<PAGE> 1
INTERCAPITAL INCOME SECURITIES INC.
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- - --------------------------------------------------------------------------------
The six-month period ended March 31, 1994 was a turbulent time for
fixed-income markets. A rapidly growing economy created fears of rising
inflation to which the Federal Reserve Board responded by raising the
federal-funds rate, the interest rate banks charge each other for overnight
loans, by a total of 0.5 percentage points, from 3.00 percent to 3.50 percent,
in two separate moves. Although this action was presented as a pre-emptive
strike against inflation, investors interpreted the move as the beginning of
trend toward gradually rising interest rates. By March 31, 1994 interest rates
on intermediate-and long-term U.S. Treasury securities were higher by 1.00 to
1.50 percentage points compared to September 30, 1993 levels. U.S. Treasury
bonds due in 30 years ended March yielding 7.09 percent versus 6.03 percent six
months earlier.
While higher interest rates have been responsible for reducing InterCapital
Income Securities' net asset value, this scenario is beginning to generate
attractive yields on longer-term bonds. As a result, we are returning to a more
aggressive investment strategy by extending maturities.
For the six months ended March 31, 1994, corporate bonds returned -3.66
percent versus -3.34 percent for U.S. Government securities, as measured by
Lehman Brothers Government/Corporate Bond Index. The Index itself returned -3.41
percent. Although the Fund's overall performance for the period was
disappointing, it did do better than the general market, registering a total
return of -2.51 percent based on a change in net asset value from $19.14 per
share on October 1, 1993 to $17.88 per share on March 31, 1994 and the
distribution of income dividends totaling $0.84 per share. Based on a change in
the Fund's New York Stock Exchange market price from $21.375 per share October
1, 1993 to $19.125 per share on March 31, 1994, the Fund's total return was
- - -6.77 percent.
The Fund was better able to preserve assets because of the defensive
posture maintained throughout the second half of 1993 and early 1994. Between
October and January, new investments emphasized higher-coupon callable utilities
yielding at least 1 percentage point above 30-year U.S. Treasury bonds. The
substantial incremental yield offered by utilities reflects this sector's
defensive nature. Sales were concentrated in 30-year lower-yielding non-callable
corporate bonds. After the Federal Reserve Board's initial 25-basis-point move
on February 4, 1994, the Fund began slowly extending maturities by reinvesting
proceeds from called bonds into 20-and 30-year corporate bonds at yields ranging
from 8.40 percent to 8.80 percent. Transactions during the period increased the
Fund's corporate holdings to approximately 81 percent of the portfolio from 75
percent on September 30, 1993. The Fund's U.S. Treasury holdings declined to 19
percent of the portfolio from 24 percent. The portfolio's average rating as of
March 31 was BBB+, as rated by Standard & Poor's Corp. At the end of the period,
the Fund maintained approximately 52 percent of its holdings in securities due
in more than 10 years. Maturities between 5 and 10 years accounted for an
additional 36 percent of the portfolio. Approximately 12 percent of the
portfolio was expected to mature or be called within 12 months.
On March 31, the Fund's net assets totaled more than $218 million. The
average coupon in the portfolio was 10.18 percent and the average duration was
5.76 years. The average maturity was 17.54 years; adjusted for likely calls and
refundings, the average maturity was 12.46 years.
<PAGE> 2
During the last six months, the Fund was faced with calls and refundings on
bonds totaling more than $12.1 million. High-coupon maturities accounted for an
additional $8.9 million. Despite the recent rise in interest rates, the income
lost could not be recaptured. With this further reduction of coupon income the
Fund's Board of Directors declared a new monthly dividend of $0.13 per share to
begin with the April 22, 1994 payment to shareholders of record on April 8,
1994.
The coming months will likely be just as challenging for fixed-income
investors as the period just ended. From all indications, economic growth should
proceed at a healthy pace during the coming quarters, but with few visible signs
of rising inflation, today's higher-interest-rate environment may provide
attractive investment opportunities.
