<PAGE> 1
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES Two World Trade Center,
New York, New York 10048
LETTER TO THE SHAREHOLDERS April 30, 1998
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of
InterCapital Insured California Municipal Securities (ICS) for the period ended
April 30, 1998.
Since last fall domestic economic growth has been tempered by the deflationary
impact of the Asian financial crisis. U.S. employment conditions strengthened
and the unemployment rate declined to its lowest level since 1970. Inflation
remained subdued despite the robust economy. In part this was the result of
productivity gains and the lower costs of oil and other imports. Foreign
currency turmoil strengthened the value of the U.S. dollar and created demand
for U.S. Treasury securities. Municipal bonds followed the trend of Treasuries
and yields declined to levels last seen 20 years ago. The bond market rally was
also aided by prospects of the first federal budget surplus in more than two
decades.
MUNICIPAL MARKET CONDITIONS
Long-term insured index yields ended April 1998 at 5.35 percent after reaching a
low of 5.15 percent in December and January. Over the past
BOND YIELDS 1994-1998
<TABLE>
<CAPTION>
Insured Municipal
30-Year 30-Year U.S. Revenue Yields
Insured Municipal Treasury as a Percentage of U.S.
Yields Yields Treasury Yields
<S> <C> <C> <C>
Dec '93 5.4 6.34 85.17%
5.4 6.24 86.54%
5.8 6.66 87.09%
6.4 7.09 90.27%
6.35 7.32 86.75%
6.25 7.43 84.12%
Jun '94 6.5 7.61 85.41%
6.25 7.39 84.57%
6.3 7.45 84.56%
6.55 7.81 83.87%
6.75 7.96 84.80%
7 8 87.50%
Dec '94 6.75 7.88 85.66%
6.4 7.7 83.12%
6.15 7.44 82.66%
6.15 7.43 82.77%
6.2 7.34 84.47%
5.8 6.66 87.09%
Jun '95 6.1 6.62 92.15%
6.1 6.86 88.92%
6 6.66 90.08%
5.95 6.48 91.82%
5.75 6.33 90.84%
5.5 6.14 89.56%
Dec '95 5.35 5.94 90.07%
5.4 6.03 89.55%
5.8 6.46 86.69%
5.85 6.66 87.84%
5.95 6.89 86.36%
6.05 6.99 86.55%
Jun '96 5.9 6.89 85.63%
5.85 6.97 83.93%
5.9 7.11 82.98%
5.7 6.93 82.25%
5.65 6.64 85.09%
5.5 6.35 86.61%
Dec '96 5.6 6.63 84.46%
5.7 6.79 83.95%
5.65 6.8 83.08%
5.9 7.1 83.10%
5.75 6.94 82.85%
5.65 6.91 81.77%
Jun '97 5.6 6.78 82.60%
5.3 6.3 84.00%
5.5 6.61 83.00%
5.4 6.4 84.40%
5.35 6.15 86.90%
5.3 6.05 87.60%
Dec '97 5.15 5.92 86.90%
Jan '98 5.15 5.8 88.80%
Feb.'98 5.2 5.92 87.80%
Mar '98 5.25 5.93 88.50%
Apr '98 5.35 5.95 89.90%
</TABLE>
Source: Municipal Market Data
<PAGE> 2
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS April 30, 1998, continued
12 months the insured index yield has declined from 5.75 percent. The yield on
one-year notes was 3.75 percent at the end of April 1998. Thus, the yield pickup
for extending maturities from 1 to 30 years was 160 basis points.
The overall decline in interest rates led to an increase in new-issue municipal
volume. In contrast the federal deficit has shrunk and the U.S. Treasury's
borrowing needs have declined. Under these conditions, the municipal rally
lagged the rally in Treasuries. The ratio of municipal yields to Treasury yields
improved from 87 percent in October to almost 90 percent in April. A year ago
the ratio was a relatively rich 83 percent. A rising ratio means that municipals
have underperformed Treasuries but have become relatively more attractive.
Total municipal volume increased 20 percent in 1997. New-issue supply totaled
$220 billion last year, with half the underwritings enhanced with bond
insurance. Overall, refundings represented one-quarter of total new issues.
