INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES, N-30D, 1995-12-20

INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
N-30D, 1995-12-20

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<PAGE>

INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
Two World Trade Center, New York, New York 10048

LETTER TO THE SHAREHOLDERS October 31, 1995

DEAR SHAREHOLDER:

Bonds have rallied significantly since late last year. Progressive tightening
of monetary policy by the Federal Reserve Board over the 12 months through
February 1995 led to slower economic growth and caused bonds to advance. The
trend toward lower long-term interest rates this year was also aided in July
by a 25 basis point reduction in the federal-funds rate (the interest rate
banks charge each other for overnight loans).

MUNICIPAL MARKET CONDITIONS

Long-term municipal bond yields declined from a high of 7.37 percent in
November 1994 to 6.02 percent at the end of October 1995, as tracked by The
Bond Buyer Revenue Bond Index*. This 135 basis point decline in yield
corresponded to an 11 percent price increase for callable municipal bonds
with 30-year maturities. Similarly, yields on 1-year municipal notes moved
from 4.51 percent to 3.82 percent. The yield pickup for extending maturity
from 1-to 30-years was 220 basis points.

Tax-exempt bonds began the year by outperforming U.S. Treasury bonds, but
then deteriorated on a relative basis. The ratio of the Revenue Bond Index
yield to the 30-year U.S. Treasury bond yield moved from 89 percent in
December 1994 to 84 percent by the end of February 1995. A declining ratio
means that municipal bond prices have been stronger than U.S. Treasury
prices. In the spring the municipal market began to discount the risk of
comprehensive changes in the tax code created by flat tax rhetoric from
Washington. This caused the yield ratio to reach a high of 95 percent during
the summer. Over the past 10 years, long municipal yields have averaged 89
percent of U.S. Treasury yields.

The municipal market continued to experience consolidation in 1995. Municipal
underwriting in the first 10 months of the year was down 16

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

*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 Investors Service, Inc., and
AA+ to A- by Standard & Poor's Corp.

<PAGE>

INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS October 31, 1995, continued

percent from the same period in 1994. This change followed a 44 percent drop
in volume for all of 1994. The effect of lower volume and profitability was
also apparent in the decisions of several major dealers to withdraw from the
municipal business.

TAX REFORM

Flat-tax advocates have generated increased publicity for their proposals and
have affected the municipal market since early 1995. Most of the discussion
on proposed tax-reform measures is based on theoretical concepts, containing
broad assumptions and lacking specific details. Basically, the various plans
raise questions about the fairness of changing from a progressive to a
regressive tax structure. Low flat-tax rate plans call for the elimination of
deductions of mortgage interest, charitable contributions, property taxes,
and state and local income taxes. Should politicians make tax reform a
central issue in the 1996 elections, media coverage will expand from the
financial page to the front page. If that happens, municipal bonds could come
under further pressure. For example, when major tax reform turmoil occurred
in 1986, municipal yields briefly exceeded taxable yields.

In addition to the market risk associated with the flat-tax proposals,
municipal credits would also be negatively affected. If mortgage interest and
property tax deductions were eliminated, municipalities would experience a
decline in their property tax base. The loss of state and local income tax
deductions would increase the relative economic disadvantage that high-tax
states already face. The flat tax represents a shift in tax accountability
from the federal to local governments. Taxpayer recognition of the extent of
changes under consideration may impede the passage of comprehensive tax
reform.

FUND PERFORMANCE

The net asset value (NAV) of InterCapital California Quality Municipal
Securities (IQC) rose from $10.62 to $12.70 per share during the fiscal year
ended October 31, 1995. Based on this NAV change plus reinvestment of
tax-free dividends totaling $0.74 per share, the Trust's total return was
28.37 percent. Over the same period, IQC's market price on the New York Stock
Exchange appreciated 11.54 percent from $9.75 to $10.875 per share. Based on
this market price change and reinvestment of tax-free dividends, the Trust's
total return was 19.73 percent. IQC began the fiscal year trading at an 8
percent discount to NAV and closed at a 14 percent discount. Undistributed
net investment income totaled $0.032 per share on October 31, 1995 versus
$0.054 per share a year ago. Since the amount of IQC's undistributed net
investment income continued to shrink during the summer, the Trustees voted
to reduce the monthly dividend from $0.06 to $0.0575 per share beginning with
the November 1995 payment. This revised dividend rate more accurately
reflects the Trust's current earnings.