We appreciate your support of InterCapital Income Securities Inc. and look
forward to continuing to serve your investment needs.
Very truly yours,
Charles A. Fiumefreddo
Chairman of the Board
<PAGE> 3
INTERCAPITAL INCOME SECURITIES INC.
PORTFOLIO OF INVESTMENTS March 31, 1994 (unaudited)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- - ---------- ------ -------- ------------
<S> <C> <C> <C> <C>
CORPORATE BONDS - UTILITIES (24.4%)
ELECTRIC (19.2%)
$ 3,000 Alabama Power Co............................................. 7.30 % 11/ 1/23 $ 2,707,170
2,000 CTC Mansfield Funding Corp................................... 11.125 9/30/16 2,110,000
4,325 Commonwealth Edison Co....................................... 8.875 10/ 1/21 4,463,443
2,000 Commonwealth Edison Co....................................... 8.625 2/ 1/22 2,019,680
4,500 First P.V. Funding Corp...................................... 10.30 1/15/14 4,522,500
1,000 Georgia Power Co............................................. 9.23 12/ 1/19 1,003,140
1,000 Long Island Lighting Co...................................... 8.90 7/15/19 963,880
5,000 Long Island Lighting Co...................................... 9.625 7/ 1/24 5,151,850
1,000 Northern States Power Co..................................... 9.375 6/ 1/20 1,116,470
6,000 Pennsylvania Power & Light Co................................ 8.50 5/ 1/22 6,216,180
1,000 Southern California Edison Co................................ 9.25 12/ 1/22 1,091,110
2,500 Texas Utilities Electric Co.................................. 9.875 11/ 1/19 2,729,450
3,000 Texas Utilities Electric Co.................................. 8.50 8/ 1/24 3,038,790
4,300 United Illuminating Co....................................... 10.24 1/ 2/20 4,723,163
------------
41,856,826
------------
GAS (1.7%)
3,600 Southwest Gas Corp........................................... 9.375 2/ 1/17 3,750,480
------------
TELEPHONE (3.5%)
1,000 Alltel Corp.................................................. 9.50 3/ 1/21 1,102,670
6,000 Northwestern Bell Telephone Co............................... 9.125 12/ 1/30 6,518,580
------------
7,621,250
------------
TOTAL CORPORATE BONDS - UTILITIES
(IDENTIFIED COST $53,119,772...................................................... 53,228,556
------------
CORPORATE BONDS (54.7%)
AIRLINES (5.7%)
5,000 Delta Airlines, Inc.......................................... 9.30 1/ 2/10 4,993,550
3,000 Delta Airlines, Inc.......................................... 10.125 5/15/10 3,235,740
4,300 United Airlines, Inc......................................... 9.35 4/ 7/16 4,137,804
------------
12,367,094
------------
BANK HOLDING COMPANIES (0.8%)
1,571 Citicorp..................................................... 10.75 12/15/15 1,729,561
------------
BANKS (3.5%)
6,000 Continental Bank, N.A........................................ 12.50 4/ 1/01 7,639,980
------------
COMPUTER EQUIPMENT (0.5%)
1,000 Unisys Corp.................................................. 13.50 7/ 1/97 1,130,000
------------
ENTERTAINMENT, GAMING & LODGING (0.2%)
446 Trump Castle Funding, Inc.................................... 11.75 11/15/03 396,495
92 Trump Castle Funding, Inc.................................... 0.00+ 11/15/05 81,942
------------
478,437
------------
FOOD, BEVERAGE & TOBACCO (2.8%)
4,695 RJR Nabisco, Inc............................................. 8.75 4/15/04 4,371,609
1,800 RJR Nabisco, Inc............................................. 8.75 8/15/05 1,666,746
------------
6,038,355
------------
FOREIGN BANK (0.9%)
2,000 Bank of China................................................ 8.25 3/15/14 1,895,000
------------
FOREST & PAPER PRODUCTS (2.8%)
5,000 Georgia Pacific Corp......................................... 9.625 3/15/22 5,442,550
685 Stone Container Corp......................................... 11.50 9/ 1/99 657,600
------------
6,100,150
------------
</TABLE>
<PAGE> 4
INTERCAPITAL INCOME SECURITIES INC.
