<PAGE>
INTERCAPITAL NEW YORK 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
- ------------
* 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 Services, Inc.,
and AA+ to A- by Standard & Poor's Corp.
<PAGE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS October 31, 1995, continued
16 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 New York Quality Municipal
Securities (IQN) rose from $10.90 to $12.86 per share during the fiscal year
ended October 31, 1995. Based on this NAV change plus reinvestment of
tax-free dividends totaling $0.73 per share, the Trust's total return was
26.36 percent. Over the same period, IQN's market price on the New York Stock
Exchange appreciated 15.38 percent from $9.75 to $11.25 per share. Based on
this market price change and reinvestment of tax-free dividends, the Trust's
total return was 23.58 percent. IQN began the fiscal year trading at a 11
percent discount to NAV and closed at a 13 percent discount. Undistributed
net investment income totaled $0.053 per share on
October 31, 1995 versus $0.073 per share a year ago.
PORTFOLIO STRUCTURE
On October 31, 1995, IQN's long-term portfolio was diversified among 12
specific long-term municipal sectors and 26 credits. The three largest
sectors -- hospital, educational facilities and transportation
<PAGE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS October 31, 1995, continued
facilities revenue bonds -- represented 39 percent of the portfolio. The
average maturity and call protection of the Trust's
long-term holdings were 22 and 8 years, respectively.
Net assets exceeded $94 million.
The credit-quality ratings of the Trust's long-term
portfolio are illustrated on the right.
[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% Baa BBB
__________________________________________________________________________
25% A A
___________________________________________________________________________
18% Aaa AAA
___________________________________________________________________________
17% Aa AA
___________________________________________________________________________
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, $24 million in ARPS are
outstanding. This represents 25 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.
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
<PAGE>
InterCapital New York Quality Municipal Securities
LETTER TO THE SHAREHOLDERS October 31, 1995, continued
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 156,600 shares of common stock at a weighted average market discount
of 8.88 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 New York 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 NEW YORK 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 ........ 3,531,732
Withheld .. 87,258
</TABLE>
Michael Bozic
<TABLE>
<CAPTION>
<S> <C>
For ........ 3,525,096
Withheld .. 93,894
</TABLE>
ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS:
Charles A. Fiumefreddo
<TABLE>
<CAPTION>
<S> <C>
For ..........303
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 ....... 3,352,522
Against .. 79,275
Abstain .. 187,193
</TABLE>
(3) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS:
<TABLE>
<CAPTION>
<S> <C>
For ....... 3,477,727
Against .. 27,039
Abstain .. 114,224
</TABLE>
<PAGE>
INTERCAPITAL NEW YORK 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>
NEW YORK EXEMPT MUNICIPAL BONDS (97.1%)
General Obligation (10.6%)
New York City,
$ 3,000 1994 Ser C ............................................................. 5.50 % 10/01/08 $ 2,848,230
5,000 1994 Ser D ............................................................. 5.75 08/15/09 4,828,850
2,500 Puerto Rico, Pub Impr Refg Ser 1993 ..................................... 5.25 07/01/18 2,330,575
- ----------- ------------
10,500 10,007,655
- ----------- ------------
Educational Facilities Revenue (10.9%)
New York State Dormitory Authority,
4,000 City University Ser 1993 F ............................................. 5.50 07/01/12 3,782,680
2,000 New York University Ser A (MBIA) ....................................... 5.00 07/01/11 1,903,800
5,000 State University Ser C ................................................. 5.375 05/15/13 4,648,350
- ----------- ------------
11,000 10,334,830
- ----------- ------------
Electric Revenue (3.0%)
3,000 New York State Power Authority, General Purpose Ser CC .................. 5.25 01/01/18 2,809,560
- ----------- ------------
Hospital Revenue (17.2%)
2,000 New York State Dormitory Authority, Rochester Hospital - FHA Insured
Mtge ................................................................... 5.70 08/01/33 1,887,820
New York State Medical Care Facilities Finance Agency,
3,930 Hospital & Nursing Home - FHA Insured Mtge 1993 Ser B .................. 5.50 02/15/22 3,766,473
4,000 Hospital & Nursing Home - FHA Insured Mtge 1993 Ser A .................. 5.90 08/15/33 3,981,560
