<PAGE>
INTERCAPITAL INSURED CALIFORNIA 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 at 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 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.
- ------------
* The Bond Buyer Revenue Bond Index is an arithmetic average of the yields of
25 selected municipal revenue bonds with 30-year maturities. Credit ratings
of these bonds range from Aa1 to Baa1 by Moody's Investors Service, Inc., and
AA+ to A- by Standard & Poor's Corp.
<PAGE>
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS October 31, 1995, continued
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 Insured California Municipal
Securities (ICS) rose from $13.15 to $14.84 per share during the fiscal year
ended October 31, 1995. Based on this NAV change plus reinvestment of
tax-free dividends totaling $0.72 per share, the Trust's total return was
19.68 percent. Over the same period, ICS's market price on the New York Stock
Exchange appreciated 13.64 percent from $11.00 to $12.50 per share. Based on
this market price change and reinvestment of tax-free dividends, the Trust's
total return was 20.51 percent. ICS began and ended the fiscal year trading
at a 16 percent discount to NAV. Undistributed net investment income totaled
$0.089 per share on October 31, 1995 versus $0.054 per share a year ago.
Since the amount of ICS's undistributed net investment income continued to
increase during the year, the Trustees voted to raise the monthly dividend
from $0.06 to $0.0625 per share beginning with the November 1995 payment.
This revised dividend rate more accurately reflects the Trust's current
earnings.
PORTFOLIO STRUCTURE
On October 31, 1995, ICS's long-term portfolio was diversified among 10
specific long-term municipal sectors and 25 credits. The three largest
sectors--tax allocation, hospital revenue and water & sewer revenue
bonds--represented 53 percent of the portfolio. The average maturity and call
protection of the Trust's long-term holdings were 25 and 8 years,
respectively. Net assets exceeded $64 million.
<PAGE>
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS October 31, 1995, continued
Each position in the portfolio was backed by triple "A" rated bond insurers.
This is to ensure the timely payment of principal and interest. The
distribution of credit enhancements is illustrated on the right.
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
(The chart below represents information which appears as a
graphic in the printed annual report)
A pie chart reflecting Credit Enhancements. As of October 31,
1995, the distribution of bond insurers was:
MUNICIPAL BOND INSURANCE PERCENT
AMBAC Indemnity Corp (AMBAC) 29%
Financial Guaranty Insurance Co (FGIC) 12%
Financial Security Assurance Inc (FSA) 8%
Municipal Bond Investors Assurance Corp (MBIA) 44%
Connie Lee Insurance Company (Connie Lee) 2%
Capital Guaranty Insurance Company (CGIC) 5%
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 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 130,900 shares of common
stock at a weighted average market discount of 12.50 percent.
We appreciate your ongoing support of InterCapital Insured California
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 INSURED CALIFORNIA 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:
<TABLE>
<CAPTION>
<S> <C>
Jack F. Bennett
For ................... 3,261,204
Withheld .............. 55,186
Michael Bozic
For ................... 3,266,120
Withheld .............. 50,270
Charles A. Fiumefreddo
For ................... 3,269,727
Withheld .............. 46,633
Edwin J. Garn
For ................... 3,263,011
Withheld .............. 53,379
John R. Haire
For ................... 3,265,868
Withheld .............. 50,522
Dr. Manuel H. Johnson
For ................... 3,266,475
Withheld .............. 49,915
Paul Kolton
For ................... 3,266,727
Withheld .............. 49,663
Michael E. Nugent
For ................... 3,267,811
Withheld .............. 48,579
Philip J. Purcell
For ................... 3,270,668
Withheld .............. 45,722
John L. Schroeder
For ................... 3,260,727
Withheld .............. 55,663
</TABLE>
(2) CONTINUANCE OF THE CURRENTLY EFFECTIVE INVESTMENT MANAGEMENT AGREEMENT:
<TABLE>
<CAPTION>
<S> <C>
FOR ................ 3,073,560
Against ............ 44,136
Abstain ............ 198,694
</TABLE>
(3) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS:
<TABLE>
<CAPTION>
<S> <C>
FOR ................ 3,152,605
Against ............ 15,768
Abstain ............ 148,017
</TABLE>
<PAGE>
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS October 31, 1995
<PAGE>
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS October 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------- ------------------------------------------------------------------------- -------- ---------- ------------
<S> <C> <C> <C> <C>
CALIFORNIA EXEMPT MUNICIPAL BONDS (97.4%)
General Obligation (8.7%)
$ 3,000 California, Various Purpose 03/01/94 (FSA) ............................... 5.50 % 03/01/20 $ 2,883,180