PORTFOLIO OF INVESTMENTS March 31, 1994 (unaudited) (continued)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount (in Coupon Maturity
thousands) Rate Date Value
- - ---------- ------ -------- ------------
<S> <C> <C> <C> <C>
GAS TRANSMISSION (1.1%)
$ 3,100 Tennessee Gas Pipeline Co.................................... 6.00 % 12/15/11 $ 2,463,756
------------
HOTEL (1.8%)
3,802 Host Marriott Corp........................................... 11.00 5/ 1/07 3,859,030
------------
INDUSTRIALS (3.0%)
5,000 Columbia Healthcare Corp..................................... 7.50 12/15/23 4,585,800
2,000 Time Warner Entertainment Co................................. 8.375 7/15/33 1,908,200
------------
6,494,000
------------
INSURANCE & FINANCIAL SERVICES (6.8%)
4,750 Heller, Walter E. & Co....................................... 13.00 9/15/94 4,935,915
2,000 Lehman Brothers, Inc......................................... 12.50 10/15/94 2,082,880
3,000 Morgan Stanley Group, Inc.................................... 7.25 10/15/23 2,663,730
2,000 Paine Webber Group, Inc...................................... 7.625 2/15/14 1,863,900
3,000 Penn Central Corp............................................ 10.875 5/ 1/11 3,416,430
------------
14,962,855
------------
MANUFACTURING (4.2%)
875 Formica Corp................................................. 14.00 10/1/99 931,875
4,000 Noranda, Inc................................................. 8.00 6/1/03 3,996,000
2,000 Weirton Steel Corp........................................... 10.875 10/15/99 2,025,000
2,400 Westinghouse Electric Corp................................... 7.875 9/1/23 2,140,128
------------
9,093,003
------------
METALS & MINING (1.0%)
2,000 Inco, Ltd.................................................... 9.60 6/15/22 2,138,940
------------
OIL RELATED (9.7%)
719 Getty Petroleum Corp......................................... 14.00 8/ 1/00 780,115
5,200 Lasmo (USA), Inc............................................. 8.375 6/ 1/23 4,921,644
2,000 Occidental Petroleum Co...................................... 9.625 7/ 1/99 2,116,280
7,240 Occidental Petroleum Co...................................... 11.75 3/15/11 8,251,428
5,000 Phillips Petroleum Co........................................ 8.49 1/ 1/23 5,009,600
------------
21,079,067
------------
RETAIL DEPARTMENT STORES (3.3%)
4,000 Dayton Hudson Co............................................. 7.65 8/ 1/23 3,702,600
2,850 K Mart Corp.................................................. 13.50 1/ 1/09 3,563,013
------------
7,265,613
------------
TELECOMMUNICATIONS (4.3%)
5,000 American Telephone and Telegraph Co.......................... 8.625 12/ 1/31 5,233,600
4,000 Telecommunications, Inc...................................... 9.25 1/15/23 4,072,160
------------
9,305,760
------------
TRANSPORTATION (2.3%)
5,000 Ryder Systems, Inc........................................... 9.375 1/15/98 5,164,700
------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $120,458,437).................................................... 119,205,301
------------
U.S. GOVERNMENT AGENCIES & OBLIGATIONS (18.3%)
1,000 Federal National Mortgage Association Multi-Currency(b)...... 12.95 3/ 9/95 397,500
2,500 Federal National Mortgage Association Multi-Currency(b)...... 13.05 6/ 7/95 737,500
1,000 U.S. Treasury Bond........................................... 7.125 2/15/23 989,063
4,000 U.S. Treasury Note........................................... 11.625 11/15/94 4,176,250
30,910 U.S. Treasury Note........................................... 12.625 5/15/95 33,595,306
------------
TOTAL U.S. GOVERNMENT AGENCIES & OBLIGATIONS
(IDENTIFIED COST $44,624,369)..................................................... 39,895,619
------------
</TABLE>
<PAGE> 5
INTERCAPITAL INCOME SECURITIES INC.
