<PAGE>
INTERCAPITAL INCOME SECURITIES, INC.
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
After continued upward pressure on interest rates during the final three
months of 1994, the first quarter of 1995 saw an overall interest rate decline.
By March 31, 1995, both corporate bond and U.S. Treasury security yields of
virtually all maturity levels had fallen, as illustrated by the following table.
<TABLE>
<CAPTION>
YIELD (%)
---------------------------------------
9/30/94 3/31/95 YIELD CHANGE
----------- ----------- -------------
<S> <C> <C> <C>
5-year corporate bond*........................................................... 7.74 7.54 -0.20
5-year U.S. Treasury note........................................................ 7.27 7.07 -0.20
10-year corporate bond*.......................................................... 8.23 7.83 -0.40
10-year U.S. Treasury bond....................................................... 7.59 7.19 -0.40
30-year corporate bond*.......................................................... 8.76 8.26 -0.50
30-year U.S. Treasury bond....................................................... 7.83 7.43 -0.40
<FN>
- ---------
* A3 RATING BY MOODY'S INVESTOR SERVICE, INC.
</TABLE>
This new market direction was the result primarily of a perception among
analysts and investors that the economy was slowing and that inflation would
remain subdued.
On average across the maturity spectrum, for the six months ended March 31,
1995, U.S. Government securities returned 5.07 percent, versus 6.38 percent for
corporate bonds. Over the same period, based on a change in the Fund's New York
Stock Exchange market price from $16.875 to $17.50 per share and reinvestment of
dividends, the Fund produced a total return of 8.62 percent, while based on a
change in net asset value from $16.93 to $17.18 per share and reinvestment of
dividends, the Fund produced a total return of 6.29 percent. The Lehman Brothers
Government Corporate Bond Index rose 5.37 percent for the same period. On March
31, 1995, the Fund's average maturity was 18.41 years. Adjusted for anticipated
early redemptions of portfolio securities, the average maturity was 13 years.
The average duration was 5.44 years (duration measures a bond fund's sensitivity
to interest rate increases and declines; basically, the effect of interest rate
fluctuations on a bond fund can be determined by multiplying its duration by the
percentage rates rise or fall). Corporate bonds comprised 78 percent of the
portfolio, U.S. Government securities 21 percent, with the remaining 1 percent
invested in money market instruments. The portfolio was diversified among 56
issues, with an average coupon of 9.64 percent and an average quality rating of
"A3," as measured by Moody's Investors Service, Inc. At the close of the period
under review, the Fund had net assets in excess of $209 million.
The Fund's performance for the six months ended March 31, 1995 was
reflective of its emphasis on longer-maturity corporate bonds, which fared
better than shorter-term issues. Indeed, as bond prices rose in the first
quarter the yield spread -- the relationship of bond yields of varying
maturities -- widened considerably, particularly during the first quarter of
1995. For example, as of March 31, 1995 the difference in yield between 2- and
30-year U.S. Treasury securities had widened to 64 basis points, compared to
just 14 basis points on December 31, 1994. As stated earlier, this development
can be partly attributed to the belief among many investors that the Federal
Reserve Board's year-long quest to restrain inflation and slow the economy to
sustainable levels is proving to be effective. Further bolstering the U.S. bond
markets is the apparent "flight-to-quality" that has occurred since the onset of
the Mexican
<PAGE>
currency crisis. In addition, it currently appears that most of the central
bank's tightening is behind us, although an additional 50 basis point rate
increase is possible in the months ahead.
As interest rates rose in the last quarter of 1994, the Fund redeemed
certain holdings and utilized assets that had accumulated earlier from interest
income to purchase securities at the higher available yields. New purchases
focused on higher-yielding 30-year utility and finance bonds with the majority
of the bonds rated "A" or better and with yields to maturity in excess of 9.50
percent. During the first quarter of 1995, the Fund still sought to enhance
yield, but shifted its focus to maturities in the 10- to 15-year range.
