<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1997
Two World Trade Center, New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the semi-annual report on the operations of
InterCapital California Insured Municipal Income Trust (IIC) for the period
ended April 30, 1997.
Economic growth moderated during the third quarter of 1996, causing
fixed-income yields to move lower through November. However, an acceleration
of economic activity led by consumer spending developed in the fourth quarter
of 1996 and continued into the first quarter of 1997. This contributed to
rising interest rates between December and April. On March 25, 1997, the
Federal Reserve Board raised the federal-funds rate 25 basis points to 5.50
percent in a preemptive move against a possible acceleration in the rate of
inflation. Subsequently, the fixed-income markets began to anticipate the
possibility of additional rate hikes by the Fed.
MUNICIPAL MARKET CONDITIONS
Municipal yields followed the trend of Treasury yields, but were less
volatile. Long-term insured revenue bond yields moved as low as
BOND YIELDS 1994-1997
<TABLE>
<CAPTION>
Insured Municipal
30-Year Insured Revenue Yields
Municipal 30-year U.S. as a Percentage of
Revenue Yields Treasury Yields U.S. Treasury Yields
<S> <C> <C> <C>
5.45 6.35 0.8586
Jan '94 5.29 6.24 0.8481
5.64 6.66 0.8468
6.19 7.09 0.8728
6.24 7.31 0.854
6.23 7.43 0.8387
6.31 7.61 0.8293
6.15 7.4 0.8314
6.17 7.45 0.828
6.42 7.82 0.8212
6.66 7.97 0.8356
6.99 8 0.8738
6.65 7.88 0.8438
Jan '95 6.42 7.7 0.834
6.12 7.44 0.8222
6.07 7.43 0.8167
6.05 7.34 0.8245
5.84 6.65 0.8784
6 6.62 0.9066
5.99 6.85 0.875
5.98 6.65 0.8997
5.97 6.5 0.9184
5.79 6.33 0.915
5.61 6.13 0.9151
5.49 5.95 0.923
Jan '96 5.42 6.03 0.8989
5.55 6.47 0.8577
5.89 6.67 0.8835
5.94 6.91 0.8601
5.99 6.99 0.8571
5.86 6.87 0.8529
5.77 6.97 0.8278
5.82 7.12 0.8176
5.71 6.92 0.8248
5.6 6.64 0.8431
5.45 6.35 0.8583
5.56 6.64 0.8372
Jan '97 5.63 6.79 0.8293
5.53 6.8 0.8129
5.83 7.1 0.8216
5.74 6.96 0.8251
</TABLE>
Source: Bloomberg L.P.
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1997, continued
5.45 percent in November 1996, before rising to 5.75 percent in April 1997.
Similarly, yields on one-year municipal notes moved from 3.70 to 3.95 percent
over the past six months. The yield curve pick-up for extending maturities
from 1 to 30 years increased to 180 basis points.
The ratio of 30-year insured revenue bond yields to 30-year U.S. Treasury
yields declined from 86 percent at the end of October 1996 to 82 percent in
April 1997. A declining ratio means that municipals have outperformed
Treasuries, but have become relatively more expensive. The ratio has ranged
from 81 to 92 percent over the past three years.
New-issue municipal volume was down 6 percent during the first four months of
1997. However, underwriting volume for the full year is expected to exceed
bond maturities and redemptions. California new-issue underwriting
represented 11 percent of national volume.
PERFORMANCE
Over the six-month period ended April 30, 1997, the Trust's net asset value
(NAV) moved from $13.55 to $13.34. Based on this NAV change plus reinvestment
of tax-free dividends totaling $0.38 per share, the Trust's total NAV return
was 1.49 percent. IIC's market price on the New York Stock Exchange moved
from $12.00 to $12.375 per share. Based on this change in market price plus
reinvestment of tax-free dividends, IIC's total market return was 6.31
percent. On April 30, 1997, the Trust was
FIVE LARGEST SECTORS AS OF APRIL 30, 1997
(% OF NET ASSETS)
WATER & SEWER 22%
ELECTRIC 17%
PUBLIC FACILITIES 16%
TAX ALLOCATION 15%
TRANSPORTATION 9%
ALL OTHERS 21%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CREDIT ENHANCEMENTS AS OF APRIL 30, 1997
(% OF TOTAL LONG-TERM PORTFOLIO)
AMBAC 24%
FGIC 20%
FSA 4%
MBIA 52%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1997, continued
trading at a 7 percent discount to NAV. Undistributed net investment income
available for dividends increased from $0.085 to $0.095 per share.