<PAGE>

INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS October 31, 1995, continued

PORTFOLIO STRUCTURE

[The chart below represents information which appears as a graphic in the
printed Annual Report]

A Pie chart reflecting the bonds in the portfolio as they are rated by Moody's
Investor Service, Inc. and Standard & Poor's Corporation:

PERCENTAGE MOODY'S CREDIT S&P'S CREDIT
OF BONDS RATINGS RATINGS
__________________________________________________________________________
40% Aaa AAA
__________________________________________________________________________
32% Aa AA
___________________________________________________________________________
28% A A
___________________________________________________________________________

On October 31, 1995, IQC's long-term portfolio was diversified among 11
specific long-term municipal sectors and 38 credits. The three largest
sectors -- water & sewer, educational facilities and public facilities
revenue bonds -- represented 53 percent of the portfolio. The average
maturity and call protection of the Trust's long-term holdings were 24 and 8
years, respectively. Net assets exceeded $206 million.

The credit-quality ratings of the Trust's long-term portfolio are illustrated
on the right.

THE IMPACT OF LEVERAGING

As discussed in previous reports, the total income available for distribution
to common shareholders includes incremental income provided by Auction Rate
Preferred Share (ARPS) leverage. ARPS dividends reflect prevailing short-term
interest rates on maturities normally ranging from one week to one year.
Incremental income to common shares depends on two factors: first, the spread
between the interest earned on the long-term bonds in the established
portfolio of investments and the ARPS auction rate plus ARPS expenses;
second, the amount of ARPS outstanding. The greater the amount of ARPS
outstanding, the greater the amount of incremental income available for
distribution to common shareholders.

The profitability of ARPS declined in 1994 and the first half of 1995. ARPS
yields have moved somewhat lower since the Federal Reserve Board's initial
easing in July 1995. A reduction in the amount of ARPS outstanding -- to
control the portfolio's price volatility last year -- also diminished
incremental income to common shares. Currently, $55 million in ARPS are
outstanding. This represents 27 percent of net assets.

LOOKING AHEAD

The slower pace of economic growth in 1995 and the Federal Reserve Board's
previous interest rate moves have improved bond-market expectations. The
decreasing supply of new issues, combined with significant maturities and
calls for redemption, should continue to be positive for the municipal
market. However, tax-reduction proposals are likely to continue to receive
publicity and may cloud the outlook for tax-exempt bonds. With long-term
municipal securities yielding more than 90 percent of the yield on U.S.
Treasuries, the market has already begun the process of discounting the risk
that a flat tax might eventually become law.

<PAGE>

INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS October 31, 1995, continued

The Trust's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps to
support the market value of the Trust's shares. In addition, we would like to
remind you that the Trustees have approved a procedure whereby the Trust,
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 fiscal year ended
October 31, 1995, the Trust purchased and retired 429,700 shares of common
stock at a weighted average market discount of 10.73 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 California Quality
Municipal Securities and look forward to continuing to serve your investment
needs.

Very truly yours,

/s/ Charles A. Fiumefreddo

CHARLES A. FIUMEFREDDO
Chairman of the Board

<PAGE>

INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
RESULTS OF ANNUAL MEETING (unaudited)

* * *
On June 22, 1995, an annual meeting of the Trust's shareholders was held for
the purpose of voting on three separate matters, the results of which were as
follows:

(1) ELECTION OF TRUSTEES BY ALL SHAREHOLDERS:

Jack F. Bennett

<TABLE>
<CAPTION>
<S> <C>
FOR .......... 9,023,021
Withheld ..... 182,455

Michael Bozic
For .......... 9,032,038
Withheld ..... 173,438
</TABLE>

ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS:

Charles A. Fiumefreddo

<TABLE>
<CAPTION>
<S> <C>
FOR .......... 752
WITHHELD ..... --
</TABLE>

The following Trustees were not standing for reelection at this meeting:
Edwin J. Garn, John R. Haire, Dr. Manuel H. Johnson, Paul Kolton, Michael
E. Nugent, Philip J. Purcell and John L. Schroeder.

