<PAGE> 1
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES Two World Trade Center,
New York, New York 10048
LETTER TO THE SHAREHOLDERS October 31, 1996
DEAR SHAREHOLDER:
We are pleased to present the annual report on the operations of InterCapital
Insured California Municipal Securities (ICS) for the fiscal year ended October
31, 1996.
Stronger economic growth and the potential threat of inflation shifted the tone
of the fixed-income markets from bullish to bearish in early 1996. This change
in market psychology was confirmed in March by a surprisingly large increase in
payroll employment. The rise in interest rates between February and July may be
attributed to market weakness on the days that strong monthly employment figures
were reported. The bond market sporadically pushed long-term yields higher,
anticipating that the Federal Reserve Board might raise the federal-funds rate.
However, with slower growth in employment and overall economic activity between
August and October, the central bank left monetary policy unchanged. As a
result, by the end of October the fixed-income markets had regained an
optimistic outlook and rallied to levels not seen since February.
MUNICIPAL MARKET CONDITIONS
Between February and July, 30-year insured revenue bond yields rose 75 basis
points from 5.40 percent to reach 6.15 percent in April and again in mid-June.
Subsequently, demand for municipal bonds improved and followed the trend of U.S.
Treasury securities toward lower yields. Insured bond yields reached 5.60
percent by the end of October. One-year municipal note yields declined
marginally from 3.80 percent to 3.70 percent over the past 12 months. In
October, the yield curve pickup for extending maturities from 1 to 30 years was
190 basis points.
The ratio of insured revenue bond yields to 30-year U.S. Treasury yields, moved
from 91 percent to 84 percent over the course of the fiscal year. A declining
ratio means that municipal bond prices outperformed U.S. Treasury prices. The
relative improvement in municipals occurred as flat tax proposals failed to gain
public support.
<PAGE> 2
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS October 31, 1996, continued
The municipal market also benefited from steady demand. In addition to regular
maturities and calls for redemption this year, it has been estimated that
investors also faced the retirement of over $60 billion of debt that has been
previously refinanced. On the supply side, new issues increased 20 percent to
$147 billion over the calendar year to date.
PERFORMANCE
The Trust's net asset value (NAV) moved from $14.84 to $15.02 per share during
the fiscal year ended October 31, 1996. Based on this NAV change plus
reinvestment of tax-free dividends of $0.75 per share and a long-term capital
gain distribution of $0.01 per share, the Trust's total return was 7.15 percent.
Over the same period, ICS's market price on the New York Stock Exchange moved
from $12.50 to $13.50 per share. Based on this market price change and
reinvestment of tax-free dividends and distributions, the Trust's total return
was 14.33 percent.
ICS began the fiscal year trading at a 16 percent discount to NAV and ended at a
10 percent discount. Undistributed net investment income available for dividends
improved $0.027 per share during the year to $0.116 per share. As a result, the
Trust's monthly dividend was increased from $0.0625 to $0.0675 per share
beginning with the November 1996 payment.
PORTFOLIO STRUCTURE
On October 31, 1996, the Trust's net assets of $64 million were diversified
among 11 long-term municipal sectors and 25 credits. The average maturity and
call protection of the ICS's portfolio were 23 and 7 years, respectively. To
assure the
CREDIT ENHANCEMENTS AS OF OCTOBER 31, 1996
(% OF TOTAL LONG-TERM PORTFOLIO)
AMBAC
30%
FSA
13%
MBIA
43%
FGIC
11%
CONNIE LEE
3%
FIVE LARGEST SECTORS AS OF OCTOBER 31, 1996
(% OF NET ASSETS)
HOSPITAL
15%
TAX
ALLOCATION
25%
ALL OTHERS
26%
GENERAL
OBLIGATION
9%
TRANSPORTATION
12%
WATER & SEWER
13%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE
<PAGE> 3
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS October 31, 1996, continued
timely payment of principal and interest, each position in the portfolio was
backed by triple "A" rated bond insurance.
LOOKING AHEAD
The balance between the supply of new issues and demand created by maturities is
expected to remain positive for the municipal market. Long-term insured
municipal securities currently yield 84 percent of U.S. Treasury securities and
may be expected to move in tandem with the Treasury market. Although municipal
performance relative to U.S. Treasury securities has improved, tax-exempts could
again be affected by market uncertainty if new tax reduction proposals were to
resurface.