5,000 Presbyterian Hospital - FHA Insured Mtge Ser A ......................... 5.25 08/15/14 4,698,250
2,000 St Lukes-Roosevelt - FHA Insured Mtge Ser 1993 A ....................... 5.625 08/15/18 1,936,220
- ----------- ------------
16,930 16,270,323
- ----------- ------------
Industrial Development/Pollution Control Revenue (6.9%)
New York State Energy Research & Development Authority,
3,000 Consolidated Edison Co of New York Inc Refg Ser 1993-B ................. 5.25 08/15/20 2,732,910
3,000 New York State Electric & Gas Co Ser A (AMT) ........................... 5.95 12/01/27 2,828,460
1,000 New York State Electric & Gas Co Ser A (AMT) (MBIA) .................... 5.70 12/01/28 968,170
- ----------- ------------
7,000 6,529,540
- ----------- ------------
Mortgage Revenue - Multi-Family (3.1%)
3,000 New York City Housing Development Corporation, FHA Insured Mtge Ser B .. 5.85 05/01/26 2,908,830
- ----------- ------------
Mortgage Revenue - Single Family (3.9%)
4,000 New York State Mortgage Agency, Homeowner Ser 29 A ...................... 5.25 04/01/15 3,649,880
- ----------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
InterCapital New York 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>
Nursing & Health Related Facilities Revenue (7.8%)
$ 2,990 New York State Dormitory Authority, Department of Health Ser 1993 ...... 5.70 % 07/01/09 $ 2,934,147
New York State Medical Care Facilities Finance Agency,
2,000 Mental Health 1993 Ser F ............................................... 5.375 02/15/14 1,841,300
3,000 Mental Health 1993 Ser D ............................................... 5.25 08/15/23 2,653,110
- ----------- ------------
7,990 7,428,557
- ----------- ------------
Public Facilities Revenue (8.0%)
4,000 New York State Dormitory Authority, Court Facilities Ser A ............. 5.625 05/15/13 3,813,520
4,000 New York State Urban Development Corporation, Correctional Refg 1993 Ser 5.50 01/01/15 3,739,120
- ----------- ------------
8,000 7,552,640
- ----------- ------------
Tax Allocation (2.4%)
2,500 Grand Central Station District Managers Association Inc, Cap Impr
Refg Ser 1994 .......................................................... 5.25 01/01/22 2,272,150
- ----------- ------------
Transportation Facilities Revenue (10.9%)
1,000 Buffalo & Fort Erie Public Bridge Authority, Toll Bridge Ser 1995 (MBIA) 5.75 01/01/25 1,002,360
3,000 New York State Thruway Authority, Local Hwy & Bridge Ser 1993 .......... 5.125 04/01/08 2,774,790
3,000 Triborough Bridge & Tunnel Authority, Ser B ............................. 5.00 01/01/20 2,722,410
Puerto Rico Highway & Transportation Authority,
2,000 Refg Ser W ............................................................. 5.50 07/01/17 1,912,100
2,000 Refg Ser X ............................................................. 5.50 07/01/19 1,908,280
- ----------- ------------
11,000 10,319,940
- ----------- ------------
Water & Sewer Revenue (4.1%)
New York City Municipal Water Finance Authority,
2,000 1993 Ser A ............................................................. 5.50 06/15/11 1,952,780
2,000 1994 Ser B ............................................................. 5.50 06/15/19 1,893,720
- ----------- ------------
4,000 3,846,500
- ----------- ------------
Other Revenue (8.3%)
4,000 New York Local Government Assistance Corporation, Ser 1993 B Refg ...... 5.50 04/01/21 3,846,400
4,000 United Nations Development Corporation, Sr Lien 1992 Refg Ser A ........ 6.00 07/01/26 3,988,480
- ----------- ------------
8,000 7,834,880
- ----------- ------------
96,920 TOTAL NEW YORK EXEMPT MUNICIPAL BONDS (Identified Cost $95,378,126) ............................. 91,765,285
- ----------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
InterCapital New York 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>
NEW YORK EXEMPT SHORT-TERM MUNICIPAL OBLIGATION (1.3%)
$ 1,300 Port Authority of New York & New Jersey, Special Obligation Ser 2
- -----------
(Demand 11/01/95) (Identified Cost $1,300,000) ......................... 3.60*% 05/01/19 $ 1,300,000
------------
$98,220 TOTAL INVESTMENTS (Identified Cost $96,678,126) (a) .................................. 98.4% 93,065,285
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ....................................... 1.6 1,525,805
------- ------------
NET ASSETS ........................................................................... 100.0% $94,591,090
======= ============
</TABLE>
- ------------
AMT Alternative Minimum Tax.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes is $96,678,126;
the aggregate gross unrealized appreciation is $55,963 and the
aggregate gross unrealized depreciation is $3,668,804, resulting in
net unrealized depreciation of $3,612,841.
Bond Insurance:
MBIA Municipal Bond Investors Assurance Corporation.