(2) CONTINUANCE OF THE CURRENTLY EFFECTIVE INVESTMENT MANAGEMENT AGREEMENT:

<TABLE>
<CAPTION>
<S> <C>
FOR ....... 8,612,825
Against .. 178,369
Abstain .. 414,282
</TABLE>

(3) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS:

<TABLE>
<CAPTION>
<S> <C>
FOR ....... 8,779,509
Against .. 76,181
Abstain .. 349,786
</TABLE>

<PAGE>

INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS October 31, 1995

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------- ----------------------------------------------------------------------------- -------- ---------- --------------
<S> <C> <C> <C> <C>
CALIFORNIA EXEMPT MUNICIPAL BONDS (97.6%)
General Obligation (1.9%)
$ 4,000 California, Various Purpose Dtd 04/01/93 .................................... 5.90 % 04/01/23 $ 3,967,520
- --------- --------------
Educational Facilities Revenue (14.6%)
California Educational Facilities Authority,
6,000 Carnegie Institute of Washington 1993 Ser A ................................ 5.60 10/01/23 5,723,220
900 Culinary Institute of America Ser 1993 (Connie Lee) ........................ 5.25 10/01/13 865,602
1,500 Culinary Institute of America Ser 1993 (Connie Lee) ........................ 5.30 10/01/23 1,375,560
2,500 Pepperdine University 1993 Ser A (MBIA) .................................... 5.50 06/01/19 2,429,150
4,465 St Mary's College of California Refg Ser 1993 .............................. 5.00 10/01/12 4,042,790
8,000 California Public Works Board, University of California Ser 1993 B ......... 5.50 06/01/14 7,521,040
University of California, UCLA Central Chiller/Cogeneration
5,750 Refg Ser 1993 COPs ......................................................... 5.50 11/01/14 5,457,842
3,000 Refg Ser 1993 COPs ......................................................... 5.60 11/01/20 2,823,480
- --------- --------------
32,115 30,238,684
- --------- --------------
Electric Revenue (8.6%)
6,000 Los Angeles Department of Water & Power, Issue of 1993 ...................... 5.375 09/01/23 5,586,840
8,375 Northern California Transmission Agency, California - Oregon Transmission
Refg Ser 1993 A (MBIA) ..................................................... 5.25 05/01/20 7,901,729
5,000 Southern California Public Power Authority, Mead - Phoenix 1994 Ser A
(AMBAC) .................................................................... 4.875 07/01/20 4,396,800
- --------- --------------
19,375 17,885,369
- --------- --------------
Hospital Revenue (6.2%)
4,000 Anaheim, Anaheim Memorial Hospital Association COPs (AMBAC) ................. 5.00 05/15/13 3,687,800
5,000 California Health Facilities Financing Authority, Kaiser Permanente Ser 1985 5.55 08/15/25 4,649,800
California Statewide Communities Development Authority,
2,000 Children's Hospital of Los Angeles Ser 1993 COPs (MBIA) .................... 6.00 06/01/13 2,090,940
2,500 Motion Picture & Television Fund COPs (AMBAC) .............................. 5.375 01/01/20 2,350,250
- --------- --------------
13,500 12,778,790
- --------- --------------
Industrial Development/Pollution Control Revenue (3.7%)
8,000 California Pollution Control Financing Authority, Pacific Gas & Electric Co
1993 Ser B (AMT) ........................................................... 5.85 12/01/23 7,690,800
- --------- --------------
Mortgage Revenue - Multi-Family (2.6%)
Los Angeles Community Redevelopment Financing Authority,
2,155 Grand Central Square 1993 Ser A (AMT) ...................................... 5.75 12/01/13 2,010,421
3,750 Grand Central Square 1993 Ser A (AMT) ...................................... 5.85 12/01/26 3,308,850
- --------- --------------
5,905 5,319,271
