<PAGE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
Strong economic growth in the fourth quarter of 1993 and a shift in Federal
Reserve Board monetary policy in February of 1994 caused the fixed-income
markets to reverse direction and led to the sharpest increase in interest rates
in more than six years. At the beginning of the year, market concerns about
inflation developed as the economy approached full employment and commodity
prices moved upward. The Federal Reserve Board responded by tightening monetary
policy. Since early February, the central bank has raised the federal-funds rate
- -- the interest rate banks charge each other for overnight loans -- 250 basis
points from 3.00 percent to 5.50 percent in six separate moves through November.
Between May and November, the discount rate -- the interest rate the Federal
Reserve charges member banks for loans -- increased 175 basis points to 4.75
percent.
During InterCapital New York Quality Municipal Securities' (NYSE symbol:
IQN) fiscal year ended October 31, 1994, long-term municipal bond yields, as
measured by THE BOND BUYER Revenue Bond Index,* rose 139 basis points from 5.56
percent to 6.95 percent. In February and March yields jumped 89 basis points
from 5.50 percent to 6.39 percent in response to the Federal Reserve Board's
initial tightening and subsequent selling pressure. A semblance of stability
returned to the municipal bond market between June and August. After Labor Day,
however, continued economic growth, aggressive tax-loss selling, heavy
mutual-fund redemptions and excessive dealer inventory led to further municipal
market deterioration. The total yield increase of 139 basis points during the
fiscal year was equivalent to a 17 percent price decline for a 30-year municipal
bond. One-third of this price decline occurred in September and October.
The municipal market was also influenced by supply and demand conditions.
New-issue underwriting totaled a record $290 billion in 1993. The pace of
new-issue activity over the first 10 months of 1994, however, slowed 44 percent.
The estimated issuance for 1994 is $160 billion. By way of comparison, bond
maturities and calls for redemption are expected to reach $190 billion this year
resulting in a reduction in the amount of municipal debt outstanding. This
scarcity would normally be expected to improve the relative performance of
municipal bonds under stable-to-improving interest rate conditions.
PERFORMANCE
The Trust's net asset value (NAV) declined from $13.99 to $10.90 per share
during the fiscal year ended October 31, 1994. Based on this change and
reinvestment of tax-free dividends totaling $0.715 per share, the Trust's total
return for the fiscal year was -17.36 percent. Concurrently, the Trust's market
price on the New York Stock Exchange declined from $15.25 to $9.75 per share.
Based on this market change and reinvestment of dividends, the Trust's total
return for the fiscal year was -32.18 percent. The Trust began the fiscal year
trading at a 9.01 percent premium to NAV and closed at a 10.6 percent discount
to NAV.
- ----------
* THE BOND BUYER REVENUE Bond Index is an arithmetic average of the yields of 25
selected municipal revenue bonds with 30-year maturities. Credit ratings of
these bonds range from Aa1 to Baa1 by Moody's and AA+ to A- by Standard &
Poor's.
<PAGE>
PORTFOLIO STRUCTURE
As of October 31, 1994, the portfolio's long-term investments were
diversified among 13 municipal sectors and 25 credits. The three largest sectors
were hospital revenue, general obligation and educational facilities revenue
bonds, representing 38 percent of net assets. The average maturity and call
protection of the Trust's long-term holdings was 23 years and 9 years,
respectively. Bonds subject to the alternative minimum tax (AMT) represented
approximately 5 percent of net assets. At the end of the period, the Trust had
net assets in excess of $92 million.
The credit-quality ratings of the Trust's long-term portfolio as of October
31, 1994 are summarized below:
<TABLE>
<CAPTION>
MOODY'S OR STANDARD & POOR'S RATING PERCENT
- ----------------------------------------------------------------- -----------
<S> <C>
Aaa or AAA....................................................... 21%
Aa or AA......................................................... 20
A or A........................................................... 29
Baa or BBB....................................................... 30
</TABLE>
THE IMPACT OF LEVERAGING
As reported previously, the Trust's common shares are leveraged. Leverage
was 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 were 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 costs of the ARPS
(yield plus operating and remarketing expenses). Although rising short-term
interest rates have narrowed the yield spread this year the ARPS continue to
provide positive incremental income to common shareholders.
The leveraged capital structure of closed-end municipal bond funds
additionally impacts NAV. ARPS normally account for one-third of a 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. The common
stock's NAV per share reflects the full price change of the portfolio's
investments since the value of the preferred shares does not fluctuate.
