 25 years and 9 years, respectively. At the end of the period, net
assets exceeded $236 million. The credit quality ratings of the long-term
portfolio are summarized below:
<TABLE>
<CAPTION>
Moody's or Standard & Poor's Rating Percent
----------------------------------------- --------
<S> <C>
Aaa or AAA.............................................................. 36.4%
Aa or AA................................................................ 36.1
A1 or A+................................................................ 16.7
A or A.................................................................. 10.8
-------
100.0%
-------
-------
</TABLE>
PREFERRED SHARE LEVERAGE
In addition to common shares, the Trust has also issued three $30 million
series of Auction Rate Preferred Shares (ARPS). Dividend and distribution
payments for these shares rank ahead of the common shares. ARPS are short-term
securities with maturities normally ranging from one week to one year. The
dividend rates on tax-free ARPS are established by an auction process, when the
maturity is rolled over. The Trust uses the proceeds from ARPS issuance to
purchase long-term municipal bonds.
The common shares are impacted by the preferred shares in two ways. First,
following the payment of the dividend on the ARPS, common shares receive any
extra incremental income when the long-term portfolio yield is higher than the
cost of the ARPS (yield plus expenses). Second, the preferred shares leverage
the common shares by a factor of approximately 1.5 times, thus multiplying any
market change in NAV. Over the past six months, incremental tax-free income from
the ARPS leverage maintained common share dividends and increased the level or
cushion of undistributed net investment income. As of April 30, 1994, an amount
equivalent to $0.066 per share had been accumulated in this cushion to help
sustain the Trust's current dividend. The average ARPS rate on the Trust's three
outstanding series as of April 30, 1994 was 2.46 percent, with two of the resets
occurring weekly and one occurring monthly. Higher yields in future ARPS
auctions may begin to erode the Trust's cushion of undistributed net investment
income available for distribution to common shareholders. If the cushion were to
erode significantly over time, the Trust would take appropriate action, which
could include an adjustment in the common dividend and/or a reduction in the
amount of ARPS.
Leverage is usually a positive influence on the overall value of a
portfolio during periods of stable to declining interest rates. However, the
increase in interest rates over the past few months has adversely impacted NAV.
LOOKING AHEAD
A continuation of low new-issue supply, coupled with significant bond calls
and maturities should sustain investor demand for municipals. However, the
overall direction of interest rates will primarily be determined by the strength
of the economy, the trend of inflation and the Federal Reserve Board's response
to economic conditions.
<PAGE> 3
The Trust's procedure for reinvestment of all dividends and distributions
on common shares is by purchase in the open market. This method helps to support
the market value of the Trust's shares. In addition, the Trustees have approved
a procedure whereby the Trust may attempt to reduce or eliminate a market value
discount from net asset value by repurchasing common shares in the open market
or in privately negotiated transactions. The Trust may also utilize procedures
to reduce or eliminate the amount of outstanding ARPS, including their
repurchase in the open market or in privately negotiated transactions.
We appreciate your support of InterCapital California Quality Municipal
Securities and look forward to continuing to serve your investment needs.