- --------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS October 31, 1995, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------- -------------------------------------- ...................................... -------- ---------- --------------
<S> <C> <C> <C> <C>
Mortgage Revenue - Single Family (4.1%)
$ 8,900 California Housing Finance Agency, Home 1993 Ser B .......................... 5.65 % 08/01/14 $ 8,426,787
- --------- --------------
Public Facilities Revenue (10.6%)
7,000 California Public Works Board, Corrections 1993 Ser D ....................... 5.375 06/01/12 6,544,020
6,400 Los Angeles Convention & Exhibition Center Authority, 1993 Refg Ser A (MBIA) 5.125 08/15/13 6,056,384
7,000 Los Angeles County Public Works Financing Authority, Multiple Capital
Project # IV (MBIA) ........................................................ 5.25 12/01/16 6,640,620
3,000 Redding Joint Powers Financing Authority, 1993 Ser A ........................ 5.50 01/01/13 2,761,920
- --------- --------------
23,400 22,002,944
- --------- --------------
Tax Allocation (9.0%)
6,870 Garden Grove Community Development Agency, Refg Issue of 1993 .............. 5.875 10/01/23 6,540,034
7,000 Rosemead Redevelopment Agency, Project #1 Ser 1993 A ........................ 5.60 10/01/33 6,081,110
6,700 San Jose Redevelopment Agency, Merged Area Ser 1993 (MBIA) .................. 5.00 08/01/20 6,064,907
- --------- --------------
20,570 18,686,051
- --------- --------------
Transportation Facilities Revenue (6.6%)
5,000 Long Beach, Harbor Ser 1993 (AMT) ........................................... 5.00 05/15/10 4,747,050
7,000 Los Angeles County Metropolitan Transportation Authority, Sales Tax Refg Ser
1993-A (MBIA) .............................................................. 5.625 07/01/18 6,898,010
2,000 San Diego County Regional Transportation Commission, Sales Tax 1994 Ser A
(FGIC) ..................................................................... 4.75 04/01/08 1,897,620
- --------- --------------
14,000 13,542,680
- --------- --------------
Water & Sewer Revenue (27.5%)
8,000 California Department of Water Resources, Central Valley Ser L ............. 5.50 12/01/23 7,594,640
7,250 Eastern Municipal Water District, Ser 1993 A COPs (FGIC) .................... 5.25 07/01/23 6,740,905
7,000 Los Angeles, Wastewater Refg Ser 1993-D (FGIC) .............................. 5.20 11/01/21 6,510,490
8,000 Los Angeles County Sanitation Districts Financing Authority, 1993 Ser A .... 5.25 10/01/19 7,385,680
3,000 Marin County Municipal Water District, Ser 1993 ............................. 5.65 07/01/23 2,913,960
5,000 Metropolitan Water District of Southern California, Issue of 1992 .......... 5.50 07/01/13 4,872,850
8,000 Moulton-Niguel Water District, 1993 COPs (AMBAC) ............................ 5.30 09/01/23 7,470,960
2,500 Rancho Water District Financing Authority, Refg Ser 1994 (AMBAC) ........... 5.00 08/15/14 2,315,875
4,000 Sacramento County Sanitation Districts Financing Authority, Ser 1993 ....... 5.00 12/01/16 3,608,840
8,000 San Diego Public Facilities Authority, Ser 1993 A ........................... 5.25 05/15/20 7,301,040
- --------- --------------
60,750 56,715,240
- --------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

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

AMT Alternative Minimum Tax.

COPs Certificates of Participation.

* Current coupon of variable rate security.

(a) The aggregate cost for federal income tax purposes is $213,449,291;
the aggregate gross unrealized appreciation is $25,407 and the
aggregate gross unrealized depreciation is $10,319,812, resulting in
net unrealized depreciation of $10,294,405.