As of March 31, 1995, the Fund maintained approximately 51 percent of its
holdings in securities scheduled to mature beyond 10 years. Maturities ranging
from 1 to 10 years accounted for an additional 16 percent of the portfolio. The
dramatic decline in interest rates during the first quarter, increased the
portion of the Fund's holdings that are likely to be called away within the next
year to 33 percent. While such commitments served to protect the Fund's
principal in 1994, we do not feel such an exposure will prove beneficial in
1995. As a result, we are reducing this exposure as opportunities arise.
For the last six months of 1994, the Fund's dividend of $0.78 per share was
the third highest of the 18 similar closed-end corporate bond funds, as measured
by Lipper Analytical Services, Inc. However, despite the rising interest rate
environment in 1994, an adjustment to the monthly dividend rate became
necessary. Just during the six months ended March 31, 1995, nearly $6.5 million
par value of high-coupon bonds were called. These and prior called or maturing
higher-coupon bond positions represented in the portfolio could not be replaced
at comparable yields without lowering the overall credit quality of the Fund. As
a result, as outlined in an announcement to shareholders dated March 28, 1995,
beginning in April, the Fund's monthly dividend will be reduced by $0.01 per
share to $0.12 per share.
As stated earlier, while it appears interest rates will remain stable for
the time being, the potential exists for another increase later in the year. The
economy is growing at a slower pace than in 1994, but it is still expected to
grow by approximately 3 percent in 1995. Consumers have cut down on their
spending over the last few months and appear confident regarding the economy, in
part because of the strong labor market, and also because inflation remains at
modest levels. The Journal of Commerce Index of Industrial Commodities climbed
by more than 17 percent in 1994, and is currently approaching new highs. At some
point, these fundamentals will filter down to the consumer to some degree,
though probably slight. On the export front, the weakened dollar should
eventually create increased demand. Once signs of renewed economic vigor
materialize -- with or without inflation -- the Federal Reserve Board is likely
to resume its policy of higher interest rates to combat potential inflation.
We appreciate your support of InterCapital Income Securities, Inc. and look
forward to continuing to serve your investment needs.
Very truly yours,
[SIG]
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
INTERCAPITAL INCOME SECURITIES, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- --------- ---------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (79.1%)
AIRLINES (4.3%)
$ 5,000 Delta Air Lines, Inc................................................. 9.30% 01/02/10 $ 5,006,700
4,300 United Airlines Inc.................................................. 9.35 04/07/16 4,026,090
---------------
9,032,790
---------------
AUTOMOTIVE FINANCE (0.8%)
1,500 Ford Capital BV...................................................... 9.375 05/15/01 1,612,125
---------------
BANK HOLDING COMPANIES (1.2%)
1,269 Citicorp............................................................. 10.75 12/15/15 1,357,437
1,000 NCNB Corp............................................................ 9.375 09/15/09 1,092,220
---------------
2,449,657
---------------
BANKS (3.5%)
6,000 Continental Bank N.A................................................. 12.50 04/01/01 7,294,080
---------------
BANKS - INTERNATIONAL (2.1%)
5,000 Bank of China........................................................ 8.25 03/15/14 4,401,450
---------------
BROKERAGE (2.8%)
3,000 Morgan Stanley Group, Inc............................................ 7.25 10/15/23 2,507,250
2,000 Morgan Stanley Group, Inc............................................ 7.50 02/01/24 1,713,200
2,000 Paine Webber Group, Inc.............................................. 7.625 02/15/14 1,660,560
---------------
5,881,010
---------------
COMPUTER EQUIPMENT (0.5%)
1,000 Unisys Corp.......................................................... 13.50 07/01/97 1,090,000
---------------
ENTERTAINMENT/GAMING & LODGING (1.3%)
2,653 Host Marriott Hospitality, Inc....................................... 11.00 05/01/07 2,672,897
---------------
FOREIGN GOVERNMENT AGENCIES (4.2%)
6,600 Italy (Republic of).................................................. 6.875 09/27/23 5,317,224