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. Over the past fiscal year, ICS purchased and
retired 98,000 shares of common stock at a weighted average market discount of
10.42 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> 4
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On June 27, 1996, 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>
<S> <C>
Michael Bozic
For................................................................. 3,092,744
Withheld............................................................ 98,816
Charles A. Fiumefreddo
For................................................................. 3,092,478
Withheld............................................................ 99,082
</TABLE>
The following Trustees were not standing for reelection at this meeting:
Edwin J. Garn, John R. Haire, Dr. Manuel H. Johnson, Michael E. Nugent,
Philip J. Purcell and John L. Schroeder.
(2) CONTINUANCE OF THE CURRENTLY EFFECTIVE INVESTMENT MANAGEMENT AGREEMENT WITH
DEAN WITTER INTERCAPITAL INC.:
<TABLE>
<S> <C>
For................................................................. 2,999,340
Against............................................................. 36,575
Abstain............................................................. 155,645
</TABLE>
(3) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS:
<TABLE>
<S> <C>
For................................................................. 3,033,470
Against............................................................. 15,679
Abstain............................................................. 142,411
</TABLE>
<PAGE> 5
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS October 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CALIFORNIA TAX-EXEMPT MUNICIPAL BONDS (97.0%)
General Obligation (8.8%)
$ 3,000 California, Various Purpose 03/01/94 (FSA)............................... 5.50% 03/01/20 $ 2,900,310
3,000 Moulton-Niguel Water District, 1993 Refg (MBIA).......................... 5.00 09/01/19 2,715,690
------- ---------
6,000 5,616,000
------- ---------
Educational Facilities Revenue (2.4%)
1,500 California Educational Facilities Authority, National University Ser 1994
------- (Connie Lee)............................................................ 6.20 05/01/21 1,540,050
---------
Electric Revenue (6.6%)
1,000 Anaheim Public Financing Authority, San Juan 2nd Ser (FGIC).............. 5.75 10/01/22 997,270
3,000 Sacramento Municipal Utility District, 1992 Ser B (MBIA)................. 6.375 08/15/22 3,191,520
------- ---------
4,000 4,188,790
------- ---------
Hospital Revenue (15.1%)
2,000 Anaheim, Anaheim Memorial Hospital Association COPs (AMBAC).............. 5.125 05/15/20 1,851,940
3,000 California Health Facilities Financing Authority, Catholic Healthcare
West 1994 B (AMBAC)..................................................... 5.00 07/01/21 2,708,760
3,000 California Statewide Communities Development Authority, Sharp Health Care
COPs (MBIA)............................................................. 6.00 08/15/24 3,071,010
2,000 San Mateo County Joint Powers Financing Authority, San Mateo County
Health Center 1994 Ser A (FSA).......................................... 5.75 07/15/22 1,994,480
------- ---------
10,000 9,626,190
------- ---------
Mortgage Revenue -- Multi-Family (4.9%)
3,000 Los Angeles Community Redevelopment Agency, 1994 Ser A (AMBAC)........... 6.45 07/01/17 3,113,220
------- ---------
Mortgage Revenue -- Single Family (3.2%)
1,995 California Housing Finance Agency, 1995 Ser B (AMT) (AMBAC).............. 6.25 08/01/14 2,021,653
------- ---------
Public Facilities Revenue (3.1%)
1,000 Glendale Unified School District, 1994 Ser A COPs (AMBAC)................ 6.00 03/01/19 1,022,840
1,000 Los Angeles Convention & Exhibition Center Authority, 1993 Refg Ser A
(MBIA).................................................................. 5.375 08/15/18 953,650
------- ---------
2,000 1,976,490
------- ---------
Tax Allocation (24.8%)
3,000 Bay Area Government Association, Pool 1994 Ser A (FSA)................... 6.00 12/15/24 3,075,240
2,000 Brea Redevelopment Agency, Redev AB 1993 Refg Ser (MBIA)................. 5.75 08/01/23 1,994,380
2,000 Cerritos Public Finance Authority, Los Coyotes Redev Ser 1993 A
(AMBAC)................................................................. 5.75 11/01/22 1,994,640
3,000 Corona Redevelopment Agency, Area A 1994 Refg Ser A (FGIC)............... 6.25 09/01/13 3,201,750
3,000 Pittsburg Redevelopment Agency, Los Medanos Refg Ser 1993 A (AMBAC)...... 5.00 08/01/17 2,752,920
3,000 Yorba Linda Redevelopment Agency, Ser 1993 A (MBIA)...................... 5.25 09/01/23 2,795,880
------- ---------
16,000 15,814,810
------- ---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS October 31, 1996, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Transportation Facilities Revenue (11.5%)
$ 3,000 Los Angeles County Transportation Commission, Second Sr Ser 1992 A
(MBIA).................................................................. 6.00% 07/01/23 $ 3,062,460
San Francisco Airports Commission, San Francisco Int'l Airport
2,000 Second Ser Refg Issue 4 (MBIA)........................................... 6.00 05/01/20 2,045,380
2,000 Second Ser Refg Issue 2 (MBIA)........................................... 6.75 05/01/20 2,212,980
------- ---------
7,000 7,320,820
------- ---------
Water & Sewer Revenue (13.4%)
3,000 Central Coast Water Authority, Ser 1992 (AMBAC).......................... 6.60 10/01/22 3,299,220
2,900 Garden Grove Public Financing Authority, Ser 1993 (FGIC)................. 5.50 12/15/23 2,793,106
2,500 Los Angeles, Wastewater Refg Ser 1993 A (MBIA)........................... 5.70 06/01/20 2,477,450
------- ---------
8,400 8,569,776