Bond Insurance:

AMBAC AMBAC Indemnity Corporation.

Connie Lee Connie Lee Insurance Company.

FGIC Financial Guaranty Insurance Company.

MBIA Municipal Bond Investors Assurance Corporation.

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995

<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $213,449,291) ....................................... $203,154,886
Cash .................................................................. 38,994
Interest receivable ................................................... 3,547,866
Deferred organizational expenses ...................................... 22,702
Prepaid expenses and other assets ..................................... 30,852
--------------
TOTAL ASSETS ........................................................ 206,795,300
--------------
LIABILITIES:
Payable for:
Common shares of beneficial interest purchased ...................... 32,715
Investment management fee ........................................... 63,011
Accrued expenses and other payables ................................... 85,553
--------------
TOTAL LIABILITIES ................................................... 181,279
--------------
NET ASSETS:
Preferred shares of beneficial interest (1,000,000 shares authorized
of non-participating $.01 par value, 1,100 shares outstanding) ...... 55,000,000
--------------
Common shares of beneficial interest (unlimited shares authorized of
$.01 par value, 11,940,213 shares outstanding) ....................... 168,278,204
Net unrealized depreciation ........................................... (10,294,405)
Accumulated undistributed net investment income ....................... 377,538
Accumulated net realized loss ......................................... (6,747,316)
--------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ........................ 151,614,021
--------------
TOTAL NET ASSETS .................................................... $206,614,021
==============
NET ASSET VALUE PER COMMON SHARE
($151,614,021 divided by 11,940,213 common shares outstanding) ...... $12.70
==============

</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

InterCapital California Quality Municipal Securities
FINANCIAL STATEMENTS, continued

STATEMENT OF OPERATIONS
For the year ended October 31, 1995

<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ........................ $11,887,413
-------------
EXPENSES
Investment management fee .............. 693,916
Auction commission fees ................ 140,882
Professional fees ...................... 106,791
Transfer agent fees and expenses ...... 52,700
Auction agent fees ..................... 44,968
Shareholder reports and notices ....... 39,630
Trustees' fees and expenses ............ 33,224
Registration fees ...................... 24,759
Custodian fees ......................... 12,355
Organizational expenses ................ 7,818
Other .................................. 25,322
-------------
TOTAL EXPENSES BEFORE EXPENSE OFFSET 1,182,365
LESS: EXPENSE OFFSET ................. (12,295)
-------------
TOTAL EXPENSES AFTER EXPENSE OFFSET . 1,170,070
-------------
NET INVESTMENT INCOME ................ 10,717,343
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss ...................... (1,012,101)
Net change in unrealized depreciation . 25,818,322
-------------
NET GAIN ............................. 24,806,221
-------------
NET INCREASE ........................... $35,523,564
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

InterCapital California Quality Municipal Securities
FINANCIAL STATEMENTS, continued

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED OCTOBER ENDED OCTOBER
31, 1995 31, 1994
- --------------------------------------------- ---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ........................ $ 10,717,343 $ 11,875,066
Net realized loss ............................ (1,012,101) (5,735,215)
Net change in unrealized depreciation ....... 25,818,322 (34,922,493)
---------------- ----------------
NET INCREASE (DECREASE) .................... 35,523,564 (28,782,642)
---------------- ----------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Preferred .................................... (2,097,393) (2,231,747)
Common ....................................... (8,908,824) (9,314,930)
---------------- ----------------
TOTAL ...................................... (11,006,217) (11,546,677)
---------------- ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST:
Preferred .................................... (17,250,000) 72,250,000
Common ....................................... (4,315,688) (4,575,617)
---------------- ----------------
TOTAL ...................................... (21,565,688) 67,674,383
---------------- ----------------
TOTAL INCREASE ............................. 2,951,659 27,345,064
NET ASSETS:
Beginning of period .......................... 203,662,362 176,317,298
---------------- ----------------
END OF PERIOD
(Including undistributed net investment
income
of $377,538 and $666,412, respectively) ... $206,614,021 $203,662,362
================ ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1995

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. The Trust was
organized as a Massachusetts business trust on March 3, 1993 and commenced
operations on September 29, 1993.

