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Proc-Type: 2001,MIC-CLEAR
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<IMS-DOCUMENT>0000912057-94-002160.txt : 19940705
<IMS-HEADER>0000912057-94-002160.hdr.sgml : 19940705
ACCESSION NUMBER: 0000912057-94-002160
CONFORMED SUBMISSION TYPE: N-30D
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 19940430
FILED AS OF DATE: 19940628
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
CENTRAL INDEX KEY: 0000894146
STANDARD INDUSTRIAL CLASSIFICATION: 0000
IRS NUMBER: 133701273
STATE OF INCORPORATION: MA
FISCAL YEAR END: 1031
FILING VALUES:
FORM TYPE: N-30D
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-07344
FILM NUMBER: 94536164
BUSINESS ADDRESS:
STREET 1: TWO WORLD TRADE CENTER
CITY: NEW YORK
STATE: NY
ZIP: 10048
BUSINESS PHONE: 2123921520
</IMS-HEADER>
<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<DESCRIPTION>N-30D
<TEXT>
<PAGE>
DEAN WITTER INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- - --------------------------------------------------------------------------------
When InterCapital California Insured Municipal Income Trust (NYSE symbol:
IIC) began its new fiscal year in November 1993, municipal yields had reached
record lows in a trend that began six years ago. Strong economic growth in the
fourth quarter of 1993 prompted concern about inflation and caused interest
rates to rise. The Federal Reserve Board tightened monetary policy by raising
the federal-funds rate -- the interest rate that banks charge each other for
overnight loans -- from 3.00 percent to 3.75 percent in three separate moves
between early February and April. This action was presented as a preemptive
strike against inflation. However, the fixed-income markets interpreted the
change in Fed policy as the beginning of a trend toward higher interest rates.
In mid-May, the Federal Reserve Board initiated another round of tightening with
a 50 basis point increase in both the federal-funds rate and the discount rate
- - -- the interest rate the Federal Reserve charges member banks for loans.
By the end of April the bond market was battered. Interest rates were at
levels not seen in over a year. Long-term municipal bond yields as measured by
THE BOND BUYER Revenue Bond Index* increased by 86 basis points from 5.56
percent to 6.42 percent between November and April. This corresponded to a price
decline of more than 11 percent.
New-issue underwriting totaled $290 billion in 1993, a 23 percent increase
over the previous high of $235 billion set in 1992. Refunding issues, which are
used by state and local governments to refinance higher-coupon debt, represented
66 percent of total volume last year. It is estimated that 1994's underwriting
volume will decline by 30 percent to about $200 billion and that approximately
$260 billion in bonds will either mature or be called. Thus, the amount of
municipal debt outstanding will be reduced. In line with these projections,
new-issue volume for the first four months of 1994 declined by 34 percent and
totaled $59 billion. Refunding activity, the catalyst of last year's record
underwriting, dropped even more sharply.
PERFORMANCE
For the six-month period ended April 30, 1994, the Trust paid shareholders
tax-free income dividends totaling $0.435 per share, including a short-term
capital gains distribution of $0.005 per share distributed in December. IIC's
total return for this period was - 8.70 percent. This calculation is based on a
change in the Trust's New York Stock Exchange market price from $15.375 on
October 31, 1993 to $13.625 per share on April 30, 1994 and includes the
reinvestment of all dividends and distributions. Over the same period, the
Trust's net asset value (NAV) declined about 16 percent from $14.87 to $12.45
per share. The current-coupon bonds purchased by the Trust in 1993 declined in
line with the Revenue Bond Index. However, the preferred stock leverage (as
discussed below) caused the Trust's NAV to decline 1.4 times more than the
unleveraged Revenue Bond Index. As of April 30, 1994, the Trust was trading at a
9.44 percent premium to NAV.
- - ------------
* THE BOND BUYER Revenue Bond Index is an arithmetic average of the yields of 25
selected municipal revenue bonds with 30-year maturities. Ratings of these
bonds range from Aaa to Baa 1 by Moody's and AAA to A-by S&P.
<PAGE>
PORTFOLIO STRUCTURE
The portfolio's long-term investments were diversified among seven specific
municipal sectors and 43 credits. The three largest sectors were water and
sewer, tax allocation and electric revenue bonds, representing 53 percent of net
assets. The average maturity and call protection of the Trust's long-term
holdings were 25 years and 9 years, respectively. At the end of the period, the
Trust's net assets exceeded $275 million.