------- ---------
Other Revenue (3.2%)
2,000 South Orange County Public Financing District #88-1, 1994 Ser A (MBIA)... 6.00 09/01/18 2,046,580
------- ---------
61,895 TOTAL CALIFORNIA TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $58,558,012)......................... 61,834,379
-------
---------
CALIFORNIA TAX-EXEMPT SHORT-TERM MUNICIPAL OBLIGATION (1.4%)
900 California Pollution Control Financing Authority, Southern California
------- Edison Co Ser 1986 B (Demand 11/01/96) (Identified Cost $900,000)....... 3.55* 02/28/08 900,000
---------
$62,795 TOTAL INVESTMENTS (Identified Cost $59,458,012) (a)...................................... 98.4% 62,734,379
=======
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................. 1.6 1,018,862
------ ---------
NET ASSETS................................................................................ 100.0% $63,753,241
====== =========
</TABLE>
- ---------------------
<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes approximates identified cost. The aggregate gross
unrealized appreciation was $3,277,096 and the aggregate gross unrealized depreciation was $729, resulting
in net unrealized appreciation of $3,276,367.
Bond Insurance:
AMBAC AMBAC Indemnity Corporation.
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> 7
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
ASSETS:
Investments in securities, at value
(identified cost $59,458,012)......................................... $62,734,379
Cash................................................................... 40,556
Interest receivable.................................................... 1,029,727
Deferred organizational expenses....................................... 18,616
Prepaid expenses....................................................... 3,104
---------
TOTAL ASSETS....................................................... 63,826,382
---------
LIABILITIES:
Investment management fee payable...................................... 20,772
Accrued expenses....................................................... 52,369
---------
TOTAL LIABILITIES.................................................. 73,141
---------
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, 4,245,213 shares outstanding)......................... 60,011,847
Net unrealized appreciation............................................ 3,276,367
Accumulated undistributed net investment income........................ 491,806
Accumulated net realized loss.......................................... (26,779)
---------
NET ASSETS......................................................... $63,753,241
=========
NET ASSET VALUE PER COMMON SHARE
($63,753,241 divided by 4,245,213 common shares outstanding).......... $15.02
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the year ended October 31, 1996
NET INVESTMENT INCOME:
INTEREST INCOME......................................................... $3,700,480
--------
EXPENSES
Investment management fee............................................... 224,846
Professional fees....................................................... 50,288
Shareholder reports and notices......................................... 24,383
Transfer agent fees and expenses........................................ 19,207
Registration fees....................................................... 16,862
Trustees' fees and expenses............................................. 16,176
Organizational expenses................................................. 8,019
Custodian fees.......................................................... 5,349
Other................................................................... 6,937
--------
TOTAL EXPENSES BEFORE EXPENSE OFFSET................................ 372,067
LESS: EXPENSE OFFSET................................................ (5,334)
--------
TOTAL EXPENSES AFTER EXPENSE OFFSET................................. 366,733
--------
NET INVESTMENT INCOME................................................... 3,333,747
--------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss....................................................... (25,529)
Net change in unrealized appreciation................................... 555,060
--------
NET GAIN............................................................ 529,531
--------
NET INCREASE............................................................ $3,863,278
========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................... $ 3,333,747 $ 3,295,918
Net realized gain (loss)............................ (25,529) 37,077
Net change in unrealized
appreciation/depreciation.......................... 555,060 6,919,822
----------- -----------
NET INCREASE.................................... 3,863,278 10,252,817
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS
FROM:
Net investment income............................... (3,230,079) (3,149,559)
Net realized gain................................... (38,327) --
----------- -----------
TOTAL........................................... (3,268,406) (3,149,559)
----------- -----------
Net decrease from transactions in shares of
beneficial interest................................ (1,310,404) (1,456,853)
----------- -----------
NET INCREASE (DECREASE)......................... (715,532) 5,646,405
NET ASSETS:
Beginning of period................................. 64,468,773 58,822,368
----------- -----------
END OF PERIOD
(Including undistributed net investment income
of $491,806 and $388,138, respectively)......... $63,753,241 $64,468,773
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1996
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'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 October 14,
1993 and commenced operations on February 28, 1994.