Very truly yours,
Charles A. Fiumefreddo
Chairman of the Board
<PAGE> 4
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS April 30, 1994 (unaudited)
- - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- - - - - ---------- ------ -------- -----
<C> <S> <C> <C> <C>
CALIFORNIA EXEMPT MUNICIPAL BONDS (93.3%)
GENERAL OBLIGATION (1.9%)
$ 4,850 California, Various Purpose Dtd 4/1/93....................... 5.90 % 4/ 1/23 $ 4,532,034
- - - - - ---------- ------------
EDUCATIONAL FACILITIES REVENUE (13.5%)
California Educational Facilities Authority,
8,000 Carnegie Institute of Washington Ser 1993 A.................. 5.60 10/ 1/23 7,204,720
900 Culinary Institute of America Ser 1993 (Connie Lee
Insured)................................................... 5.25 10/ 1/13 793,071
1,500 Culinary Institute of America Ser 1993 (Connie Lee
Insured)................................................... 5.30 10/ 1/23 1,284,225
2,500 Pepperdine University Ser A (MBIA Insured)................... 5.50 6/ 1/19 2,246,450
4,465 St Mary's College of California Refg Ser 1993................ 5.00 10/ 1/12 3,804,805
10,000 California Public Works Board, University of California Ser
1993 B..................................................... 5.50 6/ 1/14 8,855,700
University of California, UCLA Central Chiller/Cogeneration
5,750 Refg Ser 1993 COPs........................................... 5.50 11/ 1/14 5,193,860
3,000 Refg Ser 1993 COPs........................................... 5.60 11/ 1/20 2,678,100
- - - - - ---------- ------------
36,115 32,060,931
- - - - - ---------- ------------
ELECTRIC REVENUE (8.5%)
10,000 Los Angeles Department of Water & Power, Issue of 1993....... 5.375 9/ 1/23 8,679,200
8,375 Northern California Transmission Agency, California - Oregon
Transmission Refg Ser 1993 A (MBIA Insured)................ 5.25 5/ 1/20 7,228,546
5,000 Southern California Public Power Authority, Mead - Phoenix
(AMBAC Insured)............................................ 4.875 7/ 1/20 4,075,150
- - - - - ---------- ------------
23,375 19,982,896
- - - - - ---------- ------------
HOSPITAL REVENUE (5.0%)
4,000 Anaheim, Anaheim Memorial Hospital Association COPs
(AMBAC Insured)............................................ 5.00 5/15/13 3,451,640
5,000 California Health Facilities Financing Authority, Kaiser
Permanente
Ser 1985................................................... 5.55 8/15/25 4,319,950
California Statewide Communities Development Authority,
2,000 Children's Hospital of Los Angeles Ser 1993 COPs
(MBIA Insured)............................................. 6.00 6/ 1/13 1,955,440
2,500 Motion Picture & Television Fund COPs (AMBAC Insured)........ 5.375 1/ 1/20 2,198,725
- - - - - ---------- ------------
13,500 11,925,755
- - - - - ---------- ------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (4.6%)
12,000 California Pollution Control Financing Authority,
- - - - - ----------
Pacific Gas & Electric Co 1993 Ser B (AMT)................... 5.85 12/ 1/23 10,863,720
------------
MORTGAGE REVENUE -- MULTI-FAMILY (2.2%)
Los Angeles Community Redevelopment Financing Authority,
Grand Central Square
2,155 1993 Ser A (AMT)............................................. 5.75 12/ 1/13 1,959,477
3,750 1993 Ser A (AMT)............................................. 5.85 12/ 1/26 3,316,088
- - - - - ---------- ------------
5,905 5,275,565
- - - - - ---------- ------------
MORTGAGE REVENUE -- SINGLE FAMILY (3.8%)
10,000 California Housing Finance Agency, Home 1993 Ser B........... 5.65 8/ 1/14 8,986,900
- - - - - ---------- ------------
PUBLIC FACILITIES (10.9%)
10,000 California Public Works Board, Corrections 1993 Ser D........ 5.375 6/ 1/12 8,822,300
6,400 Los Angeles Convention & Exhibit Center Authority,
Refg Ser A (MBIA Insured).................................. 5.125 8/15/13 5,598,656
10,000 Los Angeles County Public Works Financing Authority, Multiple
Capital Proj #IV (MBIA Insured)............................ 5.25 12/ 1/16 8,754,100
3,000 Redding Joint Powers Financing Authority, 1993 Ser A......... 5.50 1/ 1/13 2,651,340