PORTFOLIO OF INVESTMENTS March 31, 1994 (unaudited) (continued)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Shares Value
- - ---------- ------------
<S> <C> <C>
COMMON STOCKS (0.1%)
HOTELS (0.1%)
6,016 Host Marriott Corp.(a).............................................................. $ 60,160
6,016 Marriott International, Inc......................................................... 169,200
------------
TOTAL COMMON STOCKS (IDENTIFIED COST $201,536)...................................... 229,360
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount (in
thousands)
- - ----------
<S> <C> <C> <C>
REPURCHASE AGREEMENT (0.2%)
$ 462 The Bank of New York 3.50% due 4/4/94 (dated 3/31/94; proceeds $462,486;
collateralized by $485,835 U.S. Treasury Note 6.25% due 2/15/03
valued at $471,690) (Identified Cost $462,441).................................... 462,441
------------
TOTAL INVESTMENTS (IDENTIFIED COST $218,866,555) (C)................... 97.7% 213,021,277
OTHER ASSETS IN EXCESS OF LIABILITIES.................................. 2.3 5,065,221
-------- ------------
NET ASSETS............................................................. 100.0% $218,086,498
-------- ------------
-------- ------------
</TABLE>
- - ---------------
<TABLE>
<S> <C>
+ Payment in kind security.
(a) Non-income producing.
(b) Principal Exchange Rate Linked security.
(c) The aggregate cost for federal income tax purposes is $219,036,896; the aggregate gross unrealized appreciation
is $6,077,767 and the aggregate gross unrealized depreciation is $12,093,386, resulting in net unrealized
depreciation of $6,015,619.
</TABLE>
See Notes to Financial Statements
<PAGE> 6
INTERCAPITAL INCOME SECURITIES INC.
FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1994 (unaudited)
- - -------------------------------------------
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $218,866,555) (Note
1)....................................... $ 213,021,277
Interest receivable........................ 6,201,272
Prepaid expenses and other assets.......... 36,795
-------------
TOTAL ASSETS....................... 219,259,344
-------------
LIABILITIES:
Payable for:
Investments purchased.................... 1,008,591
Investment management fee (Note 2)....... 103,893
Accrued expenses (Note 3).................. 60,362
-------------
TOTAL LIABILITIES.................. 1,172,846
-------------
NET ASSETS:
Paid-in-capital............................ 243,371,561
Accumulated net realized loss on
investments.............................. (20,023,619)
Net unrealized depreciation on
investments.............................. (5,845,278)
Accumulated undistributed net investment
income................................... 583,834
-------------
NET ASSETS......................... $ 218,086,498
-------------
-------------
NET ASSET VALUE PER SHARE,
12,200,518 shares outstanding (15,000,000
shares authorized of $.01 par value)..... $17.88
------
------
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS For the six months
ended March 31, 1994 (unaudited)
- - -------------------------------------------
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME........................... $ 10,816,392
-------------
EXPENSES
Investment management fee (Note 2)....... 571,665
Transfer agent fees and expenses......... 67,760
Professional fees........................ 28,143
Directors' fees and expenses (Note 3).... 15,910
Custodian fees........................... 14,014
Registration fees........................ 12,080
Shareholder reports and notices.......... 2,730
Other.................................... 7,334
-------------
TOTAL EXPENSES......................... 719,636
-------------
INVESTMENT INCOME - NET.............. 10,096,756
-------------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS (NOTE 1):
Net realized loss on investments......... (507,290)
Net change in unrealized depreciation on
investments............................ (14,357,617)
-------------
NET LOSS ON INVESTMENTS................ (14,864,907)
-------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS.................... $ (4,768,151)
-------------