As the bond market has eroded, the degree of leverage and volatility has
increased. The purchase and retirement of ARPS counteracts this trend. During
the fiscal year, IQN purchased and retired $9 million in par amount of ARPS, so
that $31 million in ARPS remains outstanding. Additional ARPS purchases may
occur if the degree of leverage increases or ARPS profitability (spread)
declines significantly.
DIVIDEND RESERVES
At the end of the fiscal year, IQN had undistributed net investment income
of $0.073 per share available for future distributions. This dividend reserve or
"cushion" helped sustain the Trust's current monthly dividend. Higher yields in
future ARPS auctions and ARPS retirements may further erode the cushion.
Declines in the dividend reserve may cause the Trust to adjust the common share
dividend.
LOOKING AHEAD
The overall direction of interest rates will primarily be determined by the
strength of the economy, the trend of inflation and the Federal Reserve Board's
responses. These conditions may continue to move interest rates higher through
mid-1995. Investor demand for municipal securities should be
<PAGE>
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 determine the Trust's future level of income and
influence the direction of the common stock market price.
The Trust's procedure for reinvestment of all dividends and distributions on
common shares is to purchase in the open market. This method helps to support
the market value of the Trust's shares. In addition, the Trustees have approved
a procedure whereby the Trust, when appropriate, purchases 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. 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. Over the fiscal year, the Trust purchased 112,200 shares of common
stock at a weighted average discount of 6.8 percent.
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,
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ------------- ---------- ----------- -------------
<C> <S> <C> <C> <C>
NEW YORK EXEMPT MUNICIPAL BONDS (92.0%)
GENERAL OBLIGATION (11.6%)
New York City,
$ 5,000 1994 Ser C.................. 5.50 % 10/ 1/08 $ 4,335,150
5,000 1994 Ser D.................. 5.75 8/15/09 4,403,800
2,500 Puerto Rico, Pub Impr Refg Ser
1993........................ 5.25 7/ 1/18 2,016,875
-------------
- -------------
10,755,825
12,500
-------------
- -------------
EDUCATIONAL FACILITIES REVENUE (9.9%)
New York State Dormitory
Authority,
4,000 City University Ser 1993
F......................... 5.50 7/ 1/12 3,378,720
2,000 New York University Ser A
(MBIA Insured)............ 5.00 7/ 1/11 1,672,000
5,000 State University Ser C...... 5.375 5/15/13 4,131,400
-------------
- -------------
9,182,120
11,000
-------------
- -------------
ELECTRIC REVENUE (3.1%)
3,500 New York State Power
Authority, Gen Purpose Ser
CC.......................... 5.25 1/ 1/18 2,839,865
-------------
- -------------
HOSPITAL REVENUE (16.5%)
2,000 New York State Dormitory
Authority, Rochester
Hospital - FHA Insured
Mtge........................ 5.70 8 / 1/33 1,649,580
New York State Medical Care
Facilities Finance Agency,
5,000 Hospital & Nursing Home -
FHA Insured Mtge 1993 Ser
B......................... 5.50 2/15/22 4,133,550
4,000 Hospital & Nursing Home -
FHA Insured Mtge 1993 Ser
A......................... 5.90 8/15/33 3,433,120
5,000 Presbyterian Hospital - FHA
Insured Mtge Ser A........ 5.25 8/15/14 4,205,950
2,225 St Lukes-Roosevelt - FHA
Insured Mtge Ser 1993 A... 5.625 8/15/18 1,913,900
-------------
- -------------
15,336,100
18,225
-------------
- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (8.2%)
New York State Energy Research
& Development Authority,
4,000 Consolidated Edison Co of
New York Inc Refg Ser
1993-B.................... 5.25 8/15/20 3,157,080
3,600 New York State Electric &
Gas Co Ser A (AMT)........ 5.95 12/ 1/27 2,992,140
1,750 New York State Electric &
Gas Co Ser A (AMT) (MBIA
Insured).................. 5.70 12/ 1/28 1,450,173
-------------
- -------------
7,599,393
9,350
-------------
- -------------
MORTGAGE REVENUE - MULTI-FAMILY (2.8%)
3,000 New York City Housing
Development Corporation, -
FHA Insured Mtge Ser B...... 5.85 5/ 1/26 2,553,450
-------------
- -------------
MORTGAGE REVENUE - SINGLE FAMILY (3.6%)
4,000 New York State Mortgage
Agency, Homeowner Ser 29
A........................... 5.25 4/ 1/15 3,301,640
-------------
- -------------
NURSING & HEALTH RELATED FACILITIES REVENUE (7.1%)
2,990 New York State Dormitory
Authority, Department of
Health Ser 1993............. 5.70 7/ 1/09 2,700,239
New York State Medical Care
Facilities Finance Agency,
2,000 Mental Health 1993 Ser F.... 5.375 2/15/14 1,629,400