- - - - - ---------- ------------
29,400 25,826,396
- - - - - ---------- ------------
</TABLE>
<PAGE> 5
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS April 30, 1994 (unaudited) (continued)
- - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- - - - - --------- ------ -------- -----
<C> <S> <C> <C> <C>
TAX ALLOCATION (7.5%)
$ 6,870 Garden Grove Community Development Agency,
Refg Issue of 1993......................................... 5.875% 10/ 1/23 $ 6,129,139
7,000 Rosemead Redevelopment Agency, Proj #1 Ser 1993 A............ 5.60 10/ 1/33 5,952,590
6,700 San Jose Redevelopment Agency, Merged Area Ser 1993
(MBIA Insured)............................................. 5.00 8/ 1/20 5,550,816
- - - - - ---------- ------------
20,570 17,632,545
- - - - - ---------- ------------
TRANSPORTATION FACILITIES REVENUE (5.3%)
5,000 Long Beach, Harbor Ser 1993 (AMT)............................ 5.00 5/15/10 4,308,650
9,000 Los Angeles County Metropolitan Transportation Authority,
Sales Tax Refg Ser 1993 A (MBIA Insured)................... 5.625 7/ 1/18 8,229,240
- - - - - ---------- ------------
14,000 12,537,890
- - - - - ---------- ------------
WATER & SEWER REVENUE (28.1%)
10,205 California Department of Water Resources, Central Valley Ser
L.......................................................... 5.50 12/ 1/23 9,022,240
7,250 Eastern Municipal Water District, Ser 1993 A COPs (FGIC
Insured)................................................... 5.25 7/ 1/23 6,221,588
9,750 Los Angeles, Wastewater Refg Ser 1993 -- D (FGIC Insured).... 5.20 11/ 1/21 8,322,892
10,000 Los Angeles County Sanitation Districts Financing Authority,
1993 Ser A................................................. 5.25 10/ 1/19 8,688,400
3,000 Marin County Municipal Water District, Ser 1993.............. 5.65 7/ 1/23 2,704,080
10,895 Metropolitan Water District of Southern California, Issue of
1992....................................................... 5.50 7/ 1/13 10,056,848
8,800 Moulton Niguel Water District, 1993 COPs (AMBAC Insured)..... 5.30 9/ 1/23 7,597,216
2,500 Rancho Water District Financing Authority, Refg Ser 1994
(AMBAC Insured)............................................ 5.00 8/15/14 2,138,000
4,000 Sacramento County Sanitation Districts Financing Authority,
Ser 1993................................................... 5.00 12/ 1/16 3,386,160
10,000 San Diego Public Facilities Authority, Ser 1993 A............ 5.25 5/15/20 8,484,100
- - - - - ---------- ------------
76,400 66,621,524
- - - - - ---------- ------------
OTHER REVENUE (2.0%)
5,750 California Statewide Communities Development Authority,
- - - - - ----------
The J Paul Getty Trust COPs.................................. 5.00 10/ 1/23 4,761,000
------------
251,865 TOTAL CALIFORNIA EXEMPT MUNICIPAL BONDS
- - - - - ----------
(IDENTIFIED COST $247,986,067)............................... 221,007,156
------------
CALIFORNIA EXEMPT SHORT-TERM MUNICIPAL OBLIGATIONS (4.5%)
3,700 California Health Facilities Financing Authority, St Joseph
Health Ser B (Tender 5/2/94)............................... 2.85* 7/ 1/13 3,700,000
7,000 Orange County Sanitation Districts, Capital Impr COPs
- - - - - ----------
Ser 1990-92 A (Tender 5/2/94)................................ 2.95* 8/ 1/15 7,000,000
------------
10,700 TOTAL CALIFORNIA EXEMPT SHORT-TERM MUNICIPAL OBLIGATIONS
- - - - - ----------
(IDENTIFIED COST $10,700,000).......................................... 10,700,000
------------
$262,565 TOTAL INVESTMENTS (IDENTIFIED COST $258,686,067)(A).................... 97.8% 231,707,156
---------
---------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES......................... 2.2 5,245,930
------ ------------
NET ASSETS............................................................. 100.0% $236,953,086
------ ------------
------ ------------
<FN>
- - - - - ---------------
* Variable or floating rate securities. Coupon rate shown reflects current
rate.
(a) The aggregate cost for federal income tax purposes is $258,686,067; the
aggregate gross and net unrealized depreciation is $26,978,911.
