<PAGE>
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
Two World Trade Center,
New York, New York 10048
LETTER TO THE SHAREHOLDERS April 30, 1996
DEAR SHAREHOLDER:
During the first six months of InterCapital California Quality Municipal
Securities's current fiscal year, interest rates initially declined, but
reversed direction in February and began to move higher. Last year's
favorable bond market environment was created by proposals to achieve a
balanced federal budget within five to seven years and by continued easing of
Federal Reserve Board monetary policy. However, budget negotiations reached a
political impasse early in 1996 and federal offices were partially closed.
This had an adverse impact on bonds. Concerns also developed about an
increase in the pace of the economic recovery, which was marked by
unexpectedly strong job growth in March and rising commodity prices. The bond
market reacted to these developments by pushing yields sharply higher.
MUNICIPAL MARKET CONDITIONS
Long-term municipal revenue bond yields as tracked by The Bond Buyer Revenue
Bond Index * moved from 6.02 percent in October 1995 to a low of 5.63 percent
in January 1996. Interest rates subsequently began to rise in mid-February on
signs of stronger economic growth and renewed inflationary fears. The Index
yield reached 6.16 percent in April. Yields on one-year municipal notes
declined from 3.82 percent to 3.70 percent over the past six months. The
yield pickup for extending maturities from one-to-thirty years was 246 basis
points at the end of April.
The risk of flat-tax legislation had caused the ratio of Revenue Bond Index
yields to 30-year U.S. Treasury bond yields to rise from 85 to 94 percent
between March and September 1995. However, as the prospects of a flat tax
faded, the ratio improved to 92 percent by the end of April.
A declining ratio means that municipal bond prices have outperformed
- ------------
* 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 April 30, 1996, continued
U.S. Treasury prices. Over the previous eight year period prior to the
flat-tax debate, long-term municipal yields averaged 89 percent of U.S.
Treasury yields.
Municipal underwriting activity was fueled by the trend of lower interest
rates in 1995. Between November 1995 and April 1996, new issue volume
increased 45 percent versus the same period a year ago. Despite a resurgence
in underwriting, dealers have continued to withdraw from the municipal
business.
PERFORMANCE
The Trust's net asset value (NAV) declined from $12.70 to $12.27 per share
during the six-month period ended April 30, 1996. Based on this NAV change
plus reinvestment of tax-free dividends totaling $0.345 per share, the
Trust's total return was -0.32 percent. Over the same period, the Trust's
market price on the New York Stock Exchange declined from $10.875 to $10.50
per share. Based on this market price change and reinvestment of tax-free
dividends, the Trust's total return was -0.39 percent. The Trust began and
ended the period trading at a 14 percent discount to NAV. Undistributed net
investment income improved to $0.045 per share on April 30, 1996 versus
$0.032 per share six months ago.
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
(The chart below represents information which appears as a graphic
printed report for the Five Largest Sectors as of April 30, 1996.)
MUNICIPAL SECTORS PERCENT
- ----------------- -------
Other 29%
Water & Sewer 27%
Education 15%
Public Facilities 11%
Tax allocation 9%
Electric 9%
A pie chart reflecting the credit quality of the portfolio as rated by
Moody's or Standard & Poor's Credit Ratings of total long term investments as
of April 30, 1996.
CREDIT RATING PERCENT
- ------------- -------
Aaa or AAA 39%
Aa or AA 32%
A or A 29%
PORTFOLIO STRUCTURE
On April 30, 1996, the Trust had over $198 million in net assets diversified
among 12 long-term municipal sectors and 38 credits. The five largest sectors
represented 71 percent of net assets. The portfolio has consistently maintained
its investment grade quality with all of its long-term holdings rated "A" or
better. The average maturity and call protection of the Trust's long-term
portfolio were 23 and 7 years, respectively.
THE IMPACT OF LEVERAGING
As discussed in previous reports, the total income available for distribution
to common shareholders includes incremental income provided by the Trust's
outstanding Auction Rate
<PAGE>
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS April 30, 1996, continued
Preferred Shares (ARPS). 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 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.
ARPS yields ranged between 2.50 and 5.125 percent during the six-months ended
April 30, 1996. Over the same period, ARPS leverage contributed $0.03 per
share to common share earnings. As of April 30, 1996, $55 million in ARPS
were outstanding, which represented 28 percent of net assets.