California new-issue underwriting represented 13 percent of national volume. For
the year-to-date, municipal underwriting is up 60 percent with refunding issues
comprising nearly one-third of the total.
PERFORMANCE
During the six-month period ended April 30, 1998, the Trust's net asset value
(NAV) increased from $15.50 to $15.53. Based on this NAV change plus
reinvestment of tax-free dividends totaling $0.39 per share, the Trust's total
NAV return was 2.83 percent. ICS's price on the New York Stock Exchange
increased from $14.375 to $14.625 per share. Based on this change in market
price plus reinvestment of dividends, the Trust's total market return was 4.42
percent. On April 30, 1998, ICS was trading at a 5.83 percent discount to NAV.
This means that the market price of the common stock was lower than the NAV.
Monthly dividends for the second quarter of 1998 were declared in March and
remained unchanged at $0.065 per share. The level of undistributed net
investment income decreased from $0.085 to $0.078 per share over the past six
months.
The Fund'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 may,
when appropriate, 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
2
<PAGE> 3
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS April 30, 1998, continued
LARGEST SECTORS as of April 30, 1998
(% of Net Assets)
<TABLE>
<S> <C>
TAX ALLOCATION 25%
HOSPITAL 15%
ALL OTHERS 14%
REFUNDED 12%
WATER & SEWER 9%
GENERAL OBLIGATION 9%
MORTGAGE 8%
TRANSPORTATION 8%
</TABLE>
Portfolio structure is subject to change.
CREDIT ENHANCEMENTS as of April 30, 1998
(% of Total Long-Term Portfolio)
<TABLE>
<S> <C>
MBIA 39%
AMBAC 32%
FSA 13%
FGIC 13%
CONNIE LEE 3%
</TABLE>
Portfolio structure is subject to change.
<TABLE>
<CAPTION>
CALL STRUCTURE as of April 30, 1998
(% of Total Long-Term Portfolio) WEIGHTED AVERAGE
Percent Callable CALL PROTECTION: 6 YEARS
YEARS BONDS CALLABLE
<S> <C>
1999 0%
2000 0%
2001 0%
2002 12%
2003 42%
2004 40%
2005 3%
2006 0%
2007 0%
2008 3%
2009+ 0%
</TABLE>
Portfolio structure is subject to change.
3
<PAGE> 4
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
LETTER TO THE SHAREHOLDERS April 30, 1998, continued
six-month period ended April 30, 1998, the Fund purchased and retired 2,000
shares of common stock at a weighted average market discount of 5.09 percent.
PORTFOLIO STRUCTURE
ICS remained fully invested in long-term municipal bonds during the period.
Investments were diversified among 12 long-term sectors and 26 credits. The
Trust's weighted average maturity and call protection were 21 and 6 years,
respectively. To assure timely payment of principal and interest, each position
in the portfolio was backed by triple "A" rated bond insurance.
LOOKING AHEAD
The economic fundamentals are in place for another year of solid, albeit less
spectacular, domestic growth in 1998. Events in Asia have strengthened the U.S.
dollar and contributed to lower interest rates. The Asian financial crisis seems
likely to moderate U.S. economic growth and inflationary pressures. While this
outlook is favorable for municipal bonds it is possible that the Federal Reserve
Board may begin to tighten monetary policy if capacity and labor constraints
cause cost pressures to mount.