See Notes to Financial Statements
</TABLE>
<PAGE> 6
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
FINANCIAL STATEMENTS
- - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1994 (unaudited)
- - - - - -------------------------------------------
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $258,686,067) (Note
1)....................................... $ 231,707,156
Cash....................................... 709,407
Interest receivable........................ 4,619,077
Deferred organizational expenses (Note
1)....................................... 34,450
Prepaid expenses........................... 92,448
------------
TOTAL ASSETS....................... 237,162,538
------------
LIABILITIES:
Payable for shares of beneficial interest
repurchased (Note 5)..................... 2,322
Investment management fee payable (Note
2)....................................... 82,551
Offering expenses payable (Note 1)......... 107,775
Accrued expenses (Note 3).................. 16,804
------------
TOTAL LIABILITIES.................. 209,452
------------
NET ASSETS:
Preferred shares of beneficial interest
(1,000,000 shares authorized of non-
participating $.01 par value,
1,800 shares outstanding (Note 4))....... 90,000,000
------------
Common shares of beneficial interest
(unlimited shares authorized of
$.01 par value, 12,556,013 shares
outstanding (Note 5)).................... 174,525,535
Accumulated net realized loss on
investments.............................. (1,424,898)
Net unrealized depreciation on
investments.............................. (26,978,911)
Accumulated undistributed net investment
income................................... 831,360
------------
NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS.............. 146,953,086
------------
TOTAL NET ASSETS................... $ 236,953,086
=============
NET ASSET VALUE PER COMMON SHARE
($146,953,086 divided by 12,556,013
common shares outstanding)............... $11.70
------
------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS For the six months
ended April 30, 1994 (unaudited)
- - - - - -------------------------------------------
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME........................... $ 6,431,354
------------
EXPENSES
Investment management fee (Note 2)....... 431,772
Auction commission fees.................. 79,588
Professional fees........................ 62,615
Transfer agent fees and expenses......... 25,160
Custodian fees........................... 24,250
Auction agent fees....................... 23,712
Trustees' fees and expenses (Note 3)..... 13,331
Registration fees........................ 12,237
Shareholder reports and notices (Note
3)..................................... 11,402
Organizational expenses (Note 1)......... 3,866
Other.................................... 6,597
------------
TOTAL EXPENSES......................... 694,530
------------
NET INVESTMENT INCOME................ 5,736,824
------------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS (Note 1):
Net realized loss on investments......... (1,424,898)
Net change in unrealized depreciation on
investments............................ (25,788,677)
------------
NET LOSS ON INVESTMENTS................ (27,213,575)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS.................... $ (21,476,751)
------------
------------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- - - - - --------------------------------------------------------------------------------
For the period
For the six September 29, 1993
months ended through
April 30, 1994 October 31, 1993
(unaudited) (Note 1)
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................. $ 5,736,824 $ 338,023
Net realized loss on investments...................................... (1,424,898) -0-
Net change in unrealized depreciation on investments.................. (25,788,677) (1,190,234)
--------------- ---------------
Net decrease in net assets resulting from operations.............. (21,476,751) (852,211)
--------------- ---------------
Dividends to preferred shareholders from net investment income.......... (988,650) -0-
Dividends to common shareholders from net investment income............. (4,254,837) -0-
--------------- ---------------
Total dividends................................................... (5,243,487) -0-
--------------- ---------------
Transactions in common shares of beneficial interest (Note 5)........... (2,643,974) 177,069,500
--------------- ---------------
Gross proceeds from issuance of preferred shares (Note 4)............... 90,000,000 -0-
--------------- ---------------
Total increase.................................................... 60,635,788 176,217,289
NET ASSETS:
Beginning of period..................................................... 176,317,298 100,009
--------------- ---------------
END OF PERIOD (including undistributed net investment income of $831,360
and $338,023, respectively)............................................ $ 236,953,086 $ 176,317,298
--------------- ---------------
--------------- ---------------
See Notes to Financial Statements
</TABLE>
<PAGE> 7
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS (unaudited)
- - - - - --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- InterCapital California Quality
Municipal Securities (the "Trust") is registered under the Investment Company
Act of 1940, as amended, as a non-diversified, closed-end management investment
company. It was organized on March 3, 1993 as a Massachusetts business trust and
had no operations until September 29, 1993 other than matters related to the
sale and 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 grid 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.