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 for the Trust by
an outside independent pricing service approved by the Trustees. The pricing
service has informed the Trust that in valuing the portfolio securities, it uses
both a computerized matrix of tax-exempt securities and evaluations by its
staff, in each case based on information concerning market transactions and
quotations from dealers which reflect the bid side of the market each day. The
portfolio securities are thus valued by reference to a combination of
transactions and quotations for the same or other securities believed to be
comparable in quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. Short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
The Trust amortizes premiums and accretes discounts over the life of the
respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences
<PAGE> 11
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1996, continued
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 $40,000 which 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.
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 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 proceeds from sales of portfolio securities, excluding short-term
investments, for the year ended October 31, 1996 aggregated $1,489,076.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At October 31, 1996, the Trust had transfer agent fees
and expenses payable of approximately $1,000.
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 preferred shares have a liquidation value of $50,000
<PAGE> 12
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS October 31, 1996, continued
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, 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, 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
Treasury shares purchased and retired (weighted average discount 10.42%)*........ (98,000) (980) (1,309,424)
--------- ------- -----------
Balance, October 31, 1996........................................................ 4,245,213 $ 42,452 $59,969,395
========= ======= ===========
</TABLE>
- ---------------------
* The 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
25,500 which will be available through October 31, 2004 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 RECORD PAYABLE
DATE PER SHARE DATE DATE
- ------------------ --------- ----------------- -------------------
<S> <C> <C> <C>
October 30, 1996.. $0.0675 November 8, 1996 November 22, 1996
November 26,
1996............. $0.0675 December 6, 1996 December 20, 1996
</TABLE>
<PAGE> 13
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,
FOR THE YEAR FOR THE YEAR 1994*
ENDED ENDED THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996** 1995** 1994**++
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................................ $14.84 $13.15 $14.06
-------- -------- ---------
Net investment income............................................... 0.78 0.76 0.41
Net realized and unrealized gain (loss)............................. 0.12 1.59 (0.92)
-------- -------- ---------
Total from investment operations.................................... 0.90 2.35 (0.51)
-------- -------- ---------
Less dividends and distributions from:
Net investment income............................................ (0.75) (0.72) (0.36)
Net realized gain................................................ (0.01) -- --
-------- -------- ---------
Total dividends and distributions................................... (0.76) (0.72) (0.36)
Anti-dilutive effect of acquiring treasury shares................... 0.04 0.04 0.04
Offering costs charged against capital.............................. -- 0.02 (0.08)
-------- -------- ---------
Net asset value, end of period...................................... $15.02 $14.84 $13.15
=========
Market value, end of period......................................... $13.50 $12.50 $11.00
=========
TOTAL INVESTMENT RETURN+............................................ 14.33% 20.51% (24.55)%(1)
RATIOS TO AVERAGE NET ASSETS:
Total expenses before expense offset................................ 0.58%(4) 0.72%(3) 0.65%(2)
Net investment income............................................... 5.22% 5.35%(3) 4.45%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................. $63,753 $64,469 $58,822
Portfolio turnover rate............................................. -- 3% --
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* 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, after expense offset,
which reflect 0.01% effect for custody cash credits.
(4) The above expense ratio would have been 0.57% after expense offset, which reflects 0.01% effect for custody cash credits.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 14
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, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for the two
years in the period then ended and for the period 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, 1996 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 9, 1996
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1996 FEDERAL TAX NOTICE (unaudited)
During the fiscal year ended October 31, 1996, the Trust paid
to the common shareholders $0.75 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. For the fiscal year
ended October 31, 1996, the Trust paid to the common
shareholders $0.01 per share from long-term capital gains.
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TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
INTER CAPITAL
INSURED
CALIFORNIA
MUNICIPAL SECURITIES
ANNUAL REPORT
OCTOBER 31, 1996