LOOKING AHEAD
Tax-reduction proposals may receive additional publicity. However, the
balance between the supply of new issues and demand created by maturities and
calls for redemption should remain positive for the municipal market.
Long-term municipal securities currently yield 90 percent of the yield on
U.S. Treasury securities and may be expected to move in tandem with the
Treasury market.
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 six-month period ended
April 30, 1996, the Trust purchased and retired 285,500 shares of common
stock at a weighted average market discount of 14.89 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
PORTFOLIO OFINVESTMENTS April 30, 1996 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------------------------------------------------------------------- -------- ---------- --------------
<S> <C> <C> <C> <C>
CALIFORNIA EXEMPT MUNICIPAL BONDS (97.5%)
General Obligation (2.0%)
$ 4,000 California, Various Purpose Dtd 04/01/93 .............................. 5.90 % 04/01/23 $ 3,915,320
- ----------- --------------
Educational Facilities Revenue (14.5%)
6,000 California Educational Facilities Authority,
Carnegie Institute of Washington 1993 Ser A .......................... 5.60 10/01/23 5,595,000
1,500 Culinary Institute of America Ser 1993 (Connie Lee) .................. 5.30 10/01/23 1,312,680
2,500 Pepperdine University 1993 Ser A (MBIA) .............................. 5.50 06/01/19 2,338,825
4,465 St Mary's College of California Refg Ser 1993 ........................ 5.00 10/01/12 3,938,666
8,000 California Public Works Board, University of California Ser 1993 B ... 5.50 06/01/14 7,420,240
University of California, UCLA Central Chiller/Cogeneration
5,750 Refg Ser 1993 COPs ................................................... 5.50 11/01/14 5,328,410
3,000 Refg Ser 1993 COPs ................................................... 5.60 11/01/20 2,764,080
- ----------- --------------
31,215 28,697,901
- ----------- --------------
Electric Revenue (8.6%)
6,000 Los Angeles Department of Water & Power, Issue of 1993 ................ 5.375 09/01/23 5,395,020
8,375 Northern California Transmission Agency, California -Oregon
Transmission Refg Ser 1993 A (MBIA) .................................. 5.25 05/01/20 7,522,676
5,000 Southern California Public Power Authority, Mead -Phoenix 1994 Ser A
(AMBAC) .............................................................. 4.875 07/01/20 4,224,900
- ----------- --------------
19,375 17,142,596
- ----------- --------------
Hospital Revenue (6.3%)
4,000 Anaheim, Anaheim Memorial Hospital Association COPs (AMBAC) .......... 5.00 05/15/13 3,620,240
5,000 California Health Facilities Financing Authority, Kaiser Permanente
Ser 1985 ............................................................. 5.55 08/15/25 4,550,450
California Statewide Communities Development Authority,
2,000 Children's Hospital of Los Angeles Ser 1993 COPs (MBIA) ............. 6.00 06/01/13 2,047,240
2,500 Motion Picture & Television Fund COPs (AMBAC) ........................ 5.375 01/01/20 2,271,400
- ----------- --------------
13,500 12,489,330
- ----------- --------------
Industrial Development/Pollution Control Revenue (3.8%)
California Pollution Control Financing Authority, Pacific Gas &
8,000 Electric Co 1993 Ser B (AMT) .......................................... 5.85 12/01/23 7,554,160
- ----------
--------------
Mortgage Revenue - Multi-Family (2.7%)
Los Angeles Community Redevelopment Financing Authority,
2,155 Grand Central Square 1993 Ser A (AMT) ................................ 5.75 12/01/13 2,008,266
3,750 Grand Central Square 1993 Ser A (AMT) ................................ 5.85 12/01/26 3,297,937
- ----------- --------------
5,905 5,306,203
- ----------- --------------
Mortgage Revenue - Single Family (4.0%)
8,305 California Housing Finance Agency, Home 1993 Ser B .................... 5.65 08/01/14 7,948,882
- ----------- --------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
PORTFOLIO OFINVESTMENTS April 30, 1996 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------------------------------------------------------------------- -------- ---------- --------------