PORTFOLIO STRUCTURE
The Trust remained fully invested in long-term municipal bonds during the
period. Investments were diversified among 9 long-term sectors and 38
credits. The portfolio's average maturity and call protection were 21 years
and 6 years, respectively. To assure the timely payment of principal and
interest, each position in the portfolio was backed by triple-"A"-rated bond
insurance.
THE IMPACT OF LEVERAGING
As we discussed previously, the total income available for distribution to
common shareholders includes incremental income provided by the Trust's
outstanding Auction Rate 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 amount of ARPS outstanding, and second, the spread between the
portfolio's cost yield and ARPS expenses (ARPS auction rate and expenses).
The greater the spread and the amount of ARPS outstanding, the greater the
amount of incremental income available for distribution to common
shareholders. The level of net investment income available for distribution
to common shareholders varies with the level of short-term interest rates.
ARPS yields ranged between 3.26 and 4.61 percent during the six months ended
April 30, 1997. Over the same period, ARPS leverage contributed $0.04 per
share to common share earnings. Four ARPS series totaled $65 million and
represented 27 percent of net assets.
LOOKING AHEAD
With the collapse of flat-tax proposals, municipal bonds have improved
relative to U.S. Treasury securities. Although tax-free yields are currently
somewhat "rich" in their historical relationship with Treasury yields, the
long-term benefit of tax-exemption remains intact.
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, 1997, IIC purchased and retired 217,500 shares of beneficial
interest at a
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1997, continued
weighted average market discount of 8.78 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 Insured
Municipal Income Trust 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 INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA TAX-EXEMPT MUNICIPAL BONDS (98.0%)
General Obligation (6.8%)
$ 9,000 California, Various Purpose 04/01/93 (FSA) ...................... 5.50 % 04/01/19 $ 8,570,520
Industry,
3,000 Refg Issue of 1993 (MBIA) ...................................... 5.50 07/01/13 2,954,010
4,900 Refg Issue of 1993 (MBIA) ...................................... 5.50 07/01/16 4,741,828
------- -----------
16,900 16,266,358
------- -----------
Electric Revenue (16.9%)
5,000 Los Angeles Department of Water & Power, Refg Issue of 1993
(Secondary MBIA) ............................................... 5.875 09/01/30 4,981,400
8,000 M-S-R Public Power Agency, San Juan Refg Ser F (AMBAC) .......... 6.00 07/01/20 8,076,320
7,000 Northern California Transmission Agency, California -Oregon
Transmission Refg Ser 1993 A (MBIA) ............................ 5.25 05/01/20 6,447,770
Sacramento Municipal Utility District,
3,000 Refg 1993 Ser D (FGIC) ......................................... 5.25 11/15/12 2,897,910
7,000 Refg 1993 Ser D (MBIA) ......................................... 5.625 11/15/15 6,759,900
12,000 Southern California Public Power Authority, Power 1993 Sub Refg
Ser A (FGIC) ................................................... 5.45 07/01/17 11,202,840
------- -----------
42,000 40,366,140
------- -----------
Hospital Revenue (7.7%)
4,150 Bakersfield, Adventist Health West Ser 1993 (MBIA) .............. 5.50 03/01/19 3,947,314
3,000 California Health Facilities Financing Authority, Children's
Hospital - San Diego Ser 1993 (MBIA) ........................... 5.75 07/01/23 2,944,020
California Statewide Communities Development Authority,
5,000 Motion Picture & Television Fund COPs (AMBAC) .................. 5.375 01/01/20 4,656,000
5,000 UniHealth America 1993 Ser A COPs (AMBAC) ...................... 5.50 10/01/14 4,868,700
2,000 Marysville, Fremont -Rideout Health Group Refg Ser 1993-A
(AMBAC) ........................................................ 5.55 01/01/13 1,957,260
------- -----------
19,150 18,373,294
------- -----------
Mortgage Revenue -Single Family (1.3%)
