<PAGE> 1
INTERCAPITAL CALIFORNIA 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-term 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 California Quality Municipal
Securities (IQC) increased from $10.62 to $11.75 per share during the six-month
period ended April 30, 1995. Based on this NAV change plus reinvestment of
tax-free dividends totaling $0.375 per share, the Trust's total NAV return for
the period was 14.76 percent. Concurrently, the Trust's market price on the New
York Stock Exchange rose from $9.75 to $10.50 per share. Based on this stock
price change and reinvestment of dividends, the Trust's total market return for
the period was 11.79 percent. The Trust began the period trading at a 8.2
percent discount to NAV and closed at a 10.6 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> 2
PORTFOLIO STRUCTURE
As of April 30, 1995, IQC's long-term investments were diversified among 12
specific municipal sectors and 37 issuers. The four largest sectors -- water and
sewer, educational facilities, public facilities and tax allocation revenue
bonds -- represented 61 percent of net assets. The average maturity and call
protection of the Trust's long-term holdings were 24 years and 8 years,
respectively. At the end of the period, the Trust's net assets totaled
approximately $197 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................................................................ 39%
Aa or AA.................................................................. 32
A or A.................................................................... 29
</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's 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 (dividends 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 $17.3 million in par amount of ARPS.
Currently $55 million ARPS are outstanding. Additional ARPS purchases may occur
if ARPS become unprofitable (a 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 $0.0625 to $0.06 per share. At
the end of April 1995, the Trust had undistributed net investment income of
$0.035 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. Future
declines in IQC's cushion may lead to adjustment of the common-share dividend.
<PAGE> 3
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.
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 288,500 shares of common stock at a weighted average market
discount of 10 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> 4
INTERCAPITAL CALIFORNIA 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>
CALIFORNIA EXEMPT MUNICIPAL BONDS (96.9%)
GENERAL OBLIGATION (2.3%)
$ 4,850 California, Various Purpose Dtd 4/1/93................. 5.90 % 04/01/23 $ 4,620,595
--------- -------------
EDUCATIONAL FACILITIES REVENUE (14.6%)
California Educational Facilities Authority,
6,000 Carnegie Institute of Washington 1993 Ser A............ 5.60 10/01/23 5,469,360
900 Culinary Institute of America Ser 1993 (Connie Lee).... 5.25 10/01/13 799,569
1,500 Culinary Institute of America Ser 1993 (Connie Lee).... 5.30 10/01/23 1,297,350
2,500 Pepperdine University 1993 Ser A (MBIA)................ 5.50 06/01/19 2,276,575
4,465 St Mary's College of California Refg Ser 1993.......... 5.00 10/01/12 3,813,869
8,000 California Public Works Board, University of California
Ser 1993 B........................................... 5.50 06/01/14 7,204,160
University of California, UCLA Central
Chiller/Cogeneration
5,750 Refg Ser 1993 COPs..................................... 5.50 11/01/14 5,189,778
3,000 Refg Ser 1993 COPs..................................... 5.60 11/01/20 2,679,450
--------- -------------
32,115 28,730,111
--------- -------------
ELECTRIC REVENUE (8.5%)
6,000 Los Angeles Department of Water & Power, Issue of
1993................................................. 5.375 09/01/23 5,284,680
8,375 Northern California Transmission Agency, California -
Oregon Transmission Refg Ser 1993 A (MBIA)........... 5.25 05/01/20 7,351,073
5,000 Southern California Public Power Authority,
Mead - Phoenix 1994 Ser A (AMBAC).................... 4.875 07/01/20 4,122,200
--------- -------------
19,375 16,757,953
--------- -------------
HOSPITAL REVENUE (6.2%)
4,000 Anaheim, Anaheim Memorial Hospital Association COPs
(AMBAC).............................................. 5.00 05/15/13 3,490,720
5,000 California Health Facilities Financing Authority,
Kaiser Permanente Ser 1985........................... 5.50 08/15/25 4,476,550
California Statewide Communities Development Authority,
2,000 Children's Hospital of Los Angeles Ser 1993 COPs
(MBIA)............................................. 6.00 06/01/13 2,013,040
2,500 Motion Picture & Television Fund COPs (AMBAC)........ 5.375 01/01/20 2,220,650