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
4
<PAGE> 5
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS April 30, 1998 (unaudited)
<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 (9.1%)
$ 3,000 California, Various Purpose 03/01/94 (FSA).................. 5.50 % 03/01/20 $ 3,030,180
3,000 Mouton-Niguel Water District, 1993 Refg (MBIA).............. 5.00 09/01/19 2,889,300
------- -----------
6,000 5,919,480
------- -----------
Educational Facilities Revenue (2.5%)
1,500 California Educational Facilities Authority, National
------- University Ser 1994 (Connie Lee)........................... 6.20 05/01/21 1,623,600
-----------
Electric Revenue (1.6%)
1,000 Anaheim Public Financing Authority, San Juan 2nd Ser
------- (FGIC)..................................................... 5.75 10/01/22 1,029,230
-----------
Hospital Revenue (15.3%)
2,000 Anaheim, Anaheim Memorial Hospital Association COPs
(AMBAC).................................................... 5.125 05/15/20 1,932,060
3,000 California Health Facilities Financing Authority, Catholic
Healthcare West Ser 1994 B (AMBAC)......................... 5.00 07/01/21 2,842,200
3,000 California Statewide Communities Development Authority,
Sharp Health Care COPs (MBIA).............................. 6.00 08/15/24 3,165,930
2,000 San Mateo County Joint Powers Financing Authority, San Mateo
County Health Center 1994 Ser A (FSA)...................... 5.75 07/15/22 2,065,820
------- -----------
10,000 10,006,010
------- -----------
Mortgage Revenue - Multi-Family (4.9%)
3,000 Los Angeles Community Redevelopment Agency, 1994 Ser A
------- (AMBAC).................................................... 6.45 07/01/17 3,177,150
-----------
Mortgage Revenue - Single Family (3.1%)
1,950 California Housing Financing Agency, 1995 Ser B (AMT)
------- (AMBAC).................................................... 6.25 08/01/14 2,027,649
-----------
Public Facilities Revenue (3.2%)
1,000 Glendale Unified School District, 1994 Ser A COPs (AMBAC)... 6.00 03/01/19 1,059,450
1,000 Los Angeles Convention & Exhibition Center Authority, 1993
Refg Ser A (MBIA).......................................... 5.375 08/15/18 1,002,600
------- -----------
2,000 2,062,050
------- -----------
Tax Allocation Revenue (25.2%)
3,000 Bay Area Government Association, Pool 1994 Ser A (FSA)...... 6.00 12/15/24 3,192,780
2,000 Brea Redevelopment Agency, 1993 Refg Ser AB (MBIA).......... 5.75 08/01/23 2,060,700
2,000 Cerritos Public Finance Authority, Los Coyotes Redev Ser
1993 A (AMBAC)............................................. 5.75 11/01/22 2,062,600
3,000 Corona Redevelopment Agency, Area A 1994 Refg Ser A
(FGIC)..................................................... 6.25 09/01/13 3,294,990
3,000 Pittsburg Redevelopment Agency, Los Medanos Refg Ser 1993 A
(AMBAC).................................................... 5.00 08/01/17 2,898,990
3,000 Yorba Linda Redevelopment Agency, Ser 1993 A (MBIA)......... 5.25 09/01/23 2,958,420
------- -----------
16,000 16,468,480
------- -----------
Transportation Facilities Revenue (8.0%)
San Francisco Airports Commission, San Francisco Int'l
Airport
2,000 Second Ser Refg Issue 4 (MBIA)............................. 6.00 05/01/20 2,112,120
2,000 Second Ser Refg Issue 2 (MBIA)............................. 6.75 05/01/20 2,208,820
1,000 San Francisco Bay Area Rapid Transit District, Sales Tax Ser
1998 (AMBAC)............................................... 4.75 07/01/23 918,770
------- -----------
5,000 5,239,710
------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
PORTFOLIO OF INVESTMENTS April 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Water & Sewer Revenue (9.0%)
$ 1,000 Eastern Municipal Water District, Water & Sewer Refg Ser
1998 A COPs (FGIC)......................................... 4.75 % 07/01/23 $ 913,610
2,900 Garden Grove Public Finance Authority, Water Ser 1993
(FGIC)..................................................... 5.50 12/15/23 2,928,565
2,000 Los Angeles, Wastewater Refg Ser 1993 A (MBIA).............. 5.70 06/01/20 2,054,960
------- -----------
5,900 5,897,135
------- -----------
Other Revenue (3.3%)
2,000 South Orange County Public Financing District #88-1, 1994
------- Ser A (MBIA)............................................... 6.00 09/01/18 2,122,660
-----------
Refunded (11.8%)
3,000 Central Coast Water Authority, Ser 1992 (AMBAC)............. 6.60 10/04/02+ 3,329,100
3,000 Los Angeles County Transportation Commission, Second Sr Ser
1992 A (MBIA).............................................. 6.00 07/01/02+ 3,247,620
1,000 Sacramento Municipal Utility District, 1992 Ser B (MBIA).... 6.375 08/15/02+ 1,098,690
------- -----------
7,000 7,675,410
------- -----------
61,350 TOTAL CALIFORNIA TAX-EXEMPT MUNICIPAL BONDS (Identified
Cost $57,902,680).......................................... 63,248,564
------- -----------
CALIFORNIA TAX-EXEMPT SHORT-TERM MUNICIPAL OBLIGATION (1.4%)
900 California Statewide Communities Development Authority, John
------- Muir/Mt Diablo Health Ser 1997 (AMBAC) (Demand 05/01/98)