3,000 Mental Health 1993 Ser D.... 5.25 8/15/23 2,272,650
-------------
- -------------
6,602,289
7,990
-------------
- -------------
PUBLIC FACILITIES REVENUE (7.2%)
4,000 New York State Dormitory
Authority, Court Facilities
Ser A....................... 5.625 5/15/13 3,415,120
4,000 New York State Urban
Development Corporation,
Correctional
Refg 1993 Ser............... 5.50 1/ 1/15 3,307,520
-------------
- -------------
6,722,640
8,000
-------------
- -------------
</TABLE>
<PAGE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ------------- ---------- ----------- -------------
<C> <S> <C> <C> <C>
TAX ALLOCATION (2.1%)
$ 2,500 Grand Central Station District
Managers Association Inc,
Cap Impr Refg Ser 1994...... 5.25 % 1/ 1/22 $ 1,951,050
-------------
- -------------
TRANSPORTATION FACILITIES REVENUE (8.9%)
3,000 New York State Thruway
Authority, Local Hwy &
Bridge Ser 1993............. 5.125 4/ 1/08 2,564,490
3,000 Triborough Bridge & Tunnel
Authority, Ser B............ 5.00 1/ 1/20 2,329,230
Puerto Rico Highway &
Transportation Authority,
2,000 Refg Ser W.................. 5.50 7/ 1/17 1,665,260
2,000 Refg Ser X.................. 5.50 7/ 1/19 1,651,740
-------------
- -------------
8,210,720
10,000
-------------
- -------------
WATER & SEWER REVENUE (3.6%)
New York City Municipal Water
Finance Authority,
2,000 1993 Ser A.................. 5.50 6/15/11 1,741,380
2,000 1993 Ser B.................. 5.50 6/15/19 1,643,880
-------------
- -------------
3,385,260
4,000
-------------
- -------------
OTHER REVENUE (7.4%)
4,000 New York Local Government
Assistance Corporation, Ser
1993 B Refg................. 5.50 4/ 1/21 3,306,560
4,000 United Nations Development
Corporation, Sr Lien 1992
Refg Ser A.................. 6.00 7/ 1/26 3,543,320
-------------
- -------------
6,849,880
8,000
-------------
- -------------
102,065 TOTAL NEW YORK EXEMPT MUNICIPAL BONDS (IDENTIFIED COST
$100,511,788)......................................... 85,290,232
-------------
- -------------
NEW YORK EXEMPT SHORT-TERM MUNICIPAL OBLIGATION (3.8%)
3,500 New York City Municipal
Water Finance Authority,
1994 Ser C
(FGIC Insured) (Tender
11/1/94) (Identified Cost
$3,500,000)............... 3.60* 6/15/23 3,500,000
-------------
- -------------
$105,565 TOTAL INVESTMENTS (IDENTIFIED
COST $104,011,788)(A)...................... 95.8% 88,790,232
- -------------
- -------------
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES................................ 4.2 3,881,051
---------- -----------
NET ASSETS................................... 100.0% $92,671,283
---------- -----------
---------- -----------
<FN>
- ----------------
AMT ALTERNATIVE MINIMUM TAX.
* VARIABLE OR FLOATING RATE SECURITY. COUPON RATE SHOWN REFLECTS CURRENT
RATE.
(A) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $104,011,788; THE
AGGREGATE GROSS AND NET UNREALIZED DEPRECIATION IS $15,221,556.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $104,011,788) (Note
1)...................................... $ 88,790,232
Cash...................................... 188,279
Receivable for:
Investments sold........................ 2,537,802
Interest................................ 1,582,953
Deferred organizational expenses (Note
1)...................................... 27,390
Prepaid expenses and other assets......... 8,611
-------------
TOTAL ASSETS...................... 93,135,267
-------------
LIABILITIES:
Payable for:
Shares of beneficial interest purchased:
Preferred............................. 250,000
Common................................ 117,716
Investment management fee (Note 2)...... 29,294
Accrued expenses (Note 3)................. 66,974
-------------
TOTAL LIABILITIES................. 463,984
-------------
NET ASSETS:
Preferred shares of beneficial interest,
(1,000,000 shares authorized of
nonparticipating $.01 par value, 623
shares outstanding) (Note 4)............ 31,150,000
-------------
Common shares of beneficial interest
(unlimited shares authorized of $.01 par
value, 5,644,913 shares outstanding)
(Note 5)................................ 78,541,028
Net unrealized depreciation on
investments............................. (15,221,556)
Accumulated undistributed net investment
income.................................. 410,091
Accumulated net realized loss on
investments............................. (2,208,280)
-------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS.................... 61,521,283
-------------
TOTAL NET ASSETS.................. $ 92,671,283
-------------
-------------
NET ASSET VALUE PER COMMON SHARE,
($61,521,283 divided by 5,644,913 common
shares outstanding).....................