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 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,

<PAGE>

INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued

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 -- Dean Witter InterCapital
Inc. (the "Investment Manager") paid the organizational expenses and offering
costs of the Trust's common shares in the amounts of $39,000 and $438,000,
respectively. The organizational expenses have been reimbursed by the Trust
for the full amount thereof. Such 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 have been reimbursed by
the Trust and were charged to capital at the time of issuance of the Trust's
common shares.

2. INVESTMENT MANAGEMENT AGREEMENT

Pursuant to an Investment Management Agreement, the Trust pays 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, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Trust who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Trust.

3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES

The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended October 31, 1995
aggregated $1,869,300 and $7,082,870, respectively.

Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At October 31, 1995, the Trust had transfer agent
fees and expenses payable of approximately $4,000.

The Trust has an unfunded noncontributory defined benefit pension plan
covering all independent Trustees of the Trust who will have served as
independent Trustees for at least five years at the time of

<PAGE>

INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued

retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension costs
for the year ended October 31, 1995 included in Trustees' fees and expenses
in the Statement of Operations amounted to $12,000. At October 31, 1995, the
Trust had an accrued pension liability of $22,111 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 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.
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. For the year ended October 31, 1995, the Trust
purchased and retired 194 shares of Series 1 and 151 shares of Series 2
amounting to $9,700,000 and $7,550,000, respectively.

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

<TABLE>
<CAPTION>
RESET RANGE OF
SHARES* SERIES RATE* DATE DIVIDEND RATES**
- -------------------------------------------------- -----------------------
<S> <C> <C> <C> <C>
260 1 3.90% 11/06/95 2.00% - 5.232%
240 2 3.85 11/01/95 1.00 - 6.30
600 3 3.76 11/06/95 2.90 - 4.50

</TABLE>

- ------------
* As of October 31, 1995.

** For the year ended October 31, 1995.

Subsequent to October 31, 1995 and up through December 4, 1995, the Trust
paid dividends to each Series at rates ranging from 3.40% to 3.90% in the
aggregate amount of $188,725.

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.

<PAGE>

INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued

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.

5. COMMON SHARES OF BENEFICIAL INTEREST

Transactions in common shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
CAPITAL
PAID IN
EXCESS OF
SHARES PAR VALUE PAR VALUE
------------ ---------- --------------
<S> <C> <C> <C>
Balance, October 31, 1993 .................................................. 12,632,113 $126,321 $177,043,188
Offering costs associated with the initial public offering of common shares -- -- 14,424
Offering costs and underwriting discounts associated with the issuance of
preferred shares ......................................................... -- -- (1,603,310)
Treasury shares purchased and retired (weighted average discount 5.05%)* .. (262,200) (2,622) (2,984,109)
------------ ---------- --------------
Balance October 31, 1994 ................................................... 12,369,913 123,699 172,470,193
Treasury shares purchased and retired (weighted average discount 10.73%)* . (429,700) (4,297) (4,311,391)
------------ ---------- --------------
Balance, October 31, 1995 .................................................. 11,940,213 $119,402 $168,158,802
============ ========== ==============
</TABLE>

- ------------
* The Trustees have voted to retire the shares purchased.

6. FEDERAL INCOME TAX STATUS

At October 31, 1995, the Trust had a net capital loss carryover of
approximately $6,747,000 of which $5,735,000 will be available through
October 31, 2002 and $1,012,000 will be available through October 31, 2003,
which may be used 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>
October 31, 1995 $0.0575 November 10, 1995 November 24, 1995
November 28, 1995 $0.0575 December 8, 1995 December 22, 1995
</TABLE>

<PAGE>

INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued

8. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------------
10/31/95 7/31/95 4/30/95 1/31/95
----------------- ----------------- ----------------- -----------------
PER PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income .......... $ 2,957 $0.24 $ 2,983 $0.25 $ 2,897 $0.24 $ 3,050 $0.25
Net investment income ............ 2,662 0.22 2,699 0.22 2,605 0.21 2,751 0.23
Net realized and unrealized gain 7,983 0.68 3,234 0.28 7,796 0.65 5,793 0.50
</TABLE>