Public Facilities Revenue (10.8%)
$ 7,000 California Public Works Board, Corrections 1993 Ser D ................. 5.375% 06/01/12 $ 6,477,310
6,400 Los Angeles Convention & Exhibition Center Authority, 1993 Refg
Ser A (MBIA) ......................................................... 5.125 08/15/13 5,899,584
7,000 Los Angeles County Public Works Financing Authority, Multiple
Capital Project #IV (MBIA) ........................................... 5.25 12/01/16 6,360,690
3,000 Redding Joint Powers Financing Authority, 1993 Ser A .................. 5.50 01/01/13 2,694,240
- ----------- -------------
23,400 21,431,824
- ----------- -------------
Tax Allocation (8.8%)
6,870 Garden Grove Community Development Agency, Refg Issue of 1993 ........ 5.875 10/01/23 6,266,333
7,000 Rosemead Redevelopment Agency, Project #1 Ser 1993 A .................. 5.60 10/01/33 5,931,240
6,000 San Jose Redevelopment Agency, Merged Area Ser 1993 (MBIA) ........... 5.00 08/01/20 5,230,980
- ----------- -------------
19,870 17,428,553
- ----------- -------------
Transportation Facilities Revenue (6.6%)
5,000 Long Beach, Harbor Ser 1993 (AMT) ..................................... 5.00 05/15/10 4,552,000
7,000 Los Angeles County Metropolitan Transportation Authority, Sales
Tax Refg Ser 1993-A (MBIA) ........................................... 5.625 07/01/18 6,688,080
2,000 San Diego County Regional Transportation Commission, Sales Tax
1994 Ser A (FGIC) .................................................... 4.75 04/01/08 1,873,360
- ----------- -------------
14,000 13,113,440
- ----------- -------------
Water & Sewer Revenue (27.2%)
8,000 California Department of Water Resources, Central Valley Ser L ....... 5.50 12/01/23 7,372,640
7,250 Eastern Municipal Water District, Ser 1993 A COPs (FGIC) ............. 5.25 07/01/23 6,436,550
7,000 Los Angeles, Wastewater Refg Ser 1993-D (FGIC) ........................ 5.20 11/01/21 6,206,760
8,000 Los Angeles County Sanitation Districts Financing Authority, 1993 Ser
A .................................................................... 5.25 10/01/19 7,194,480
3,000 Marin County Municipal Water District, Ser 1993 ....................... 5.65 07/01/23 2,776,830
5,000 Metropolitan Water District of Southern California, Issue of 1992 .... 5.50 07/01/13 4,775,100
7,000 Moulton-Niguel Water District, 1993 COPs (AMBAC) ...................... 5.30 09/01/23 6,241,970
2,500 Rancho Water District Financing Authority, Refg Ser 1994 (AMBAC) ..... 5.00 08/15/14 2,221,875
4,000 Sacramento County Sanitation Districts Financing Authority, Ser 1993 . 5.00 12/01/16 3,513,360
8,000 San Diego Public Facilities Authority, Ser 1993 A ..................... 5.25 05/15/20 7,092,800
- ----------- -------------
59,750 53,832,365
- ----------- -------------
Other Revenue (2.2%)
5,000 California Statewide Communities Development Authority,
- -----------
The J Paul Getty Trust COPs .......................................... 5.00 10/01/23 4,307,250
-------------
212,320 TOTAL CALIFORNIA EXEMPT MUNICIPAL BONDS (Identified Cost $208,975,730) .................. 193,167,824
- ----------- --------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
PORTFOLIO OFINVESTMENTS April 30, 1996 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ---------------------------------------------------------------------- -------- ---------- ------------
CALIFORNIA EXEMPT SHORT-TERM MUNICIPAL OBLIGATION (0.8%)
$ 1,500 California Pollution Control Financing Authority, Shell Oil Co
- -----------
1991 Ser A (Demand 05/01/96) (Identified Cost $1,500,000) ........... 3.50*% 10/01/08 $ 1,500,000
------------
$213,820 TOTAL INVESTMENTS (Identified Cost $210,475,730) (a) ........................... 98.3% 194,667,824
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ................................. 1.7 3,384,565
----- ------------
NET ASSETS ..................................................................... 100.0% $198,052,389
===== ============
</TABLE>
- ------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross and net unrealized
depreciation was $15,807,906.