-------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the six
months ended For the
March 31, 1994 year ended
(unaudited) September 30, 1993
-------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.................................................... $ 10,096,756 $ 20,618,704
Net realized gain (loss) on investments.................................. (507,290) 3,273,273
Net change in unrealized appreciation (depreciation) on investments...... (14,357,617) 1,283,966
------------- ---------------
Net increase (decrease) in net assets resulting from operations...... (4,768,151) 25,175,943
Dividends to shareholders from net investment income....................... (10,248,435) (20,496,870)
------------- ---------------
Total increase (decrease)............................................ (15,016,586) 4,679,073
NET ASSETS:
Beginning of period........................................................ 233,103,084 228,424,011
------------- ---------------
END OF PERIOD (including undistributed net investment income of $583,834
and $735,513, respectively)............................................... $218,086,498 $233,103,084
------------- ---------------
------------- ---------------
</TABLE>
See Notes to Financial Statements
<PAGE> 7
INTERCAPITAL INCOME SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS (unaudited)
- - --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- InterCapital Income Securities Inc.
(the "Fund") is registered under the Investment Company Act of 1940, as amended
(the "Act"), as a diversified, closed-end management investment company. The
Fund commenced operations on April 6, 1973.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- (1) an equity portfolio security listed or
traded on the New York or American Stock Exchange is valued at its latest
sale price on that exchange (if there were no sales that day, the security
is valued at the latest bid price); (2) all other portfolio securities for
which over-the-counter market quotations are readily available are valued
at the latest bid price; (3) when market quotations are not readily
available, portfolio securities are valued at their fair value as
determined in good faith under procedures established by and under the
general supervision of the Fund's Board of Directors (valuation of
securities for which market quotations are not readily available may be
based upon current market prices of securities which are comparable in
coupon, rating and maturity or an appropriate matrix utilizing similar
factors); (4) certain of the Fund's portfolio securities may be valued by
an outside pricing service approved by the Fund's Directors. The pricing
service utilizes a matrix system incorporating security quality, maturity
and coupon as the evaluation model parameters, and/or research and
evaluations by its staff, including review of broker-dealer market price
quotations, in determining what it believes is the fair valuation of the
portfolio securities valued by such pricing service; and (5) short-term
debt securities with remaining maturities of 60 days or less at time of
purchase are valued at amortized cost; other short-term securities are
valued on a mark-to-market basis until such time as they reach a remaining
maturity of 60 days, whereupon they are valued at amortized cost using
their value on the 61st day. All other securities and other assets are
valued at their fair value as determined in good faith under procedures
established by and under the supervision of the Directors.
B. Accounting for Investments -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). In computing
net investment income, the Fund does not amortize premiums or accrue
discounts on fixed income securities in the portfolio, except those
original issue discounts for which amortization is required for federal
income tax purposes. Additionally, with respect to market discount, a
portion of any capital gain realized upon disposition may be
recharacterized as investment income. Realized gains and losses on security
transactions are determined on the identified cost method. Dividend income
is recorded on the ex-dividend date. Interest income is accrued daily.