<PAGE>
INTERCAPITAL NEW YORK 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 $96,678,126) ........................................ $93,065,285
Cash .................................................................. 67,810
Interest receivable ................................................... 1,515,379
Deferred organizational expenses ...................................... 20,374
Prepaid expenses and other assets ..................................... 22,853
-------------
TOTAL ASSETS ........................................................ 94,691,701
-------------
LIABILITIES:
Investment management fee payable ..................................... 28,915
Accrued expenses and other payables ................................... 71,696
-------------
TOTAL LIABILITIES ................................................... 100,611
-------------
NET ASSETS:
Preferred shares of beneficial interest (1,000,000 shares authorized
of
non-participating $.01 par value, 480 shares outstanding) ........... 24,000,000
-------------
Common shares of beneficial interest (unlimited shares authorized of
$.01 par value, 5,488,313 shares outstanding) ........................ 76,977,753
Net unrealized depreciation ........................................... (3,612,841)
Accumulated undistributed net investment income ....................... 288,778
Accumulated net realized loss ......................................... (3,062,600)
-------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ........................ 70,591,090
-------------
TOTAL NET ASSETS .................................................... $94,591,090
=============
NET ASSET VALUE PER COMMON SHARE
($70,591,090 divided by 5,488,313 common shares outstanding) ........ $ 12.86
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL NEW YORK 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 .......................... $ 5,462,116
------------
EXPENSES
Investment management fee ................ 316,829
Professional fees ........................ 105,713
Auction commission fees .................. 61,705
Transfer agent fees and expenses ........ 32,826
Shareholder reports and notices .......... 32,795
Auction agent fees ....................... 29,715
Trustees' fees and expenses .............. 22,484
Registration fees ........................ 17,749
Organizational expenses .................. 7,016
Custodian fees ........................... 2,964
Other .................................... 19,117
------------
TOTAL EXPENSES BEFORE EXPENSE OFFSET .. 648,913
LESS: EXPENSE OFFSET ................... (2,923)
------------
TOTAL EXPENSES AFTER EXPENSE OFFSET ... 645,990
------------
NET INVESTMENT INCOME .................. 4,816,126
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss ........................ (854,320)
Net change in unrealized depreciation ... 11,608,715
------------
NET GAIN ............................... 10,754,395
------------
NET INCREASE ............................. $15,570,521
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994
<S> <C> <C>
- ----------------------------------------------- ---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income .......................... $ 4,816,126 $ 5,277,930
Net realized loss .............................. (854,320) (2,208,280)
Net change in unrealized depreciation ......... 11,608,715 (15,009,593)
---------------- ----------------
NET INCREASE (DECREASE) ...................... 15,570,521 (11,939,943)
---------------- ----------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Preferred ...................................... (902,563) (944,798)
Common ......................................... (4,034,876) (4,087,093)
---------------- ----------------
TOTAL ........................................ (4,937,439) (5,031,891)
---------------- ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Preferred ...................................... (7,150,000) 31,150,000
Common ......................................... (1,563,275) (2,035,981)
---------------- ----------------
TOTAL ........................................ (8,713,275) 29,114,019
---------------- ----------------
TOTAL INCREASE ............................... 1,919,807 12,142,185
NET ASSETS:
Beginning of period ............................ 92,671,283 80,529,098
---------------- ----------------
END OF PERIOD
(Including undistributed net investment
income of $288,778 and $410,091, respectively) $94,591,090 $ 92,671,283
================ ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1995
1. ORGANIZATION AND ACCOUNTING POLICIES
InterCapital New York 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 New York 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 -- Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Trust's common shares in
the amount of $35,000 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 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 $946,250 and $5,257,727, 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 $5,600.
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 800 shares of
<PAGE>
InterCapital New York Quality Municipal Securities
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued
Auction Rate Preferred Shares ("Preferred Shares") consisting of 400 shares
each of Series 1 and 2 for gross total proceeds of $40,000,000. 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 83 shares of Series 1 and 60 shares of Series 2 in the
amounts of $4,150,000 and $3,000,000, respectively.
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
RESET RANGE OF DIVIDEND
SHARES* SERIES RATE* DATE RATES**
- --------- -------- ----------- ---------- ------------------
<S> <C> <C> <C> <C>
260 1 3.90% 11/06/95 2.25% - 5.23%
220 2 3.60 11/02/95 2.90 - 6.00
</TABLE>
- ------------
* As of October 31, 1995.
** For the year ended October 31, 1995.
Subsequent to October 31, 1995 and up through December 7, 1995, the Trust
paid dividends to each Series at rates ranging from 3.40% to 3.90% in the
aggregate amount of $94,279.
The Trust is subject to certain restrictions relating to the preferred
shares. Failure to comply with these restrictions could preclude the Trust
from declaring any distributions to common shareholders or purchasing common
shares and/or could trigger the mandatory redemption of preferred shares at
liquidation value.
The preferred shares, which are entitled to one vote per share, generally
vote with the common shares but vote separately as a class to elect two
Trustees and on any matters affecting the rights of the preferred shares.