4,000 Quebec Province...................................................... 7.50 07/15/23 3,540,400
---------------
8,857,624
---------------
GAS (1.8%)
3,600 Southwest Gas Corp................................................... 9.375 02/01/17 3,732,192
---------------
GAS TRANSMISSION (1.2%)
3,100 Tennessee Gas Pipeline Co............................................ 6.00 12/15/11 2,413,753
---------------
HEALTH & PERSONAL CARE (2.1%)
5,000 Columbia Healthcare Corp............................................. 7.50 12/15/23 4,428,300
---------------
INSURANCE & FINANCIAL SERVICES (1.6%)
3,000 Penn Central Corp.................................................... 10.875 05/01/11 3,300,360
---------------
MANUFACTURING (2.0%)
2,000 Weirton Steel Corp................................................... 10.875 10/15/99 1,955,000
2,400 Westinghouse Electric Corp........................................... 8.625 08/01/12 2,334,408
---------------
4,289,408
---------------
METALS & MINING (1.0%)
2,000 Inco, Ltd............................................................ 9.60 06/15/22 2,113,120
---------------
</TABLE>
<PAGE>
INTERCAPITAL INCOME SECURITIES, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- --------- -------------
<C> <S> <C> <C> <C>
OIL RELATED (9.4%)
$ 5,200 Lasmo (USA), Inc............................................. 8.375% 06/01/23 $ 4,951,700
2,000 Occidental Petroleum Corp.................................... 9.625 07/01/99 2,054,240
7,240 Occidental Petroleum Corp.................................... 11.75 03/15/11 7,857,065
5,000 Phillips Petroleum Co........................................ 8.49 01/01/23 4,896,900
-------------
19,759,905
-------------
PAPER & FOREST PRODUCTS (3.4%)
6,000 Georgia Pacific Co........................................... 9.625 03/15/22 6,386,280
685 Stone Container Corp......................................... 11.50 09/01/99 705,550
-------------
7,091,830
-------------
RETAIL (1.6%)
2,850 KMart Corp................................................... 13.50 01/01/09 3,322,701
-------------
RETAIL - FOOD CHAINS (2.1%)
5,000 Great Atlantic & Pacific Tea Co., Inc........................ 7.70 01/15/04 4,364,300
-------------
TELECOMMUNICATIONS (4.0%)
5,100 Tele-Communications, Inc..................................... 9.25 01/15/23 4,890,543
4,000 Time Warner Entertainment Co................................. 8.375 07/15/33 3,507,880
-------------
8,398,423
-------------
TELEPHONES (7.9%)
2,000 Alltel Corp.................................................. 10.375 04/01/09 2,121,260
2,000 Alltel Corp.................................................. 9.50 03/01/21 2,144,760
1,000 GTE South, Inc............................................... 9.375 06/15/30 1,057,890
6,000 Northwestern Bell Telephone Co............................... 9.125 12/01/30 6,235,680
5,000 Southern Bell Telephone & Telegraph Co....................... 8.625 09/01/26 5,020,550
-------------
16,580,140
-------------
TOBACCO (1.3%)
2,990 RJR Nabisco, Inc............................................. 7.625 09/15/03 2,730,797
-------------
UTILITIES - ELECTRIC (19.0%)
5,000 Cleveland Electric Illuminating Co........................... 9.00 07/01/23 4,270,850
6,325 Commonwealth Edison Co....................................... 8.875 10/01/21 6,192,138
1,000 Consolidated Edison.......................................... 9.70 12/01/25 1,090,690
2,000 CTC Mansfield Funding Corp................................... 11.125 09/30/16 1,995,000
389 Georgia Power Co............................................. 9.23 12/01/19 389,844
1,000 Long Island Lighting Co...................................... 9.00 11/01/22 847,240
6,000 Long Island Lighting Co...................................... 9.625 07/01/24 5,659,620
2,000 Louisiana Power & Light Co................................... 10.67 01/02/17 2,142,180
2,000 Niagara Mohawk Power Corp.................................... 9.50 03/01/21 2,012,040
1,000 Northern States Power Co..................................... 9.375 06/01/20 1,063,390
4,000 Southern California Edison Co................................ 9.25 12/01/22 4,148,360
2,500 Texas Utilities Electric Co.................................. 9.875 11/01/19 2,671,750
3,000 Texas Utilities Electric Co.................................. 8.50 08/01/24 2,959,350
4,300 United Illuminating Co....................................... 10.24 01/02/20 4,373,530
-------------
39,815,982
-------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $167,981,329)................................ 165,632,844
-------------
</TABLE>
<PAGE>
INTERCAPITAL INCOME SECURITIES, INC.