B. Accounting for Investments -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). In computing
net investment income, the Trust amortizes premiums and original issue
discounts on fixed income securities. Additionally, with respect to market
discount on bonds, a portion of any capital gain realized upon disposition
is recharacterized as taxable investment income. Realized gains and losses
on security transactions are determined on the identified cost method.
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
reclassifications. 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 and Offering Expenses -- The Trust's Investment Manager
paid the organizational and offering expenses of the Trust's common shares
in the amount of approximately $39,000 and $438,000, respectively, and paid
approximately $325,000 in offering expenses of the Trust's preferred
shares. Organizational expenses have been reimbursed by the Trust for the
full amount
<PAGE> 8
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- - - - - --------------------------------------------------------------------------------
thereof and are being amortized by the straight-line method over a period
not to exceed five years from the commencement of operations. Offering
expenses will be reimbursed by the Trust and were charged to capital at the
time of issuance of the Trust's shares.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement (the "Agreement") with Dean Witter InterCapital Inc. (the "Investment
Manager"), 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, in addition to managing the Trust's
investments, the Investment Manager maintains certain of the Trust's books and
records and furnishes office space and 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 the proceeds from sales of portfolio securities for the six months
ended April 30, 1994, excluding short-term investments, aggregated $153,712,781
and $16,303,587, respectively.
Effective January 1, 1994, the Trust adopted an unfunded noncontributory
defined pension plan covering all independent Trustees of the Trust who will
have served as an independent Trustee 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 cost for
the six months ended April 30, 1994, included in Trustees' fees and expenses in
the Statement of Operations, amounted to $3,945. At April 30, 1994, the Trust
had an accrued pension liability of $3,937 which is included in accrued expenses
in the Statement of Assets and Liabilities.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At April 30, 1994, the Trust had transfer agent fees and
expenses payable of $7,000.
Dean Witter Distributors Inc., the Trust's principal underwriter and an
affiliate of the Investment Manager, has informed the Trust that it received
approximately $1,350,000 in underwriting discounts and commissions in connection
with the offering of the preferred shares.
Bowne & Co., Inc. is an affiliate of the Trust by virtue of a common Trust
Trustee and Director of Bowne & Co., Inc. During the six months ended April 30,
1994, the Trust paid Bowne & Co., Inc. $2,979 for printing of shareholder
reports.
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 the approval of the common shareholders. On November
16, 1993, the Trust issued 1,800 shares of Auction Rate Preferred Shares
("Preferred Shares") consisting of 600 shares each of Series 1 through 3 for
gross total proceeds of $90,000,000. Underwriting discounts, commissions and
offering expenses were charged to capital at the time of issuance. The preferred
shares have a liquidation value of $50,000 per share plus any accumulated but
unpaid dividends plus the redemption premium, if any, and are redeemable (in
whole or in part) on any dividend payment date.
<PAGE> 9
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- - - - - --------------------------------------------------------------------------------
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
Range of
Reset Dividend
Shares Series Rate* Date Rates**
- - - - - ----- ----- ----- ----- --------------
<S> <C> <C> <C> <C>
600 1 2.75% 5/2/94 2.04% - 2.75%
600 2 2.85% 5/4/94 1.90% - 2.95%
600 3 2.75% 8/8/94 2.65% - 2.75%
<FN>
- - - - - ---------------
* As of April 30, 1994.
** For the period ended April 30, 1994.
</TABLE>
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 repurchasing 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 will vote separately as a class to elect two
Trustees and on any matter affecting the rights of the preferred shares.
5. COMMON SHARES OF BENEFICIAL INTEREST -- Transactions in common shares of
beneficial interest were as follows:
<TABLE>
<CAPTION>
Capital
Par Value Paid in
of Excess of
Shares Shares Par Value
----------- --------- -------------
<S> <C> <C> <C>
Balance (Note 1)....................................... 7,113 $ 71 $ 99,938
Shares issued at close of public offering on
September 29, 1993*.................................. 11,500,000 115,000 161,137,000
Shares issued on October 12, 1993 and October 27, 1993
to cover over-allotment.............................. 1,125,000 11,250 15,806,250
----------- --------- -------------
Balance, October 31, 1993.............................. 12,632,113 126,321 177,043,188
----------- --------- -------------
Offering costs and underwriting discounts associated
with the issuance of preferred shares................ (1,675,000)
Treasury shares purchased and retired (weighted average
discount 0.94%)**.................................... (76,100) (761) (968,213)
----------- --------- -------------
Balance, April 30, 1994................................ 12,556,013 $ 125,560 $ 174,399,975
----------- --------- -------------
----------- --------- -------------
<FN>
- - - - - ---------------
* Net of offering cost of $438,000.