<PAGE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued
5. COMMON SHARES OF BENEFICIAL INTEREST
Transactions in common shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL PAID
PAR IN EXCESS OF
SHARES VALUE PAR VALUE
----------- --------- -------------
<S> <C> <C> <C>
Balance, October 31, 1993 ...................................................... 5,757,113 $57,571 $80,519,438
Offering costs associated with the initial public offering of the common shares -- -- 45,384
Offering costs and underwriting discounts associated with the issuance of
preferred shares .............................................................. -- -- (818,946)
Treasury shares purchased and retired (weighted average discount 6.82%)* ...... (112,200) (1,122) (1,261,297)
----------- --------- -------------
Balance, October 31, 1994 ...................................................... 5,644,913 56,449 78,484,579
Treasury shares purchased and retired (weighted average discount 8.88%)* ...... (156,600) (1,566) (1,561,709)
----------- --------- -------------
Balance, October 31, 1995 ...................................................... 5,488,313 $54,883 $76,922,870
=========== ========= =============
</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 $3,062,000 of which $2,208,000 will be available through
October 31, 2002 and $854,000 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 $0.06 November 10, 1995 November 24, 1995
November 28, 1995 $0.06 December 8, 1995 December 22, 1995
</TABLE>
<PAGE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued
8. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
-------- ------- -------- ------- -------- ------- -------- -------
Total investment income .......... $ 1,391 $0.25 $ 1,338 $ 0.24 $ 1,333 $ 0.24 $ 1,400 $ 0.25
Net investment income ............ 1,222 0.22 1,186 0.21 1,176 0.22 1,232 0.22
Net realized and unrealized gain 2,922 0.55 1,636 0.32 4,120 0.74 2,076 0.37
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
--------- -------- -------- ------- ---------- -------- -------- -------
Total investment income ......... $1,588 $ 0.28 $ 1,573 $ 0.28 $ 1,604 $ 0.28 $ 1,291 $ 0.22
Net investment income ........... 1,398 0.24 1,380 0.24 1,404 0.25 1,096 0.19
Net realized and unrealized gain
(loss) ........................ (7,347) (1.27) 1,027 0.19 (13,029) (2.27) 2,131 0.37
</TABLE>
- ------------
* Amounts in thousands.
<PAGE>
INTERCAPITAL NEW YORK 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 PERIOD
FOR THE YEAR FOR THE YEAR SEPTEMBER 29, 1993*
ENDED ENDED THROUGH
OCTOBER 31, 1995** OCTOBER 31, 1994** OCTOBER 31, 1993**
- -------------------------------------------- ---------------------- ---------------------- -----------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $10.90 $ 13.99 $14.06
---------------------- ---------------------- -----------------------
Net investment income 0.87 0.92 0.03
Net realized and unrealized gain (loss) 1.98 (2.98) (0.04)
---------------------- ---------------------- -----------------------
Total from investment operations 2.85 (2.06) (0.01)
---------------------- ---------------------- -----------------------
Less dividends from:
Net investment income (0.73) (0.72) --
Common share equivalent of dividends paid
to preferred shareholders (0.16) (0.17) --
---------------------- ---------------------- -----------------------
Total dividends (0.89) (0.89) --
Offering costs charged against capital -- (0.14) (0.06)
---------------------- ---------------------- -----------------------
Net asset value, end of period $12.86 $ 10.90 $13.99
====================== ====================== =======================
Market value, end of period $11.25 $ 9.75 $15.25
====================== ====================== =======================
TOTAL INVESTMENT RETURN+ 23.58% (32.18)% 1.67% (1)
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS:
Total expenses before expense offset 0.99%(3) 1.08% 0.67%(2)
Net investment income before preferred stock
dividends 7.31%(3) 7.31% 2.55%(2)
Preferred stock dividends 1.37% 1.31% N/A
Net investment income available to common
shareholders 5.94% 6.00% 2.55%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $94,591 $92,671 $80,529
Asset coverage on preferred shares at end of
period 394% 297% N/A
Portfolio turnover rate 1% 17% -- %(1)
<FN>
- ------------
* Commencement of operations.
** The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total investment return is based upon the current market value on the
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.
(1) Not annualized.
(2) Annualized.
(3) The above expense and net investment income ratios would have been
0.98% and 7.31%, respectively, which reflects 0.01%
effect for custody cash credits.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF INTERCAPITAL NEW YORK 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 New
York 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 7, 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: $0.73 to the common shareholders,
$484 to Series 1 preferred shareholders and $419 to Series 2 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
NEW YORK
QUALITY
MUNICIPAL
SECURITIES
ANNUAL REPORT
OCTOBER 31, 1995