$10.90
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME......................... $ 6,057,026
-------------
EXPENSES
Investment management fee (Note 2).... 380,729
Professional fees..................... 153,073
Auction commission fees............... 88,317
Transfer agent fees and expenses (Note
3).................................. 38,890
Auction agent fees.................... 32,000
Shareholder reports and notices....... 27,017
Trustees' fees and expenses........... 18,900
Registration fees..................... 18,013
Organizational expenses (Note 1)...... 6,997
Other................................. 15,160
-------------
TOTAL EXPENSES.................... 779,096
-------------
NET INVESTMENT INCOME........... 5,277,930
-------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS (Note 1):
Net realized loss on investments...... (2,208,280)
Net change in unrealized depreciation
on investments...................... (15,009,593)
-------------
NET LOSS ON INVESTMENTS........... (17,217,873)
-------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... $ (11,939,943)
-------------
-------------
<PAGE>
</TABLE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
OCTOBER 31,
1994
-------------
FOR
THE
PERIOD
SEPTEMBER
29, 1993
THROUGH
OCTOBER
31,
1993
(NOTE
1)
--
INCREASE (DECREASE) IN NET ASSETS:
<S> <C> <S> <C> <C>
Operations:
Net investment income.......................................... $ 5,277,930 $ 164,052
Net realized loss on investments............................... (2,208,280) --
Net change in unrealized depreciation on investments........... (15,009,593) (211,963)
----------------- -------------
Net decrease in net assets resulting from operations......... (11,939,943) (47,911)
----------------- -------------
Dividends to preferred shareholders from net investment income... (944,798) --
Dividends to common shareholders from net investment income...... (4,087,093) --
----------------- -------------
Total dividends.............................................. (5,031,891) --
----------------- -------------
Net increase (decrease) from transactions in shares of beneficial
interest
(Notes 4 & 5):
Common......................................................... (2,035,981) 80,477,000
Preferred...................................................... 31,150,000 --
----------------- -------------
Total transactions........................................... 29,114,019 80,477,000
----------------- -------------
Total increase............................................... 12,142,185 80,429,089
NET ASSETS:
Beginning of period.............................................. 80,529,098 100,009
----------------- -------------
END OF PERIOD (including undistributed net investment income of
$410,091 and $164,052, respectively)............................ $ 92,671,283 $ 80,529,098
----------------- -------------
----------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 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") for $100,009. 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 on the identified cost
method. The Trust amortizes premiums and 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 AND OFFERING EXPENSES--The Investment Manager paid the
organizational and offering expenses of the Trust's common shares in the
amounts of $35,000 and $322,616, respectively, and paid $218,946 in offering
expenses of the Trust's preferred shares. The organizational
<PAGE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
expenses have been reimbursed by the Trust for the full amount thereof. Such
expenses have been deferred and are being amortized by the straight-line
method over a period not to exceed five years from the commencement of
operations. Offering expenses 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, 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, 1994 aggregated $77,384,138 and
$16,223,719, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At October 31, 1994, the Trust had transfer agent fees
and expenses payable of approximately $6,000.
Dean Witter Distributors Inc., the Trust's principal underwriter and an
affiliate of the Investment Manager, has informed the Trust that it received
$600,000 in underwriting discounts and commissions in connection with the
offering of the preferred shares.
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 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. During the year ended October 31,
1994, the Trust purchased and retired 57 shares of Series 1 and 120 shares of
Series 2 in the amounts of $2,850,000 and $6,000,000, respectively.
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
RESET RANGE OF
SHARES* SERIES RATE* DATE DIVIDEND RATES**
---------- ---------- ----- ------ ----------------
<S> <C> <C> <C> <C>
343 1 2.40 % 11/7/94 1.50% - 3.39%
280 2 3.30 11/3/94 1.50 - 3.30
<FN>
- ----------
* AS OF OCTOBER 31, 1994.