3,000 Moulton - Niguel Water District, 1993 Refg (MBIA) ........................ 5.00 09/01/19 2,720,610
- ----------- ------------
6,000 5,603,790
- ----------- ------------
Educational Facilities Revenue (2.4%)
1,500 California Educational Facilities Authority, National University
Ser 1994
- ----------- (Connie Lee) ............................................................ 6.20 05/01/21 1,532,490
------------
Electric Revenue (7.2%)
1,500 Anaheim Public Financing Authority, San Juan 2nd Ser (FGIC) ............. 5.75 10/01/22 1,473,720
3,000 Sacramento Municipal Utility District, 1992 Ser B (MBIA) ................. 6.375 08/15/22 3,148,710
- ----------- ------------
4,500 4,622,430
- ----------- ------------
Hospital Revenue (14.7%)
2,000 Anaheim, Anaheim Memorial Hospital Association COPs (AMBAC) ............. 5.125 05/15/20 1,826,860
3,000 California Health Facilities Financing Authority, Catholic Healthcare
West Ser 1994 B (AMBAC) ................................................. 5.00 07/01/21 2,670,360
3,000 California Statewide Communities Development Authority, Sharp
Health Care COPs (MBIA) ................................................. 6.00 08/15/24 3,016,230
2,000 San Mateo County Joint Powers Financing Authority, San Mateo County
Health Center 1994 Ser A (FSA) .......................................... 5.75 07/15/22 1,967,640
- ----------- ------------
10,000 9,481,090
- ----------- ------------
Mortgage Revenue - Multi-Family (4.8%)
3,000 Los Angeles Community Redevelopment Agency, 1994 Ser A (AMBAC) .......... 6.45 07/01/17 3,112,110
- ----------- ------------
Mortgage Revenue - Single Family (3.1%)
2,000 California Housing Finance Agency, 1995 Ser B (AMT) (AMBAC) ............. 6.25 08/01/14 2,013,240
- ----------- ------------
Public Facilities Revenue (3.9%)
1,000 Glendale Unified School District, 1994 Ser A COPs (AMBAC) ................ 6.00 03/01/19 1,008,330
1,570 Los Angeles Convention & Exhibit Center Authority, 1993 Refg Ser A (MBIA) 5.375 08/15/18 1,501,360
- ----------- ------------
2,570 2,509,690
- ----------- ------------
Tax Allocation (24.3%)
3,000 Bay Area Government Association, Pool 1994 Ser A (CGIC) .................. 6.00 12/15/24 3,021,540
2,000 Brea Redevelopment Agency, Redev AB 1993 Refg Ser (MBIA) ................. 5.75 08/01/23 1,964,420
2,000 Cerritos Public Finance Authority, Los Coyotes Redev Ser 1993 A (AMBAC) . 5.75 11/01/22 1,978,380
3,000 Corona Redevelopment Agency, Area A 1994 Refg Ser A (FGIC) .............. 6.25 09/01/13 3,156,510
3,000 Pittsburg Redevelopment Agency, Los Medanos Refg Ser 1993 A (AMBAC) ..... 5.00 08/01/17 2,739,810
3,000 Yorba Linda Redevelopment Agency, Ser 1993 A (MBIA) ...................... 5.25 09/01/23 2,804,550
- ----------- ------------
16,000 15,665,210
- ----------- ------------
</TABLE>
<PAGE>
INTERCAPITAL INSURED CALIFORNIA 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>
Transportation Facilities Revenue (11.3%)
$ 3,000 Los Angeles County Transportation Commission, Second Sr Ser 1992 A (MBIA) 6.00 % 07/01/23 $ 3,025,920
San Francisco Airports Commission, San Francisco Int'l Airport
2,000 Second Ser Refg Issue 4 (MBIA) .......................................... 6.00 05/01/20 2,027,440
2,000 Second Ser Refg Issue 2 (MBIA) .......................................... 6.75 05/01/20 2,187,640
- ----------- ------------
7,000 7,241,000
- ----------- ------------
Water & Sewer Revenue (13.9%)
3,000 Central Coast Water Authority, Ser 1992 (AMBAC) .......................... 6.60 10/01/22 3,214,680
2,900 Garden Grove Public Financing Authority, Ser 1993 (FGIC) ................. 5.50 12/15/23 2,811,086
3,000 Los Angeles, Wastewater Refg Ser 1993 A (MBIA) ........................... 5.70 06/01/20 2,953,080
- ----------- ------------
8,900 8,978,846
- ----------- ------------
Other Revenue (3.1%)
2,000 South Orange County Public Financing District #88-1, 1994 Ser A (MBIA) .. 6.00 09/01/18 2,011,600
- ----------- ------------
63,470 TOTAL CALIFORNIA EXEMPT MUNICIPAL BONDS (Identified Cost $60,050,189) .......................... 62,771,496
- ----------- ------------
CALIFORNIA EXEMPT SHORT-TERM MUNICIPAL OBLIGATION (0.9%)
600 California Health Facilities Financing Authority, Sutter Health Ser 1990 A
- -----------
(Demand 11/01/95) (Identified Cost $600,000) ............................ 3.80* 03/01/20 600,000
------------
$64,070 TOTAL INVESTMENTS (Identified Cost $60,650,189) (a) ................................. 98.3% 63,371,496
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ...................................... 1.7 1,097,277
------------
NET ASSETS .......................................................................... 100.0% $64,468,773
============
<FN>
- ------------
COPs Certificates of Participation.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes is $60,650,189; the
aggregate gross unrealized appreciation is $2,742,020 and the
aggregate gross unrealized depreciation is $20,713, resulting in net
unrealized appreciation of $2,721,307.