--------- -------------
13,500 12,200,960
--------- -------------
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 7,318,160
--------- -------------
MORTGAGE REVENUE -- MULTI-FAMILY (2.7%)
Los Angeles Community Redevelopment Financing
Authority, Grand Central Square
2,155 1993 Ser A (AMT)..................................... 5.75 12/01/13 1,958,141
3,750 1993 Ser A (AMT)..................................... 5.85 12/01/26 3,302,287
--------- -------------
5,905 5,260,428
--------- -------------
</TABLE>
<PAGE> 5
INTERCAPITAL CALIFORNIA 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>
MORTGAGE REVENUE -- SINGLE FAMILY (4.1%)
$ 8,900 California Housing Finance Agency, Home 1993 Ser B..... 5.65 % 08/01/14 $ 8,074,525
--------- -------------
PUBLIC FACILITIES REVENUE (10.5%)
7,000 California Public Works Board, Corrections 1993 Ser
D.................................................... 5.375 06/01/12 6,267,030
6,400 Los Angeles Convention & Exhibition Center Authority,
1993 Refg Ser A (MBIA)............................... 5.125 08/15/13 5,691,200
7,000 Los Angeles County Public Works Financing Authority,
Multiple Capital Proj # IV (MBIA).................... 5.25 12/01/16 6,191,150
3,000 Redding Joint Powers Financing Authority, 1993 Ser A... 5.50 01/01/13 2,599,230
--------- -------------
23,400 20,748,610
--------- -------------
TAX ALLOCATION (8.8%)
6,870 Garden Grove Community Development Agency, Refg Issue
of 1993.............................................. 5.875 10/01/23 6,169,535
7,000 Rosemead Redevelopment Agency, Proj #1 Ser 1993 A...... 5.60 10/01/33 5,531,820
6,700 San Jose Redevelopment Agency, Merged Area Ser 1993
(MBIA)............................................... 5.00 08/01/20 5,664,850
--------- -------------
20,570 17,366,205
--------- -------------
TRANSPORTATION FACILITIES REVENUE (5.6%)
5,000 Long Beach, Harbor Ser 1993 (AMT)...................... 5.00 05/15/10 4,418,150
7,000 Los Angeles County Metropolitan Transportation
Authority, Sales Tax Refg Ser 1993-A (MBIA).......... 5.625 07/01/18 6,532,190
--------- -------------
12,000 10,950,340
--------- -------------
WATER & SEWER REVENUE (27.4%)
8,000 California Department of Water Resources, Central
Valley Ser L......................................... 5.50 12/01/23 7,204,560
7,250 Eastern Municipal Water District, Ser 1993 A COPs
(FGIC)............................................... 5.25 07/01/23 6,319,897
8,000 Los Angeles County Sanitation Districts Financing
Authority, 1993 Ser A................................ 5.25 10/01/19 6,995,200
7,000 Los Angeles, Wastewater Refg Ser 1993 - D (FGIC)....... 5.20 11/01/21 6,078,240
3,000 Marin County Municipal Water District, Ser 1993........ 5.65 07/01/23 2,716,710
5,000 Metropolitan Water District of Southern California,
Issue of 1992........................................ 5.50 07/01/13 4,641,600
8,800 Moulton Niguel Water District, 1993 COPs (AMBAC)....... 5.30 09/01/23 7,632,680
2,500 Rancho Water District Financing Authority, Refg Ser
1994 (AMBAC)......................................... 5.00 08/15/14 2,172,425
4,000 Sacramento County Sanitation Districts Financing
Authority, Ser 1993.................................. 5.00 12/01/16 3,407,360
8,000 San Diego Public Facilities Authority, Ser 1993 A...... 5.25 05/15/20 6,832,320
--------- -------------
61,550 54,000,992
--------- -------------
OTHER REVENUE (2.5%)
5,750 California Statewide Communities Development Authority,
--------- The J Paul Getty Trust COPs.......................... 5.00 10/01/23 4,799,640
-------------
215,915 TOTAL CALIFORNIA EXEMPT MUNICIPAL BONDS
--------- (IDENTIFIED COST $212,514,259)................................................ 190,828,519
-------------
</TABLE>
<PAGE> 6
INTERCAPITAL CALIFORNIA 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>
CALIFORNIA EXEMPT SHORT-TERM MUNICIPAL OBLIGATIONS
(1.3%)
California Statewide Communities Development Authority,
$ 1,500 House & Ear Institute 1993 Ser A (Tender 05/01/95)... 5.00*% 07/01/24 $ 1,500,000
1,100 St Joseph Health Systems COPs (Tender 05/01/95)...... 4.85* 12/01/18 1,100,000
--------- -------------
2,600 TOTAL CALIFORNIA EXEMPT SHORT-TERM
--------- MUNICIPAL OBLIGATIONS
(IDENTIFIED COST $2,600,000)................................................ 2,600,000
-------------
$ 218,515 TOTAL INVESTMENTS
======== (IDENTIFIED COST $215,114,259)(A)............................. 98.2% 193,428,519
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES................ 1.8 3,524,676
----- -------------
NET ASSETS...................................................... 100.0% $ 196,953,195
----- -------------
----- -------------
</TABLE>
- ---------------
Bond Insurance:
AMBAC AMBAC Indemnity Corporation.