3,000 California Housing Financing Agency, Home 1996 Ser E (AMT)
(MBIA) ......................................................... 6.05 08/01/15 3,013,800
------- -----------
Public Facilities Revenue (15.5%)
10,000 Alameda County, Santa Rita Jail 1993 Refg COPs (MBIA) ........... 5.70 12/01/14 9,968,600
14,000 Beverly Hills Public Financing Authority, 1993 Refg Ser A
(MBIA) ......................................................... 5.65 06/01/15 13,535,060
9,000 California Public Works Board, Corrections Refg 1993 Ser B
(MBIA) ......................................................... 5.50 12/01/12 8,925,210
5,000 Modesto, Community Center Refg 1993 Ser A COPs (AMBAC) .......... 5.00 11/01/23 4,499,250
------- -----------
38,000 36,928,120
------- -----------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
Tax Allocation (14.8%)
$ 7,000 Long Beach Financing Authority, Ser 1992 (AMBAC) ................ 5.50 % 11/01/22 $ 6,650,770
5,000 Orange Redevelopment Agency, Southwest Refg Issue of 1993 A
(AMBAC) ........................................................ 5.70 10/01/23 4,879,750
7,500 Port Hueneme Redevelopment Agency, Central Community 1993 Refg
(AMBAC) ........................................................ 5.50 05/01/23 7,122,675
5,000 Poway Redevelopment Agency, Paguay Sub Refg Ser 1993 (FGIC) ..... 5.50 12/15/23 4,745,550
3,000 Riverside Redevelopment Agency, Merged Refg 1993 Ser A (MBIA) ... 5.625 08/01/23 2,894,130
5,000 Santa Clara Redevelopment Agency, Bayshore North 1992 Refg
(AMBAC) ........................................................ 5.75 07/01/14 5,002,450
4,000 Simi Valley Public Financing Authority, 1993 Refg (MBIA) ........ 5.50 09/01/15 3,904,960
------- -----------
36,500 35,200,285
------- -----------
Transportation Facilities Revenue (8.6%)
6,000 Los Angeles County Metropolitan Transportation Authority, Sales
Tax
Refg Ser 1993-A (MBIA) ......................................... 5.625 07/01/18 5,822,580
7,000 Los Angeles County Transportation Commission, Second Sr Ser 1992
A (MBIA) ....................................................... 6.00 07/01/23 7,060,060
5,000 San Francisco Airports Commission, San Francisco Int'l Airport
Second Ser Refg Issue 2 (MBIA) ................................. 6.75 05/01/20 5,441,650
2,300 San Francisco Bay Area Rapid Transit District, Sales Tax Ser
1995 (FGIC) ................................................... 5.50 07/01/20 2,206,804
------- -----------
20,300 20,531,094
------- -----------
Water & Sewer Revenue (22.3%)
10,000 California Department of Water Resources, Central Valley Ser L
(Secondary MBIA) ............................................... 5.75 12/01/19 9,838,000
7,000 Eastern Municipal Water District, Ser 1993-A COPs (FGIC) ........ 5.25 07/01/23 6,370,630
10,000 Los Angeles, Wastewater Refg Ser 1993-A (MBIA) .................. 5.80 06/01/21 9,884,300
3,000 Oceanside, Water 1993 Refg COPs (AMBAC) ......................... 5.70 08/01/14 2,990,580
3,500 Redding Joint Powers Financing Authority, Wastewater Refg 1992
Ser A (FGIC) ................................................... 6.00 12/01/11 3,618,125
2,500 San Elijo Joint Powers Authority, 1993 Refg (FGIC) .............. 5.00 03/01/20 2,216,650
5,000 Santa Maria, Local Water & Refg Ser 1993 COPs (FGIC) ............ 5.50 08/01/21 4,743,250
9,000 South County Regional Wastewater Authority, Morgan Hill Ser 1992
B (FGIC) ....................................................... 5.50 08/01/22 8,552,070
5,000 West & Central Basin Financing Authority, Water Ser 1992
(AMBAC) ........................................................ 6.125 08/01/22 5,082,750
------- -----------
55,000 53,296,355
- ----------- -------------
Other Revenue (4.1%)
10,000 Puerto Rico Telephone Authority, Refg Ser M (MBIA) .............. 5.45 01/16/15 9,719,100
------- -----------
240,850 TOTAL CALIFORNIA TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $237,614,379) .......... 233,694,546
------- -----------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
CALIFORNIA TAX-EXEMPT SHORT-TERM MUNICIPAL OBLIGATION (0.2%)
$500 California Pollution Control Financing Authority, Southern