Bond Insurance:
AMBAC AMBAC Indemnity Corporation.
CGIC Capital Guaranty Insurance Company.
Connie Lee Connie Lee Insurance Company.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $60,650,189) ........................................ $63,371,496
Cash .................................................................. 99,543
Interest receivable ................................................... 1,033,867
Deferred organizational expenses ...................................... 26,635
Prepaid expenses and other assets ..................................... 2,794
-------------
TOTAL ASSETS ........................................................ 64,534,335
-------------
LIABILITIES:
Investment management fee payable ..................................... 19,642
Accrued expenses and other payables ................................... 45,920
-------------
TOTAL LIABILITIES ..................................................... 65,562
-------------
NET ASSETS:
Preferred shares of beneficial interest (1,000,000 shares authorized
of non-participating $.01 par value, none issued) ................... --
-------------
Common shares of beneficial interest (unlimited shares authorized of
$.01 par value, 4,343,213 shares outstanding) ........................ 61,322,251
Net unrealized appreciation ........................................... 2,721,307
Accumulated undistributed net investment income ....................... 388,138
Accumulated undistributed net realized gain ........................... 37,077
-------------
NET ASSETS .......................................................... $64,468,773
=============
NET ASSET VALUE PER COMMON SHARE
($64,468,773 divided by 4,343,213 common shares outstanding) ........ $14.84
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended October 31, 1995
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ........................ $ 3,733,719
------------
EXPENSES
Investment management fee .............. 215,558
Professional fees ...................... 93,464
Shareholder reports and notices ....... 48,844
Transfer agent fees and expenses ...... 25,675
Trustees' fees and expenses ............ 21,495
Registration fees ...................... 17,290
Organizational expenses ................ 7,997
Custodian fees ......................... 4,844
Other .................................. 7,469
------------
TOTAL EXPENSES BEFORE EXPENSE OFFSET 442,636
LESS: EXPENSE OFFSET ................. (4,835)
------------
TOTAL EXPENSES AFTER EXPENSE OFFSET . 437,801
------------
NET INVESTMENT INCOME ................ 3,295,918
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ...................... 37,077
Net change in unrealized depreciation . 6,919,822
------------
NET GAIN ............................. 6,956,899
------------
NET INCREASE ........................... $10,252,817
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FEBRUARY 28, 1994*
ENDED OCTOBER THROUGH OCTOBER
31, 1995 31, 1994
- ------------------------------------------------------ ---------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 3,295,918 $ 1,881,751
Net realized gain ..................................... 37,077 --
Net change in unrealized depreciation ................. 6,919,822 (4,198,515)
---------------- ------------------
NET INCREASE (DECREASE) ............................. 10,252,817 (2,316,764)
Dividends to common shareholders from net investment
income ............................................... (3,149,559) (1,639,972)
Net increase (decrease) from transactions in shares of
beneficial interest .................................. (1,456,853) 62,679,095
---------------- ------------------
TOTAL INCREASE ...................................... 5,646,405 58,722,359
NET ASSETS:
Beginning of period ................................... 58,822,368 100,009
---------------- ------------------
END OF PERIOD
(Including undistributed net investment income
of $388,138 and $241,779, respectively) .............. $64,468,773 $58,822,368
================ ==================
</TABLE>
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1995
1. ORGANIZATION AND ACCOUNTING POLICIES
InterCapital Insured California Municipal Securities (the "Trust") is
registered under the Investment Company Act of 1940, as amended, as a
diversified, closed-end management investment company. The Trust was
organized as a Massachusetts business trust on October 14, 1993 and had no
operations other than those relating to organizational matters and the
issuance of 7,113 common shares of beneficial interest for $100,009 to Dean
Witter InterCapital Inc. (the "Investment Manager") to effect the Trust's
initial capitalization. The Trust commenced operations on February 28, 1994.