Connie Lee Connie Lee Insurance Company.
FGIC Financial Guaranty Insurance Company.
MBIA Municipal Bond Investors Assurance Corporation.
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Variable or floating rate securities. Coupon rate shown reflects
current rate.
(a) The aggregate cost for federal income tax purposes is
$215,114,259; the aggregate gross and net unrealized depreciation
is $21,685,740.
See Notes to Financial Statements
<PAGE> 7
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (unaudited)
- -------------------------------------------
ASSETS:
Investments in securities, at value
(identified cost $215,114,259)........... $ 193,428,519
Cash....................................... 159,101
Interest receivable........................ 3,532,229
Deferred organizational expenses........... 26,633
Prepaid expenses and other assets.......... 47,400
-------------
TOTAL ASSETS......................... 197,193,882
-------------
LIABILITIES:
Payable for:
Common shares of beneficial interest
purchased.............................. 94,895
Investment management fee................ 57,969
Accrued expenses and other payables........ 87,823
-------------
TOTAL LIABILITIES.................... 240,687
-------------
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, 12,081,413 shares outstanding).... 169,794,415
Accumulated undistributed net investment
income................................... 418,239
Accumulated net realized loss.............. (6,573,719)
Net unrealized depreciation................ (21,685,740)
-------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS....................... 141,953,195
-------------
TOTAL NET ASSETS..................... $ 196,953,195
=============
NET ASSET VALUE PER COMMON SHARE,
($141,953,195 divided by 12,081,413
common shares outstanding)............... $11.75
======
STATEMENT OF OPERATIONS For the six months
ended April 30, 1995 (unaudited)
- -------------------------------------------
NET INVESTMENT INCOME:
INTEREST INCOME.......................... $ 5,947,190
-------------
EXPENSES
Investment management fee.............. 336,251
Auction commission fees................ 74,749
Professional fees...................... 57,561
Transfer agent fees and expenses....... 30,410
Auction agent fees..................... 24,187
Shareholder reports and notices........ 17,429
Registration fees...................... 17,349
Trustees' fees and expenses............ 16,288
Organizational expenses................ 3,888
Other.................................. 13,263
-------------
TOTAL EXPENSES..................... 591,375
-------------
NET INVESTMENT INCOME.............. 5,355,815
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................ (838,504)
Net change in unrealized depreciation.... 14,426,987
-------------
NET GAIN........................... 13,588,483
-------------
NET INCREASE....................... $ 18,944,298
=============
</TABLE>
See Notes to Financial Statements
<PAGE> 8
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the six
months
ended For the year
April 30, ended
1995 October 31,
(unaudited) 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.................................................. $ 5,355,815 $ 11,875,066
Net realized loss...................................................... (838,504) (5,735,215)
Net change in unrealized depreciation.................................. 14,426,987 (34,922,493)
------------- -------------
Net increase (decrease)............................................ 18,944,298 (28,782,642)
------------- -------------
Dividends to shareholders from net investment income:
Common................................................................. (4,580,456) (9,314,930)
Preferred.............................................................. (1,023,532) (2,231,747)
------------- -------------
Total.............................................................. (5,603,988) (11,546,677)
------------- -------------
Transactions in shares of beneficial interest:
Common................................................................. (2,799,477) (4,575,617)
Preferred.............................................................. (17,250,000) 72,250,000
------------- -------------
Total transactions................................................. (20,049,477) 67,674,383
------------- -------------
Total increase (decrease).......................................... (6,709,167) 27,345,064
NET ASSETS:
Beginning of period...................................................... 203,662,362 176,317,298
------------- -------------
END OF PERIOD (including undistributed net investment income of $418,239
and $666,412, respectively)............................................ $ 196,953,195 $ 203,662,362
============= =============
</TABLE>
See Notes to Financial Statements
<PAGE> 9
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 nondiversified, closed-end management investment
company. The Trust was organized as a Massachusetts business trust on March 3,
1993 and had no operations 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 Trust 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 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 $39,000 and $438,000, respectively. The
organizational expenses have been reimbursed by the Trust for the full
amount
<PAGE> 10
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- --------------------------------------------------------------------------------
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
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, 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 six months ended April 30, 1995 aggregated $-0- and
$4,887,850, 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 $12,000.