** FOR THE YEAR ENDED OCTOBER 31, 1994.
</TABLE>
<PAGE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Subsequent to October 31, 1994 and up through December 5, 1994, the Trust
paid dividends to each of Series 1 and 2 at rates ranging from 2.25% to 2.80%
and 2.90% to 3.522%, respectively, in the aggregate amount of $78,941.
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.
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*................. 5,000,000 50,000 69,882,000
Shares issued on October 12, 1993 and
October 27, 1993 to cover
over-allotment......................... 750,000 7,500 10,537,500
---------- --------- -----------
Balance, October 31, 1993................ 5,757,113 57,571 80,519,438
Adjustment to estimated 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
---------- --------- -----------
---------- --------- -----------
<FN>
- ---------
* NET OF ESTIMATED OFFERING COSTS OF $368,000.
** THE TRUSTEES HAVE VOTED TO RETIRE THE SHARES PURCHASED.
</TABLE>
6. FEDERAL INCOME TAX STATUS--At October 31, 1994, the Trust had net capital
loss carryovers of approximately $2,208,000 all of which will be available
through October 31, 2002, 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>
<CAPTION>
DECLARATION AMOUNT PER RECORD PAYABLE
DATE SHARE DATE DATE
----------------- ---------- ----------------- -----------------
<S> <C> <C> <C>
November 1, 1994 $0.065 November 11, 1994 November 25, 1994
November 29, 1994 $0.065 December 9, 1994 December 23, 1994
</TABLE>
<PAGE>
INTERCAPITAL NEW YORK QUALITY MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
8. SELECTED QUARTERLY FINANCIAL DATA--(UNAUDITED)
<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....... 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) on investments... (7,347) (1.27) 1,027 0.19 (13,029) (2.27) 2,131 0.37
</TABLE>
<TABLE>
<CAPTION>
QUARTER
ENDED*
-------------
10/31/93**
-------------
PER
TOTAL SHARE
------ -----
<S> <C> <C>
Total investment income......................................................... 207 0.04
Net investment income........................................................... 164 0.03
Net realized and unrealized loss on investments................................. (212) (0.04)
<FN>
- ----------
* TOTALS EXPRESSED IN THOUSANDS OF DOLLARS.
** FOR THE PERIOD SEPTEMBER 29, 1993 (COMMENCEMENT OF OPERATIONS) THROUGH
OCTOBER 31, 1993.
</TABLE>
<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
SEPTEMBER 29,
1993*
FOR THE YEAR THROUGH
ENDED OCTOBER 31,
OCTOBER 31,1994** 1993**
----------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $13.99 $14.06
----------------- -----------------
Net investment income................... 0.92 0.03
Net realized and unrealized loss on
investments........................... (2.98) (0.04)
----------------- -----------------
Total from investment operations........ (2.06) (0.01)
----------------- -----------------
Less dividends and other charges:
Net investment income................. (0.72) --
Common share equivalent of dividends
paid to preferred
shareholders........................ (0.17) --
Offering costs charged against
capital.............................. (0.14) (0.06)
----------------- -----------------
Total dividends and other charges....... (1.03) (0.06)
----------------- -----------------
Net asset value, end of period.......... $10.90 $13.99
----------------- -----------------
----------------- -----------------
Market value, end of period............. $9.75 $15.25
----------------- -----------------
----------------- -----------------
TOTAL INVESTMENT RETURN+................ (32.18)% 1.67%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)............................ $ 92,667 $ 80,529
Ratios to average net assets of common
shareholders:
Expenses.............................. 1.08% 0.67%(2)
Net investment income before preferred
stock dividends...................... 7.31% 2.55%(2)
Preferred stock dividends............. 1.31% N/A
Net investment income available to
common shareholders.................. 6.00% 2.55%(2)
Asset coverage on preferred shares at
end of period......................... 297% N/A
Portfolio turnover rate................. 17% 0%(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 AND DISTRIBUTIONS, IF ANY, 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.
</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, 1994, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for the year 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 owned at October 31, 1994 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
New York, New York
December 5, 1994
1994 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended October 31, 1994, the Trust paid the following per share
amounts from tax-exempt income; $0.715 to the common shareholders $1,231 to
Series 1 and 2 preferred shareholders.
<PAGE>
TRUSTEES
- -------------------------------------------------
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo INTERCAPITAL
Edwin J. Garn NEW YORK
John R. Haire QUALITY
Dr. Manuel H. Johnson MUNICIPAL
Paul Kolton SECURITIES
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
Annual Report
October 31, 1994