(Identified Cost $900,000)................................. 4.05 * 08/15/27 900,000
-----------
$62,250 TOTAL INVESTMENTS (Identified Cost $58,802,680) (a).................... 98.4% 64,148,564
=======
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................... 1.6 1,036,594
----- -----------
NET ASSETS.............................................................. 100.0% $65,185,158
===== ===========
</TABLE>
- ---------------------
<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
+ Prerefunded to call date shown.
* 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 $5,409,410 and the aggregate gross
unrealized depreciation is $63,526, resulting in net
unrealized appreciation of $5,345,884.
<CAPTION>
Bond Insurance:
- ---------------
<S> <C>
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
6
<PAGE> 7
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $58,802,680).............................. $64,148,564
Cash........................................................ 78,492
Interest receivable......................................... 1,002,389
Deferred organizational expenses............................ 6,653
Prepaid expenses............................................ 11,588
-----------
TOTAL ASSETS............................................ 65,247,686
-----------
LIABILITIES:
Investment management fee payable........................... 21,521
Accrued expenses............................................ 41,007
-----------
TOTAL LIABILITIES....................................... 62,528
-----------
NET ASSETS.............................................. $65,185,158
===========
COMPOSITION OF 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, 4,198,513 shares
outstanding)............................................... $59,355,572
Net unrealized appreciation................................. 5,345,884
Accumulated undistributed net investment income............. 329,362
Accumulated net realized gain............................... 154,340
-----------
TOTAL NET ASSETS........................................ $65,185,158
===========
NET ASSET VALUE PER COMMON SHARE
($65,185,158 divided by 4,198,513 common shares
outstanding)............................................... $15.53
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended April 30, 1998 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $1,788,204
----------
EXPENSES
Investment management fee................................... 114,444
Professional fees........................................... 27,739
Shareholder reports and notices............................. 13,011
Registration fees........................................... 8,313
Trustees' fees and expenses................................. 6,828
Transfer agent fees and expenses............................ 5,736
Organizational expenses..................................... 3,966
Custodian fees.............................................. 1,567
Other....................................................... 2,336
----------
TOTAL EXPENSES.......................................... 183,940
Less: expense offset........................................ (1,563)
----------
NET EXPENSES............................................ 182,377
----------
NET INVESTMENT INCOME................................... 1,605,827
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 181,496
Net change in unrealized appreciation....................... (45,844)
----------
NET GAIN................................................ 135,652
----------
NET INCREASE................................................ $1,741,479
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 1998 OCTOBER 31, 1997
- --------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 1,605,827 $ 3,271,980
Net realized gain (loss)............................. 181,496 (377)
Net change in unrealized appreciation................ (45,844) 2,115,361
----------- -----------
NET INCREASE..................................... 1,741,479 5,386,964
Dividends to common shareholders from net investment
income.............................................. (1,637,479) (3,402,772)
Decrease from transactions in common shares of
beneficial interest................................. (29,498) (626,777)
----------- -----------
TOTAL INCREASE................................... 74,502 1,357,415
NET ASSETS:
Beginning of period.................................. 65,110,656 63,753,241
----------- -----------
END OF PERIOD
(Including undistributed net investment income of
$329,362 and $361,014, respectively)............. $65,185,158 $65,110,656
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (unaudited)
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
10
<PAGE> 11
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (unaudited) continued
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 $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 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 six months ended April 30, 1998 aggregated
$1,895,470 and $2,247,520, respectively.