---- California Edison Co Ser 1986 B (Demand 05/01/97)(Identified
Cost $500,000) ................................................. 3.85*% 02/28/08 $ 500,000
------------
$241,350 TOTAL INVESTMENTS (Identified Cost $238,114,379) (a) ..................... 98.2% 234,194,546
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ........................... 1.8 4,347,426
------ ------------
NET ASSETS ............................................................... 100.0% $238,541,972
====== ============
</TABLE>
- --------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Current coupon of variable rate demand obligation.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$467,671 and the aggregate gross unrealized depreciation is
$4,387,504, resulting in net unrealized depreciation of
$3,919,833.
Bond Insurance:
- ---------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $238,114,379)........................................ $234,194,546
Cash................................................................... 141,856
Interest receivable.................................................... 4,412,353
Deferred organizational expenses....................................... 5,948
Prepaid expenses ...................................................... 51,465
------------
TOTAL ASSETS......................................................... 238,806,168
------------
LIABILITIES:
Payable for:
Investment management fee............................................ 77,076
Dividends to preferred shareholders.................................. 57,864
Common shares of beneficial interest repurchased..................... 24,810
Accrued expenses ...................................................... 104,446
------------
TOTAL LIABILITIES.................................................... 264,196
------------
NET ASSETS:
Preferred shares of beneficial interest (1,000,000 shares authorized
of non-participating $.01 par value, 1,300 shares outstanding) ....... 65,000,000
------------
Common shares of beneficial interest (unlimited shares authorized of
$.01 par value, 13,012,213 shares outstanding)........................ 183,243,388
Net unrealized depreciation............................................ (3,919,833)
Accumulated undistributed net investment income........................ 1,230,196
Accumulated net realized loss.......................................... (7,011,779)
------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS......................... 173,541,972
------------
TOTAL NET ASSETS..................................................... $238,541,972
============
NET ASSET VALUE PER COMMON SHARE
($173,541,972 divided by 13,012,213 common shares outstanding) ....... $13.34
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME......................... $ 6,790,890
-----------
EXPENSES
Investment management fee............... 420,878
Auction commission fees................. 80,668
Professional fees....................... 53,635
Transfer agent fees and expenses ....... 25,812
Shareholder reports and notices......... 21,422
Auction agent fees...................... 18,113
Registration fees....................... 12,549
Trustees' fees and expenses............. 9,153
Custodian fees.......................... 6,170
Organizational expenses................. 3,568
Other................................... 17,061
-----------
TOTAL EXPENSES........................ 669,029
LESS: EXPENSE OFFSET ................. (6,100)
-----------
NET EXPENSES.......................... 662,929
-----------
NET INVESTMENT INCOME................. 6,127,961
-----------
NET REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized gain....................... 415
Net change in unrealized depreciation .. (3,093,280)
-----------
NET LOSS.............................. (3,092,865)
-----------
NET INCREASE............................ $ 3,035,096
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 1997 OCTOBER 31, 1996
- -------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income .......................... $ 6,127,961 $ 12,515,925
Net realized gain (loss)........................ 415 (279,566)
Net change in unrealized depreciation........... (3,093,280) 814,615