PORTFOLIO OF INVESTMENTS MARCH 31, 1995 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- --------- ---------------
<C> <S> <C> <C> <C>
U.S. GOVERNMENT & AGENCIES OBLIGATIONS (17.9%)
$ 2,000 Federal Home Loan Banks.............................................. 9.02% 01/19/05 $ 2,029,736
2,500 Federal National Mortgage Association (a)............................ 13.05 06/07/95 50,000
19,500 Federal National Mortgage Association................................ 11.15 06/12/95 19,670,625
4,000 U.S. Treasury Note................................................... 8.50 05/15/95 4,010,000
11,790 U.S. Treasury Note................................................... 11.25 05/15/95 11,856,319
---------------
TOTAL U.S. GOVERNMENT & AGENCIES OBLIGATIONS
(IDENTIFIED COST $40,772,061)............................................................. 37,616,680
---------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENT (0.8%)
REPURCHASE AGREEMENT
1,643 The Bank of New York (dated 03/31/95; proceeds $1,643,996,
collateralized by $1,698,537 U.S. Treasury Bill 6.10% due 09/07/95
valued at $1,655,516) (Identified Cost $1,643,192)................. 5.875 04/03/95 1,643,192
---------------
TOTAL INVESTMENTS (IDENTIFIED COST $210,396,582) (B).............................. 97.8% 204,892,716
OTHER ASSETS IN EXCESS OF LIABILITIES............................................. 2.2 4,686,272
---------- ---------------
NET ASSETS........................................................................ 100.0% $ 209,578,988
---------- ---------------
---------- ---------------
<FN>
- ----------
(A) PRINCIPAL EXCHANGE RATE LINKED SECURITY; PRINCIPAL REPAYMENT IS LINKED TO
SPECIFIED FOREIGN CURRENCY EXCHANGE RATES.
(B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $210,444,223; THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $4,734,439 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $10,285,946, RESULTING IN NET UNREALIZED
DEPRECIATION OF $5,551,507.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INCOME SECURITIES, INC.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $210,396,582).......... $ 204,892,716
Receivable for:
Interest................................ 5,333,518
Investments sold........................ 4,062,240
Prepaid expenses and other assets......... 4,135
-------------
TOTAL ASSETS...................... 214,292,609
-------------
LIABILITIES:
Payable for:
Investments purchased................... 4,486,567
Investment management fee............... 100,439
Accrued expenses and other payables....... 126,615
-------------
TOTAL LIABILITIES................. 4,713,621
-------------
NET ASSETS:
Paid-in-capital........................... 242,285,882
Net unrealized depreciation............... (5,503,866)
Distributions in excess of net investment
income.................................. (94,014)
Accumulated net realized loss............. (27,109,014)
-------------
NET ASSETS........................ $ 209,578,988
-------------
-------------
NET ASSET VALUE PER SHARE, 12,200,518
shares outstanding (15,000,000 shares
authorized of $.01 par value)...........
$17.18
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME.......................... $ 10,171,472
------------
EXPENSES
Investment management fee.............. 513,217
Transfer agent fees and expenses....... 93,196
Professional fees...................... 31,505
Shareholder reports and notices........ 18,691
Directors' fees and expenses........... 14,247
Custodian fees......................... 13,155
Registration fees...................... 13,143
Other.................................. 6,504
------------
TOTAL EXPENSES..................... 703,658
------------
NET INVESTMENT INCOME............ 9,467,814
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss...................... (4,170,816)
Net change in unrealized
depreciation......................... 7,272,892
------------
NET GAIN........................... 3,102,076
------------
NET INCREASE..................... $ 12,569,890
------------
------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEAR
MARCH 31, 1995 ENDED
(UNAUDITED) SEPTEMBER 30, 1994
----------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.......................................... $ 9,467,814 $ 19,850,296
Net realized loss.............................................. (4,170,816) (5,373,942)
Net change in unrealized appreciation (depreciation)........... 7,272,892 (21,289,097)
----------------------- -------------------
Net increase (decrease).................................... 12,569,890 (6,812,743)
Dividends to shareholders from net investment income............. (9,516,404) (19,764,839)
----------------------- -------------------
Total increase (decrease).................................. 3,053,486 (26,577,582)
NET ASSETS:
Beginning of period.............................................. 206,525,502 233,103,084
----------------------- -------------------
END OF PERIOD (including distributions in excess of net
investment income of $94,014 and $45,424, respectively)......... $ 209,578,988 $ 206,525,502
----------------------- -------------------
----------------------- -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