11
<PAGE> 12
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (unaudited) continued
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is
the Trust's transfer agent. At April 30, 1998, the Trust had transfer agent fees
and expenses payable of approximately $900.
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
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, 1996................................... 4,245,213 $42,452 $59,969,395
Treasury shares purchased and retired (weighted average
discount 6.99%)*........................................... (44,700) (447) (626,330)
--------- ------- -----------
Balance, October 31, 1997................................... 4,200,513 42,005 59,343,065
Treasury shares purchased and retired (weighted average
discount 5.09%)*........................................... (2,000) (20) (29,478)
--------- ------- -----------
Balance, April 30, 1998..................................... 4,198,513 $41,985 $59,313,587
========= ======= ===========
</TABLE>
- ---------------------
* The Trustees have voted to retire the shares purchased.
12
<PAGE> 13
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (unaudited) continued
6. FEDERAL INCOME TAX STATUS
At October 31, 1997, the Trust had a net capital loss carryover of approximately
$25,900 of which $25,500 will be available through October 31, 2004 and $400
will be available through October 31, 2005, to offset future capital gains to
the extent provided by regulations.
7. DIVIDENDS TO COMMON SHAREHOLDERS
On March 24, 1998, the Trust declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
- --------- ------------ -------------
<S> <C> <C>
$0.065 May 8, 1998 May 22, 1998
$0.065 June 5, 1998 June 19, 1998
</TABLE>
13
<PAGE> 14
INTERCAPITAL INSURED CALIFORNIA MUNICIPAL SECURITIES
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a common share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31** FEBRUARY 28, 1994*
MONTHS ENDED --------------------------------- THROUGH
APRIL 30, 1998** 1997 1996 1995 OCTOBER 31, 1994**
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......... $ 15.50 $ 15.02 $14.84 $13.15 $14.06
------- ------- ------ ------ ------
Net investment income......................... 0.38 0.78 0.78 0.76 0.41
Net realized and unrealized gain (loss)....... 0.04 0.50 0.12 1.59 (0.92)
------- ------- ------ ------ ------
Total from investment operations.............. 0.42 1.28 0.90 2.35 (0.51)
------- ------- ------ ------ ------
Less dividends and distributions from:
Net investment income...................... (0.39) (0.81) (0.75) (0.72) (0.36)
Net realized gain.......................... -- -- (0.01) -- --
------- ------- ------ ------ ------
Total dividends and distributions............. (0.39) (0.81) (0.76) (0.72) (0.36)
------- ------- ------ ------ ------
Anti-dilutive effect of acquiring treasury
shares....................................... -- 0.01 0.04 0.04 0.04
------- ------- ------ ------ ------
Offering costs charged against capital........ -- -- -- 0.02 (0.08)
======= ======= ====== ====== ======
Net asset value, end of period................ $ 15.53 $ 15.50 $15.02 $14.84 $13.15
======= ======= ====== ====== ======
Market value, end of period................... $14.625 $14.375 $13.50 $12.50 $11.00
======= ======= ====== ====== ======
TOTAL INVESTMENT RETURN+...................... 4.42%(1) 12.64% 14.33% 20.51% (24.55)%(1)
RATIOS TO AVERAGE NET ASSETS:
Total expenses................................ 0.56%(2) 0.56%(3) 0.58%(3) 0.72%(3) 0.65%(2)
Net investment income......................... 4.91%(2) 5.14% 5.22% 5.35% 4.45%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands....... $65,185 $65,111 $63,753 $64,469 $58,822
Portfolio turnover rate....................... 3%(1) -- -- 3% --
</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.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE> 15
(This Page Intentionally Left Blank)
<PAGE> 16
TRUSTEES
- -------------------------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
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
- -------------------------------------------------
Morgan Stanley Dean Witter Trust FSB
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
INSURED
CALIFORNIA
MUNICIPAL
SECURITIES
Semiannual Report
April 30, 1998