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
APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $210,475,730) ....................................... $194,667,824
Cash .................................................................. 56,296
Interest receivable ................................................... 3,493,580
Deferred organizational expenses ...................................... 18,815
Prepaid expenses and other assets ..................................... 25,431
--------------
TOTAL ASSETS ....................................................... 198,261,946
--------------
LIABILITIES:
Payable for:
Common shares of beneficial interest repurchased .................... 63,180
Investment management fee ........................................... 61,475
Accrued expenses and other payables ................................... 84,902
--------------
TOTAL LIABILITIES .................................................. 209,557
--------------
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, 11,654,713 shares outstanding) ....................... 165,144,018
Net unrealized depreciation ........................................... (15,807,906)
Accumulated undistributed net investment income ....................... 522,198
Accumulated net realized loss ......................................... (6,805,921)
--------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ....................... 143,052,389
--------------
TOTAL NET ASSETS ................................................... $198,052,389
==============
NET ASSET VALUE PER COMMON SHARE
($143,052,389 divided by 11,654,713 common shares outstanding) ...... $ 12.27
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ....................... $ 5,810,157
-------------
EXPENSES
Investment management fee ............. 363,871
Auction commission fees ............... 68,643
Professional fees ..................... 54,726
Transfer agent fees and expenses ..... 26,135
Shareholder reports and notices ...... 17,328
Trustees' fees and expenses ........... 15,742
Auction agent fees .................... 13,437
Registration fees ..................... 12,363
Custodian fees ........................ 5,406
Organizational expenses ............... 3,887
Other ................................. 12,945
-------------
TOTAL EXPENSES BEFORE EXPENSE
OFFSET ............................ 594,483
LESS: EXPENSE OFFSET ............... (5,326)
-------------
TOTAL EXPENSES AFTER EXPENSE OFFSET 589,157
-------------
NET INVESTMENT INCOME .............. 5,221,000
-------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss ..................... (58,605)
Net change in unrealized depreciation (5,513,501)
-------------
NET LOSS ........................... (5,572,106)
-------------
NET DECREASE .......................... $ (351,106)
=============
</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 SIX FOR THE YEAR
MONTHS ENDED ENDED OCTOBER
APRIL 30, 1996 31, 1995
- ---------------------------------------------- -------------- ----------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ......................... $ 5,221,000 $ 10,717,343
Net realized loss ............................. (58,605) (1,012,101)
Net change in unrealized depreciation ........ (5,513,501) 25,818,322
-------------- ----------------
NET INCREASE (DECREASE) .................... (351,106) 35,523,564
-------------- ----------------
DIVIDENDS FROM NET INVESTMENT INCOME:
Preferred ..................................... (998,513) (2,097,393)
Common ........................................ (4,077,827) (8,908,824)
-------------- ----------------
TOTAL ...................................... (5,076,340) (11,006,217)
-------------- ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Preferred ..................................... -- (17,250,000)
Common ........................................ (3,134,186) (4,315,688)
-------------- ----------------
TOTAL ...................................... (3,134,186) (21,565,688)
-------------- ----------------
TOTAL INCREASE (DECREASE) .................. (8,561,632) 2,951,659
NET ASSETS:
Beginning of period ........................... 206,614,021 203,662,362
-------------- ----------------
END OF PERIOD
(Including undistributed net investment
income of $522,198 and $377,538, respectively) $198,052,389 $206,614,021
============== ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 1996 (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. 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 by an outside
independent pricing service approved by the Trustees. The pricing service has
informed the Trust that in valuing the 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 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, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment;
<PAGE>
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued
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 -- Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Trust's common shares in
the amount of $39,000 which have been reimbursed 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.
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 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 proceeds from sales of portfolio securities, excluding short-term
investments, for the six months ended April 30, 1996 aggregated $3,050,113.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At April 30, 1996, the Trust had transfer agent fees
and expenses payable of approximately $11,000.
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 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, 1996 included in Trustees' fees and expenses in the
Statement of Operations amounted to $5,982. At April 30, 1996, the Trust had
an accrued pension liability of $27,424 which is included in accrued expenses
in the Statement of Assets and Liabilities.
<PAGE>
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued
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.