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,
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 security listed or traded on the
New York or American Stock Exchange is valued at its latest sale price on
that exchange prior to the time when assets are valued; if there were no
sales that day, the security is valued at the latest bid price (in cases
where a security is traded on more than one exchange, the security is valued
on the exchange designated as the primary market by the Directors); (2) all
other portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest available bid price prior to the
time of valuation; (3) when market quotations are not readily available,
including circumstances under which it is determined by the Investment
Manager that sale and bid prices are not reflective of a security's market
value, portfolio securities are valued at their fair value as determined in
good faith under procedures established by and under the general supervision
of the Directors; (4) certain of the Fund's portfolio securities may be
valued by an outside pricing service approved by the 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, if available, in determining what it believes is the fair
valuation of the portfolio securities valued by such pricing service; and
(5) 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. Discounts on securities purchased are amortized over the life of the
respective securities. 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 record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such
amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent they
exceed net
<PAGE>
INTERCAPITAL INCOME SECURITIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
investment income and net realized capital gains for tax purposes, they are
reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT--Pursuant to an Investment Management
Agreement with Dean Witter InterCapital Inc. (the "Investment Manager"), the
Fund pays its Investment Manager a management fee, accrued weekly and payable
monthly, by applying the annual rate of 0.50% to the Fund's average weekly net
assets.
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, 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 Fund 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 Fund.
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 March 31, 1995 aggregated $41,714,632 and
$57,548,204, respectively. Included in the aforementioned are purchases and
sales of U.S. Government securities of $4,769,530 and $19,906,736, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Fund's transfer agent. At March 31, 1995, the Fund had transfer agent fees and
expenses payable of approximately $23,500.
The Fund established an unfunded noncontributory defined benefit pension
plan covering all independent Directors of the Fund who will have served as
independent Directors/Trustees for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension costs for
the six months ended March 31, 1995 included in Directors' fees and expenses in
the Statement of Operations amounted to $3,782. At March 31, 1995, the Fund had
an accrued pension liability of $47,974 which is included in accrued expenses in
the Statement of Assets and Liabilities.
4. CAPITAL STOCK--Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
CAPITAL PAID
PAR VALUE OF IN EXCESS OF
SHARES SHARES PAR VALUE
----------- -------------- -------------
<S> <C> <C> <C>
Balance, September 30, 1992...................................... 12,200,518 $122,003 $ 263,862,071
Reclassification due to permanent book/tax differences........... -- -- (20,612,513)
----------- -------------- -------------
Balance, September 30, 1993...................................... 12,200,518 122,003 243,249,558
Reclassification due to permanent book/tax differences........... -- -- (1,085,679)
----------- -------------- -------------
Balance, September 30, 1994 and March 31, 1995................... 12,200,518 $122,003 $ 242,163,879
----------- -------------- -------------
----------- -------------- -------------
</TABLE>
<PAGE>
INTERCAPITAL INCOME SECURITIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
5. DIVIDENDS--On March 28, 1995, the Fund declared the following dividends from
net investment income:
<TABLE>
<CAPTION>
AMOUNT PER
SHARE RECORD DATE PAYABLE DATE
- ------------ ------------------ ------------------
<S> <C> <C>
$0.12 April 7, 1995 April 21, 1995
0.12 May 5, 1995 May 19, 1995
0.12 June 16, 1995 June 30, 1995
</TABLE>
6. FEDERAL INCOME TAX STATUS--At September 30, 1994, the Fund had net capital
loss carryovers of approximately $16,534,000 of which $782,000 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.
Any net capital losses incurred after October 31 ("post-October losses")
within the taxable year are deemed to arise on the first business day of the
Fund's next taxable year. The Fund incurred and will elect to defer such net
capital losses of approximately $6,436,000 during fiscal 1994.
As of September 30, 1994, the Fund had temporary book/tax differences
primarily attributable to post-October loss deferrals and permanent book/tax
differences primarily attributable to expired capital loss carryovers and
foreign currency losses.