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 $5,952. At April 30, 1995, the Trust had an accrued pension
liability of $15,805 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. During the six months ended April
30, 1995, the Trust purchased and retired 194 shares of Series 1 and 151 shares
of Series 2 amounting to $9,7000,000 and $7,550,000, respectively.
<PAGE> 11
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>
260 1 4.375% 5/01/95 2.25% - 5.23%
240 2 4.50 5/03/95 1.00 - 6.30
600 3 4.45 5/01/95 3.43 - 4.45
</TABLE>
- ---------------
* As of April 30, 1995.
** For the six months ended April 30,1995.
Subsequent to April 30, 1995 and up through June 9, 1995, the Trust paid
dividends to the Series at rates ranging from 3.50% to 4.50% in the aggregate
amount of $266,779.
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, 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 (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 cost associated with 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 9.976%)**......................... (288,500) (2,885) (2,796,592)
----------- --------- -------------
Balance, April 30, 1995.............................. 12,081,413 $ 120,814 $ 169,673,601
========== ========= =============
</TABLE>
- ---------------
* Net of estimated offering costs of $438,000.
** The Trustees have voted to retire the shares purchased.
<PAGE> 12
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- --------------------------------------------------------------------------------
6. FEDERAL INCOME TAX STATUS -- At October 31, 1994, the Trust had net capital
loss carryovers of approximately $5,735,000 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
Declaration per
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>
8. SELECTED QUARTERLY FINANCIAL DATA --
<TABLE>
<CAPTION>
Quarters Ended
-----------------------------------------
4/30/95 1/31/95
------------------- ------------------
Per Per
Total* Share Total* Share
--------- ------- -------- -------
<S> <C> <C> <C> <C>
Total investment income................................................... $2,897 $0.24 $3,050 $0.25
Net investment income..................................................... 2,605 0.21 2,751 0.23
Net realized and unrealized gain (loss)................................... (16,789) (1.35) 30,377 2.50
</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>
<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 realized and unrealized loss................................................................. (1,190) (0.10)
</TABLE>
- ---------------
* Totals expressed in thousands.
+ For the period September 29, 1993 (commencement of operations) through October
31, 1993.
<PAGE> 13
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
For the period
six For the September
months year 29, 1993*
ended ended through
April 30, October October
1995** 31, 31,
(unaudited) 1994** 1993**
--------- --------- ---------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......... $ 10.62 $ 13.96 $ 14.06
--------- --------- ---------
Net investment income........................ 0.44 0.95 0.03
Net realized and unrealized gain (loss)...... 1.15 (3.24) (0.10)
--------- --------- ---------
Total from investment operations............. 1.59 (2.29) (0.07)
--------- --------- ---------
Less dividends and distributions from:
Net investment income...................... (0.38) (0.74) --
Common share equivalent of dividend paid to
preferred shareholders.................. (0.08) (0.18) --
--------- --------- ---------
Total dividends and distributions............ (0.46) (0.92) --
Offering costs charged against capital....... -- (0.13) (0.03)
--------- --------- ---------
Net asset value, end of period............... $ 11.75 $ 10.62 $ 13.96
========= ========= =========
Market value, end of period.................. $ 10.50 $ 9.75 $ 15.00
========= ========= =========
TOTAL INVESTMENT RETURN+..................... 11.79%(1) (30.89)% -- %(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..... $ 196,953 $ 203,662 $ 176,317
Ratios to average net assets of common
shareholders:
Total expenses............................. 0.88%(2) 0.93% 0.52%(2)
Net investment income before preferred
stock dividends......................... 7.97%(2) 7.63% 2.32%(2)
Preferred stock dividends.................. 1.52%(2) 1.43% N/A
Net investment income available to common
shareholders............................ 6.45%(2) 6.18% 2.55%(2)
Asset coverage on preferred shares at end of
period..................................... 358% 281% N/A
Portfolio turnover rate...................... 0% 20% 0%
</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 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
- --------------------------------------------------------------------------------
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> 14
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<PAGE> 15
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<PAGE> 16
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
Semiannual Report
April 30, 1995