C. Federal Income Tax Status -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. Dividends and Distributions to Shareholders -- The Fund 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 that 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
reclassifications. Divi-
<PAGE> 8
INTERCAPITAL INCOME SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- - --------------------------------------------------------------------------------
dends 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. Repurchase Agreements -- When the Fund enters into a repurchase
agreement, the Fund's custodian takes possession on behalf of the Fund of
the collateral pledged for investments in repurchase agreements. It is the
policy of the Fund to value the underlying collateral daily on a mark-
to-market basis to determine that the value, including accrued interest, is
at least equal to the repurchase price plus accrued interest. In the event
of default of the obligation to repurchase, the Fund has the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement (the "Agreement") with Dean Witter InterCapital, Inc. (the "Investment
Manager"), the Fund pays its Investment Manager a management fee, calculated at
the rate of 1/2 of 1% per annum of the average weekly net assets of the Fund,
payable monthly. Under the terms of the Agreement, in addition to managing the
Fund's investments, the Investment Manager maintains certain of the Fund's books
and records and furnishes office space and facilities, equipment, clerical,
bookkeeping and certain legal services, and pays the salaries of all personnel,
including officers of the Fund who are employees of the Investment Manager. The
Investment Manager also bears the cost of the telephone services, heat, light,
power and other utilities provided to the Fund.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and the proceeds from sales of portfolio securities for the six months
ended March 31, 1994, excluding short-term investments, aggregated $107,062,331
and $110,010,548, respectively, including purchases and sales of U.S. Government
securities of $23,022,500 and $36,603,912, respectively.
On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Directors of the Fund who will
have served as an Independent Director for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension cost for
the six months ended March 31, 1994, included in Directors' fees and expenses in
the Statement of Operations, amounted to $4,577. At March 31, 1994, the Fund had
an accrued pension liability of $40,677 which is included in accrued expenses in
the Statement of Assets and Liabilities.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Fund's transfer agent. At March 31, 1994, the Fund had transfer agent fees and
expenses payable of $17,330.
4. FEDERAL INCOME TAX STATUS -- During the year ended September 30, 1993, the
Fund utilized approximately $3,297,000 of its net capital loss carryovers. At
September 30, 1993, the Fund had net capital loss carryovers of approximately
$19,339,000 of which $153,000 will be available through September 30, 1997,
$3,434,000 will be available through September 30, 1998, $13,382,000 will be
available through September 30, 1999 and $2,370,000 will be available through
September 30, 2000 to offset future capital gains to the extent provided by
regulations. To the extent that these carryover losses are used to offset future
capital gains, it is probable that the gains so offset will not be distributed
to shareholders.
<PAGE> 9
INTERCAPITAL INCOME SECURITIES INC.
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- - --------------------------------------------------------------------------------
As of September 30, 1993, the Fund had temporary book/tax differences
primarily attributable to capital loss deferrals on wash sales and permanent
book/tax differences primarily attributable to expired capital loss carryovers
and foreign currency gains. To reflect reclassifications arising from permanent
book/tax differences as of September 30, 1993, accumulated undistributed net
investment income was credited $329,952, accumulated net realized loss on
investments was credited $20,282,561 and paid-in capital was charged
$20,612,513. The Investment Manager has determined that distribution of paid-in
capital is likely to occur.
5. CAPITAL STOCK TRANSACTIONS -- Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Par Value Capital Paid
of in Excess of
Shares Shares Par Value
----------- --------- -------------
<S> <C> <C> <C>
Balance, September 30, 1992, September 30, 1993
and March 31, 1994................................... 12,200,518 $ 122,003 $ 263,862,071
----------- --------- -------------
----------- --------- -------------
</TABLE>
6. DIVIDENDS -- On March 29, 1994, the Fund declared the following dividends
from net investment income --
<TABLE>
<CAPTION>
Amount Per Record Payable
Share Date Date
- - ---------- -------------- --------------
<S> <C> <C>
$.13 ..................................... April 8, 1994 April 22, 1994
$.13 ..................................... May 5, 1994 May 20, 1994
$.13 ..................................... June 10, 1994 June 24, 1994
</TABLE>
7. SELECTED QUARTERLY FINANCIAL DATA --
<TABLE>
<CAPTION>
Quarters Ended*
----------------------------------
3/31/94 12/31/93
---------------- ---------------
Per Per
Total Share Total Share
-------- ----- ------- -----
<S> <C> <C> <C> <C>
Total investment income................................... $ 5,346 $ .44 $ 5,470 $ .45
Investment income - net................................... 4,975 .41 5,122 .42
Realized and unrealized loss on investments - net......... (10,422) (.85) (4,443) (.37)
</TABLE>
<TABLE>
<CAPTION>
Quarters Ended*
--------------------------------------------------------------------
9/30/93 6/30/93 3/31/93 12/31/92
-------------- -------------- ---------------- ---------------
Per Per Per Per
Total Share Total Share Total Share Total Share
------ ----- ------ ----- -------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income....... $5,664 $.46 $5,313 $.44 $ 5,521 $ .45 $ 5,616 $ .46
Investment income - net....... 5,319 .44 4,950 .40 5,128 .42 5,222 .43
Realized and unrealized gain
(loss) on
investments - net........... 1,999 .17 1,961 .16 5,520 .45 (4,923) (.40)
</TABLE>
- - ---------------
*Totals expressed in thousands of dollars.