7. SELECTED QUARTERLY FINANCIAL DATA--
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------
3/31/95 12/31/94
-------------------- --------------------
TOTAL* PER SHARE TOTAL* PER SHARE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total investment income................................................. $ 5,108 $ 0.42 $ 5,063 $ 0.41
Net investment income................................................... 4,755 0.39 4,713 0.39
Net realized and unrealized gain........................................ 817 0.06 2,285 0.19
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------------------------------
9/30/94 6/30/94 3/31/94 12/31/93
-------------------- -------------------- --------------------- --------------------
TOTAL* PER SHARE TOTAL* PER SHARE TOTAL* PER SHARE TOTAL* PER SHARE
--------- --------- --------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income..... $ 5,302 $ 0.43 $ 5,239 $ 0.43 $ 5,346 $ 0.44 $ 5,470 $ 0.45
Net investment income....... 4,922 0.40 4,831 0.39 4,975 0.41 5,122 0.42
Net realized and unrealized
loss....................... (3,992) (0.32) (7,806) (0.64) (10,422) (0.85) (4,443) (0.37)
<FN>
- ---------
* TOTAL EXPRESSED IN THOUSANDS.
</TABLE>
<PAGE>
INTERCAPITAL INCOME SECURITIES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
7. SELECTED QUARTERLY FINANCIAL DATA--(CONTINUED)
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------------------------
9/30/93 6/30/93 3/31/93 12/31/92
-------------------- -------------------- -------------------- --------------------
TOTAL* PER SHARE TOTAL* PER SHARE TOTAL* PER SHARE TOTAL* PER SHARE
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income...... $ 5,664 $ 0.46 $ 5,313 $ 0.44 $ 5,521 $ 0.45 $ 5,616 $ 0.46
Net investment income........ 5,319 0.44 4,950 0.40 5,128 0.42 5,222 0.43
Net realized and unrealized
gain (loss)................. 1,999 0.17 1,961 0.16 5,520 0.45 (4,923) (0.40)
<FN>
- ---------
* TOTAL EXPRESSED IN THOUSANDS.
</TABLE>
<PAGE>
INTERCAPITAL INCOME SECURITIES, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
1995* ------------------------------------------------------
(UNAUDITED) 1994* 1993* 1992* 1991* 1990*
-------------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of
period.......... $16.93 $19.11 $18.72 $18.03 $16.97 $18.83
-------------- --------- --------- ---------- --------- ---------
Net investment
income.......... 0.78 1.62 1.69 1.79 1.94 2.03
Net realized and
unrealized gain
(loss)........... 0.25 (2.18) 0.38 0.79 0.96 (1.79)
-------------- --------- --------- ---------- --------- ---------
Total from
investment
operations...... 1.03 (0.56) 2.07 2.58 2.90 0.24
Dividends from
net investment
income.......... (0.78) (1.62) (1.68) (1.89) (1.84) (2.10)
-------------- --------- --------- ---------- --------- ---------
Net asset value,
end of period... $ 17.18 $ 16.93 $ 19.11 $ 18.72 $ 18.03 $ 16.97
-------------- --------- --------- ---------- --------- ---------
-------------- --------- --------- ---------- --------- ---------
Market value, end
of period....... $ 17.50 $ 16.875 $ 21.375 $ 22.25 $ 20.50 $ 20.00
-------------- --------- --------- ---------- --------- ---------
-------------- --------- --------- ---------- --------- ---------
TOTAL INVESTMENT
RETURN+......... 8.62%(1) (14.12)% 2.97% 19.91% 13.40% 5.31%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of period (in
thousands)...... $209,579 $206,526 $233,103 $228,424 $218,524 $199,519
Ratios to average
net assets:
Expenses....... 0.69%(2) 0.68% 0.66% 0.69% 0.72% 0.72%
Net investment
income........ 9.22%(2) 9.02% 9.04% 9.69% 11.11% 11.23%
Portfolio
turnover rate... 23%(1) 82% 85% 61% 56% 61%
<FN>
- ------------
* THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ TOTAL INVESTMENT RETURN IS BASED UPON THE CURRENT MARKET VALUE ON THE LAST
DAY OF EACH PERIOD REPORTED. DIVIDENDS AND DISTRIBUTIONS ARE ASSUMED TO BE
REINVESTED AT THE PRICES OBTAINED UNDER THE 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>
BOARD OF DIRECTORS
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn INTERCAPITAL
John R. Haire INCOME
Dr. Manuel H. Johnson SECURITIES,
Paul Kolton INC.
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
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
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
SEMIANNUAL REPORT
MARCH 31, 1995