------------ ------------
NET INCREASE.................................. 3,035,096 13,050,974
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Preferred....................................... (1,106,525) (2,233,731)
Common.......................................... (4,921,743) (9,706,672)
------------ ------------
TOTAL......................................... (6,028,268) (11,940,403)
------------ ------------
Decrease from transactions in common shares of
beneficial interest............................ (2,674,525) (6,133,345)
------------ ------------
NET DECREASE.................................. (5,667,697) (5,022,774)
NET ASSETS:
Beginning of period............................. 244,209,669 249,232,443
------------ ------------
END OF PERIOD
(Including undistributed net investment income
of $1,230,196 and $1,130,503, respectively) .. $238,541,972 $244,209,669
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1997 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
InterCapital California Insured Municipal Income Trust (the "Trust") is
registered under the Investment Company Act of 1940, as amended, as a
non-diversified, closed-end management investment company. The Trust's
investment objective is to provide current income which is exempt from both
federal and California income taxes. The Trust was organized as a
Massachusetts business trust on November 2, 1992 and commenced operations on
February 26, 1993.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
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.
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1997 (unaudited) continued
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
E. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Trust's common shares in
the amount of $36,000 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 the Investment
Manager 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, 1997 aggregated $2,188,793.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At April 30, 1997, the Trust had transfer agent fees
and expenses payable of approximately $8,000.
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1997 (unaudited) continued
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, 1997 included in Trustees' fees and expenses in the
Statement of Operations amounted to $2,524. At April 30, 1997, the Trust had
an accrued pension liability of $27,778 which is included in accrued expenses
in the Statement of Assets and Liabilities.
4. PREFERRED SHARES OF BENEFICIAL INTEREST
The Trust is authorized to issue up to 1,000,000 non-participating preferred
shares of beneficial interest having a par value of $.01 per share, in one or
more series, with rights as determined by the Trustees, without approval of
the common shareholders. The Trust has issued Series 1 through 4 Auction Rate
Preferred Shares ("Preferred Shares") which 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>
AMOUNT IN RESET RANGE OF
SERIES SHARES* THOUSANDS* RATE* DATE DIVIDEND RATES**
------ ------- ---------- ----- ---- ----------------
<S> <C> <C> <C> <C> <C>
1 200 $10,000 3.51% 06/30/97 3.40% -3.51%
2 400 20,000 4.50 05/05/97 2.89 -5.125
3 500 25,000 4.50 05/05/97 2.60 -5.125
4 200 10,000 3.53 07/14/97 3.40 -3.53
</TABLE>
- --------------
* As of April 30, 1997.
** For the six months ended April 30, 1997
Subsequent to April 30, 1997 and up through June 6, 1997 the Trust paid
dividends to Series 1 through 4 at rates ranging from 3.51 to 4.50 in the
aggregate amount of $291,369.
The Trust is subject to certain restrictions relating to the preferred
shares. Failure to comply with these restrictions could preclude the Trust
from declaring any distributions to common shareholders or purchasing common
shares and/or could trigger the mandatory redemption of preferred shares at
liquidation value.
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1997 (unaudited) continued
The preferred shares, which are entitled to one vote per share, generally
vote with the common shares but vote separately as a class to elect two
Trustees and on any matters affecting the rights of the preferred shares.