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 3.00 % 5/6/96 2.62%- 5.00 %
240 2 3.375 5/1/96 2.50 - 4.90
600 3 3.375 5/6/96 2.90 - 5.125
<FN>
- ------------
* As of April 30, 1996.
** For the six months ended April 30, 1996.
Subsequent to April 30, 1996 and up through June 7, 1996, the Trust paid
dividends to each of the Series 1 through 3 at rates ranging from 3.00% to
3.75% respectively, in the aggregate amount of $185,778.
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.
<PAGE>
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued
5. COMMON SHARES OF BENEFICIAL INTEREST
Transactions in common shares of beneficial interest were as follows:
</TABLE>
<TABLE>
<CAPTION>
CAPITAL PAID
IN EXCESS OF
SHARES PAR VALUE PAR VALUE
------------ ---------- --------------
<S> <C> <C> <C>
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
Treasury shares purchased and retired (weighted average discount 14.89%)* (285,500) (2,855) (3,131,331)
------------ ---------- --------------
Balance, April 30, 1996 .................................................. 11,654,713 $116,547 $165,027,471
============ ========== ==============
<FN>
- ------------
* 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 declared the following dividends from net investment income:
</TABLE>
<TABLE>
<CAPTION>
AMOUNT PER
DECLARATION DATE SHARE RECORD DATE PAYABLE DATE
- ---------------- ----------- -------------- ---------------
<S> <C> <C> <C>
April 23, 1996 $0.0575 May 3, 1996 May 17, 1996
May 28, 1996 $0.0575 June 7, 1996 June 21, 1996
</TABLE>
<PAGE>
INTERCAPITAL CALIFORNIA QUALITY MUNICIPAL SECURITIES
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a common share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED SEPTEMBER 29, 1993*
MONTHS ENDED ENDED OCTOBER 31, THROUGH OCTOBER 31,
APRIL 30, 1996** OCTOBER 31, 1995** 1994**++ 1993**
- ------------------------------------------------------ ---------------- ------------------ --------------- -------------------
<S> <C> <C> <C> <C>
(unaudited)
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..................$ 12.70 $ 10.62 $13.96 $14.06
---------------- ------------------ --------------- -------------------
Net investment income ................................. 0.44 0.88 0.95 0.03
Net realized and unrealized gain (loss) ............... (0.48) 2.07 (3.25) (0.10)
---------------- ------------------ --------------- -------------------
Total from investment operations ...................... (0.04) 2.95 (2.30) (0.07)
---------------- ------------------ --------------- -------------------
Less dividends from:
Net investment income ................................ (0.35) (0.74) (0.74) --
Common share equivalent of dividends paid to
preferred shareholders .............................. (0.09) (0.17) (0.18) --
---------------- ------------------ --------------- -------------------
Total dividends ....................................... (0.44) (0.91) (0.92) --
Anti-dilutive effect of acquiring treasury shares .... 0.05 0.04 0.01 --
Offering costs charged against capital ................ -- -- (0.13) (0.03)
---------------- ------------------ --------------- -------------------
Net asset value, end of period ........................$ 12.27 $ 12.70 $10.62 $13.96
================ ================== =============== ===================
Market value, end of period ...........................$ 10.50 $10.875 $9.75 $15.00
================ ================== =============== ===================
TOTAL INVESTMENT RETURN+ .............................. (0.39)%(1) 19.73% (30.89)% %(1)
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses before expense offset .................. 0.78%(2)(4) 0.84%(3) 0.93% 0.52%(2)
Net investment income before preferred stock dividends 6.83%(2) 7.57%(3) 7.63% 2.32%(2)
Preferred stock dividends ............................. 1.31%(2) 1.48% 1.43% N/A
Net investment income available to common shareholders 5.52%(2) 6.09% 6.18% 2.55%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ............... $198,052 $206,614 $203,662 $176,317
Asset coverage on preferred shares at end of period .. 360% 376% 281% N/A
Portfolio turnover rate ............................... --%(1) 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.
(4) The above annualized expense ratio would have been 0.77%, which reflects
0.01% effect for custody cash credits.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TRUSTEES
- -----------------------------------------------------------------------------
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
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.
INTERCAPITAL
CALIFORNIA
QUALITY
MUNICIPAL
SECURITIES
Semiannual Report
April 30, 1996