<PAGE> 10
INTERCAPITAL INCOME SECURITIES INC.
FINANCIAL HIGHLIGHTS (unaudited)
- - --------------------------------------------------------------------------------
Selected ratios and per share data for a share of capital stock outstanding
throughout each period:
<TABLE>
<CAPTION>
For the six For the year ended September 30,
months ended ----------------------------------------------------
March 31, 1994 1993 1992 1991 1990 1989
-------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................ $19.11 $ 18.72 $ 18.03 $ 16.97 $ 18.83 $ 19.28
-------------- -------- -------- -------- -------- --------
Net investment income............. .83 1.69 1.79 1.94 2.03 2.14
Net realized and unrealized gain
(loss) on investments........... (1.22) .38 .79 .96 (1.79) (.49)
-------------- -------- -------- -------- -------- --------
Total from investment operations.... (.39) 2.07 2.58 2.90 .24 1.65
Dividends from net
investment income................. (.84) (1.68) (1.89) (1.84) (2.10) (2.10)
-------------- -------- -------- -------- -------- --------
Net asset value, end of period...... $17.88 $ 19.11 $ 18.72 $ 18.03 $ 16.97 $ 18.83
-------------- -------- -------- -------- -------- --------
-------------- -------- -------- -------- -------- --------
Market value, end of period......... $19.125 $ 21.375 $ 22.50 $ 20.50 $ 20.00 $ 21.125
-------------- -------- -------- -------- -------- --------
-------------- -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN+.............. (6.77)%(1) 2.97% 19.91% 13.40% 5.31% 9.77%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands).................... $218,086 $233,103 $228,424 $218,524 $199,519 $215,056
Ratio of expenses to average net
assets............................ .63% (2) .66% .69% .72% .72% .67%
Ratio of net investment income to
average net assets................ 8.78% (2) 9.04% 9.69% 11.11% 11.23% 11.18%
Portfolio turnover rate............. 48% 85% 61% 56% 61% 88%
</TABLE>
- - ---------------
<TABLE>
<S> <C>
+ Total investment return is based upon the current market value on the first
and last day of each period reported. Dividends and distributions are
assumed to be reinvested at the prices obtained under the Fund's dividend
reinvestment plan. Total investment return does not reflect sales charges or
brokerage commissions.
(1) Not Annualized.
(2) Annualized.
</TABLE>
See Notes to Financial Statements
- - --------------------------------------------------------------------------------
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly they
do not express an opinion thereon.
<PAGE> 11
(This Page Intentionally Left Blank)
<PAGE> 12
BOARD OF DIRECTORS
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Rochelle G. Siegel
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
LEGAL COUNSEL
Sheldon Curtis
Two World Trade Center
New York, New York 10048
INDEPENDENT ACCOUNTANTS
Price Waterhouse
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
INCOME
SECURITIES
INC.
Semiannual Report
March 31, 1994