** The Trustees have voted to retire the shares repurchased.
</TABLE>
6. DIVIDENDS -- The Trust has declared the following dividends from net
investment income --
<TABLE>
<CAPTION>
Declaration Amount Per Record Payable
Date Share Date Date
- - - - - -------------- ---------- ------------- -------------
<S> <C> <C> <C>
April 26, 1994 $.0675 May 6, 1994 May 20, 1994
May 31, 1994 $.0675 June 10, 1994 June 24, 1994
</TABLE>
<PAGE> 10
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- - - - - --------------------------------------------------------------------------------
7. SELECTED QUARTERLY FINANCIAL DATA --
<TABLE>
<CAPTION>
Quarters Ended*
------------------------------------------
4/30/94 1/31/94
------------------- ------------------
Per Per
Total Share Total Share
-------- ------ ------- ------
<S> <C> <C> <C> <C>
Total investment income.......................... $ 3,466 $ 0.27 $ 2,965 $ 0.24
Net investment income............................ 3,112 0.25 2,625 0.21
Net realized and unrealized gain (loss)
on investments................................. (32,314) (2.57) 5,100 0.40
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended*
------------------
10/31/93**
------------------
Per
Total Share
------- ------
<S> <C> <C>
Total investment income................................................. $ 414 $ 0.03
Net investment income................................................... 338 0.03
Net unrealized loss on investments...................................... (1,190) (0.10)
<FN>
- - - - - ---------------
* Totals expressed in thousands of dollars.
** For the period September 29, 1993 (commencement of operations) through
October 31, 1993.
</TABLE>
<PAGE> 11
INTERCAPITAL CALIFORNIA 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 six For the period
months ended September 29, 1993*
April 30, 1994** through
(unaudited) October 31, 1993
-------------- ---------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................ $ 13.96 $ 14.06
-------------- ---------------
Net investment income............................ 0.46 0.03
Net realized and unrealized loss on
investments.................................... (2.17) (0.10)
-------------- ---------------
Total from investment operations.................... (1.71) (0.07)
-------------- ---------------
Less dividends and other charges:
Dividends from net investment income............. (0.34) -0-
Common share equivalent of dividends paid to
preferred shareholders......................... (0.08) -0-
Offering costs charged against capital........... (0.13) (0.03)
-------------- ---------------
Total dividends and other charges................... (0.55) (0.03)
-------------- ---------------
Net asset value, end of period...................... $ 11.70 $ 13.96
-------------- ---------------
-------------- ---------------
Market value, end of period......................... $ 11.75 $ 15.00
-------------- ---------------
-------------- ---------------
TOTAL INVESTMENT RETURN+.............................. (19.70)%(1) -0-
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............ $236,953 $ 176,317
Ratios to average net assets of common shareholders:
Total expenses................................... 0.83%(2) 0.52%(2)
Net investment income before preferred stock
dividends...................................... 6.89%(2) 2.32%(2)
Preferred stock dividends........................ 1.19%(2) N/A
Net investment income available to
common shareholders............................ 5.70%(2) 2.32%(2)
Asset coverage on preferred shares at end of
period........................................... 263% N/A
Portfolio turnover rate............................. 8% 0%
<FN>
- - - - - ---------------
* 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 first
and 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.
See Notes to Financial Statements
</TABLE>
- - - - - --------------------------------------------------------------------------------
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> 12
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
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
LEGAL COUNSEL
Sheldon Curtis
Two World Trade Center
New York, New York 10048
INDEPENDENT ACCOUNTANTS
Price Waterhouse
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
CALIFORNIA
QUALITY
MUNICIPAL
SECURITIES
Semiannual Report
April 30, 1994