<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------------------
10/31/94 7/31/94 4/30/94 1/31/94
-------------------- ----------------- -------------------- -----------------
PER PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
---------- -------- -------- ------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ......... $ 3,465 $ 0.28 $ 3,431 $0.28 $ 3,466 $ 0.27 $ 2,965 $0.24
Net investment income ........... 3,086 0.25 3,052 0.24 3,112 0.25 2,625 0.21
Net realized and unrealized gain
(loss) ........................ (16,186) (1.30) 2,742 0.23 (32,314) (2.57) 5,100 0.40
</TABLE>

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

* Amounts in thousands.

<PAGE>

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 YEAR ENDED
OCTOBER 31 FOR THE PERIOD
SEPTEMBER 29, 1993*
----------------------- THROUGH
1995** 1994**++ OCTOBER 31, 1993**
- -------------------------------------------------------------------- ----------- ---------- -------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............................... $ 10.62 $ 13.96 $ 14.06
----------- ---------- -------------------
Net investment income .............................................. 0.88 0.95 0.03
Net realized and unrealized gain (loss) ............................ 2.07 (3.25) (0.10)
----------- ---------- -------------------
Total from investment operations ................................... 2.95 (2.30) (0.07)
----------- ---------- -------------------
Less dividends from:
Net investment income ............................................. (0.74) (0.74) --
Common share equivalent of dividends paid to preferred shareholders (0.17) (0.18) --
----------- ---------- -------------------
Total dividends .................................................... (0.91) (0.92) --
Anti-dilutive effect of acquiring treasury shares .................. 0.04 0.01 --
Offering costs charged against capital ............................. -- (0.13) (0.03)
----------- ---------- -------------------
Net asset value, end of period ..................................... $ 12.70 $ 10.62 $ 13.96
=========== ========== ===================
Market value, end of period ........................................ $ 10.875 $ 9.75 $ 15.00
=========== ========== ===================
--
TOTAL INVESTMENT RETURN+ ........................................... 19.73% (30.89)% %(1)
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses before expense offset ............................... 0.84%(3) 0.93 % 0.52%(2)
Net investment income before preferred stock dividends ............. 7.57%(3) 7.63 % 2.32%(2)
Preferred stock dividends .......................................... 1.48% 1.43 % N/A
Net investment income available to common shareholders ............. 6.09% 6.18 % 2.55%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ............................ $206,614 $ 203,662 $176,317
Asset coverage on preferred shares at end of period ................ 376% 281 % N/A
--
Portfolio turnover rate ............................................ 1% 20 % %(1)

</TABLE>

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

* 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 are assumed to be
reinvested at the prices obtained under the Trust's dividend
reinvestment plan. Total investment return does not reflect brokerage
commissions.

++ Restated for comparative purposes.

(1) Not annualized.

(2) Annualized.

(3) The above expense and net investment income ratios would have been
0.83% and 7.58%, respectively, which reflects 0.01%
effect for custody cash credits.

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS AND TRUSTEES
OF INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES

In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of InterCapital
California Quality Municipal Securities (the "Trust") at October 31, 1995,
the results of its operations for the year then ended, and the changes in its
net assets for each of the two years in the period then ended and the
financial highlights for the two years in the period then ended and for the
period September 29, 1993 (commencement of operations) through October 31,
1993, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1995 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 4, 1995

1995 FEDERAL TAX NOTICE (unaudited)

During the year ended October 31, 1995, the Trust paid the following per
share amounts from tax-exempt income: $0.74 to the common shareholders,
$1,836 to Series 1 preferred shareholders, $1,889 to Series 2 preferred
shareholders and $2,073 to Series 3 preferred shareholders.

<PAGE>

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
CALIFORNIA
QUALITY
MUNICIPAL
SECURITIES

ANNUAL REPORT
OCTOBER 31, 1995