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
<PAGE>
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued
which may differ from generally accepted accounting principles. These
"book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
E. ORGANIZATIONAL EXPENSES AND OFFERING COSTS -- The Investment Manager paid
the organizational expenses and offering costs of the Trust's common shares
in the amounts of $40,000 and $286,877, respectively. The organizational
expenses have been deferred and are being amortized by the straight-line
method over a period not to exceed five years from the commencement of
operations. Offering costs were charged to capital at the time of issuance of
the Trust's common shares.
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 $2,000,000 and $1,882,780, 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 $3,500.
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,
<PAGE>
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued
without approval of the common shareholders. 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.
Upon issuance, the Trust will be 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, October 31, 1993 (Note 1) ........................................ 7,113 $ 71 $ 99,938
Shares issued at close of public offering on February 28, 1994* .......... 4,500,000 45,000 62,865,000
Shares issued on April 7, 1994 to cover over-allotment .................... 75,000 750 1,053,750
Treasury shares purchased and retired (weighted average discount 13.33%)** (108,000) (1,080) (1,284,325)
----------- --------- -------------
Balance, October 31, 1994 ................................................. 4,474,113 44,741 62,734,363
Adjustments to estimated offering costs associated with the
initial public offering of the common shares ............................ -- -- 73,123
Treasury shares purchased and retired (weighted average discount 12.50%)** (130,900) (1,309) (1,528,667)
----------- --------- -------------
Balance, October 31, 1995 ................................................. 4,343,213 $43,432 $61,278,819
=========== ========= =============
</TABLE>
- ------------
* Net of offering costs of $286,877.
** The Trustees have voted to retire the shares purchased.
<PAGE>
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued
6. 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 $0.0625 November 10, 1995 November 24, 1995
November 28, 1995 $0.0625 December 8, 1995 December 22, 1995
</TABLE>
7. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
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
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ......... $ 938 $0.22 $937 $0.22 $ 915 $0.21 $ 944 $0.21
Net investment income ........... 804 0.19 818 0.19 821 0.19 853 0.19
Net realized and unrealized gain 2,167 0.49 750 0.18 1,513 0.35 2,527 0.61
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------
10/31/94 7/31/94 4/30/94+
------------------- ----------------- -----------------
PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
--------- -------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Total investment income ................ $ 950 $ 0.21 $ 901 $0.19 $ 307 $ 0.07
Net investment income. ................. 848 0.19 794 0.17 240 0.05
Net realized and unrealized gain (loss) (4,320) (0.92) 867 0.20 (746) (0.16)
</TABLE>
- ------------
* Amounts in thousands.
+ For the period February 28, 1994 through April 30, 1994.
<PAGE>
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 28, 1994*
FOR THE YEAR ENDED THROUGH OCTOBER 31,
OCTOBER 31, 1995** 1994**++
- ------------------------------------------------- ------------------ -------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............. $ 13.15 $ 14.06
------------------ -------------------
Net investment income ............................ 0.76 0.41
Net realized and unrealized gain (loss) ......... 1.59 (0.92)
------------------ -------------------
Total from investment operations ................. 2.35 (0.51)
------------------ -------------------
Dividends from net investment income ............. (0.72) (0.36)
Anti-dilutive effect of acquiring treasury shares 0.04 0.04
Offering costs charged against capital ........... 0.02 (0.08)
------------------ -------------------
Net asset value, end of period ................... $ 14.84 $ 13.15
================== ===================
Market value, end of period ...................... $ 12.50 $ 11.00
================== ===================
TOTAL INVESTMENT RETURN+ ......................... 20.51% (24.55)%(1)
RATIOS TO AVERAGE NET ASSETS:
Total expenses before expense offset ............. 0.72%(3) 0.65%(2)
Net investment income ............................ 5.35%(3) 4.45%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $64,469 $58,822
Portfolio turnover rate .......................... 3% --%(1)
</TABLE>
- ------------
* Commencement of operations.
** The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total investment return is based upon the current market value on the
last day of each period reported. Dividends are assumed to be
reinvested at the prices obtained under the Trust's dividend
reinvestment plan. Total investment return does not reflect brokerage
commissions.
++ Restated for comparative purposes.
(1) Not annualized.
(2) Annualized.
(3) The above expense and net investment income ratios would have been
0.71% and 5.36%, respectively, which reflects 0.01% effect for
custody cash credits.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF INTERCAPITAL INSURED CALIFORNIA 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
Insured California 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 and the financial highlights for the year then ended and for the
period February 28, 1994 (commencement of operations) through October 31,
1994, 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 5, 1995
1995 FEDERAL TAX NOTICE (unaudited)
During the year ended October 31, 1995, the Trust paid to the common
shareholders $0.72 per share from net investment income. All of the Trust's
dividends from net investment income were exempt interest dividends,
excludable from gross income for Federal income tax purposes.
<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
INSURED
CALIFORNIA
MUNICIPAL
SECURITIES
ANNUAL REPORT
OCTOBER 31, 1995