5. COMMON SHARES OF BENEFICIAL INTEREST
Transactions in common shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL
PAID IN
EXCESS OF PAR
SHARES PAR VALUE VALUE
-------- ------------- --------------
<S> <C> <C> <C>
Balance, October 31, 1995 ................................................ 13,750,013 $137,500 $191,913,758
Treasury shares purchased and retired (weighted average discount 11.69%)* (520,300) (5,203) (6,128,142)
---------- -------- ------------
Balance, October 31, 1996 ................................................ 13,229,713 132,297 185,785,616
Treasury shares purchased and retired (weighted average discount 8.78%)* (217,500) (2,175) (2,672,350)
---------- -------- ------------
Balance, April 30, 1997 .................................................. 13,012,213 $130,122 $183,113,266
========== ======== ============
</TABLE>
- --------------
* Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS
At October 31, 1996, the Trust had a net capital loss carryover of
approximately $7,012,000 to offset future capital gains to the extent
provided by regulations, which is available through October 31 in the
following years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
-----------------------------
2002 2003 2004
---- ---- ----
<S> <C> <C>
$4,795 $1,938 $279
====== ====== ====
</TABLE>
7. DIVIDENDS TO COMMON SHAREHOLDERS
The Trust declared the following dividends from net investment income:
<TABLE>
<CAPTION>
AMOUNT RECORD PAYABLE
DECLARATION DATE PER SHARE DATE DATE
- ---------------- --------- ---- ----
<S> <C> <C> <C>
April 29, 1997 $0.0625 May 9, 1997 May 23, 1997
May 27, 1997 $0.0625 June 6, 1997 June 20, 1997
</TABLE>
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
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 SIX FOR THE YEAR ENDED OCTOBER 31 ** FEBRUARY 26, 1993*
MONTHS ENDED --------------------------------- THROUGH
APRIL 30, 1997** 1996 1995++ 1994 OCTOBER 31, 1993**
---------------- ---------- ----------- ---------- ------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ................... $ 13.55 $13.40 $11.29 $ 14.87 $ 14.06
------- ------ ------ ------- -------
Net investment income .................................. 0.47 0.93 0.92 1.07 0.62
Net realized and unrealized gain (loss) ................ (0.24) 0.05 2.12 (3.57) 0.89
------- ------ ------ ------- -------
Total from investment operations ....................... 0.23 0.98 3.04 (2.50) 1.51
------- ------ ------ ------- -------
Less dividends and distributions from:
Net investment income ................................. (0.38) (0.72) (0.77) (0.87) (0.43)
Common share equivalent of dividends paid to preferred
shareholders ......................................... (0.08) (0.17) (0.18) (0.20) (0.11)
Net realized gain ..................................... -- -- -- (0.01) --
------- ------ ------ ------- -------
Total dividends and distributions ...................... (0.46) (0.89) (0.95) (1.08) (0.54)
------- ------ ------ ------- -------
Anti-dilutive effect of acquiring treasury shares ..... 0.02 0.06 0.02 -- --
------- ------ ------ ------- -------
Offering costs charged against capital ................. -- -- -- -- (0.16)
------- ------ ------ ------- -------
Net asset value, end of period ......................... $ 13.34 $13.55 $13.40 $ 11.29 $ 14.87
======= ====== ====== ======= =======
Market value, end of period ............................ $12.375 $12.00 $11.75 $11.125 $15.375
======= ====== ====== ======= =======
TOTAL INVESTMENT RETURN+ .............................. 6.31%(1) 8.54% 12.93% (22.82)% 5.39% (1)
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses ......................................... 0.76%(2)(3) 0.76% 0.81% (3) 0.89% 0.73% (2)
Net investment income before preferred stock dividends 6.97%(2) 6.93% 7.39% 8.12% 6.39% (2)
Preferred stock dividends .............................. 1.26%(2) 1.24% 1.44% 1.54% 1.11% (2)
Net investment income available to common shareholders 5.71%(2) 5.69% 5.95% 6.58% 5.28% (2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $238,542 $244,210 $249,232 $243,676 $309,759
Asset coverage on preferred shares at end of period ... 367% 375% 383% 287% 309%
Portfolio turnover rate ................................ -- 1% 1% 12% 2% (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 and distributions 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) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TRUSTEES
- -------------------------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
- -------------------------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
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
INSURED
MUNICIPAL
INCOME
TRUST
Semiannual Report
April 30, 1997