Each position in the portfolio was backed either by bond insurers that are
rated Aaa by Moody's Investors Service, Inc. and AAA by Standard & Poor's Corp.
This is to ensure the timely payment of principal and interest. The distribution
of long-term credit enhancements was:
<TABLE>
<CAPTION>
MUNICIPAL BOND INSURANCE PERCENT
- - ---------------------------------------------------------------------------------------------- ------------
<S> <C>
AMBAC Indemnity Corporation (AMBAC)........................................................... 25.8%
Financial Guaranty Insurance Company (FGIC)................................................... 18.7
Financial Security Assurance Inc. (FSA)....................................................... 5.2
Municipal Bond Investors Assurance Corporation (MBIA)......................................... 50.3
</TABLE>
PREFERRED SHARE LEVERAGE
In addition to common shares, the Trust has also issued four $25 million
series of Auction Rate Preferred Shares (ARPS). Dividend and distribution
payments for these shares rank ahead of the common shares. ARPS are short-term
securities with maturities normally ranging from one week to one year. The
dividend rates on tax-free ARPS are established by an auction process when the
maturity is rolled over. The Trust uses the proceeds from ARPS issuance to
purchase long-term municipal bonds.
The common shares are impacted by the preferred shares in two ways. First,
following the payment of the dividend on the ARPS, common shares receive any
extra incremental income when the long-term portfolio yield is higher than the
cost of the ARPS (yield plus expenses). Second, the preferred shares leverage
the common shares by a factor of approximately 1.5 times, thus multiplying any
market change in NAV. Over the past six months, incremental tax-free income from
the ARPS leverage maintained common share dividends and increased the level or
cushion of undistributed net investment income. As of April 30, 1994, an amount
equivalent to $0.085 per share had been accumulated in this cushion to help
sustain the Trust's current dividend. The average ARPS rate on the Trust's four
outstanding series as of April 30, 1994 was 2.76 percent, with all resets
scheduled to occur within 5 months. Higher yields in future ARPS auctions may
begin to erode the Trust's cushion of undistributed net investment income
available for distribution to common shareholders. If the cushion were to erode
significantly over time, the Trust would take appropriate action which could
include an adjustment in the common dividend and/ or a reduction in the amount
of ARPS.
Leverage was a positive influence on the overall value of the portfolio for
the first year of the Trust's existence. However, the increase in interest rates
over the past few months has adversely impacted NAV.
LOOKING AHEAD
A continuation of low new-issue supply, coupled with significant bond calls
and maturities should sustain investor demand for municipals. However, the
overall direction of interest rates will primarily be determined by the strength
of the economy, the trend of inflation and the Federal Reserve Board's response
to economic conditions.
The Trust's procedure for reinvestment of all dividends and distributions on
common shares is by purchase in the open market. This method helps to support
the market value of the Trust's shares. In addition, the Trustees have approved
a procedure whereby the Trust may attempt to reduce or eliminate
<PAGE>
a market value discount from net asset value by repurchasing common shares in
the open market or in privately negotiated transactions. The Trust may also
utilize procedures to reduce or eliminate the amount of outstanding ARPS,
including their repurchase in the open market or in privately negotiated
transactions.
We appreciate your support of InterCapital California Insured Income Trust
and look forward to continuing to serve your investment needs.
Very truly yours,
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS APRIL 30, 1994 (UNAUDITED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - ----------- ---------- --------- -------------
<C> <S> <C> <C> <C>
CALIFORNIA EXEMPT MUNICIPAL BONDS (93.0%)
GENERAL OBLIGATION (8.2%)
$ 15,000 California, Var Purpose 4/1/93 (FSA Insured)........................... 5.50 % 4/ 1/19 $ 13,465,500
Industry,
3,000 Refg Issue of 1993 (MBIA Insured).................................... 5.50 7/ 1/13 2,781,870
4,900 Refg Issue of 1993 (MBIA Insured).................................... 5.50 7/ 1/16 4,461,695
2,000 Refg Issue of 1992 (FGIC Insured).................................... 6.00 7/ 1/17 1,943,760
- - ----------- -------------
24,900 22,652,825
- - ----------- -------------
ELECTRIC REVENUE (14.9%)
15,000 Los Angeles Department of Water & Power, Refg Issue of 1993
(Secondary MBIA Insured)............................................. 5.875 9/ 1/30 13,972,050
10,000 M-S-R Public Power Agency, San Juan Refg Ser F (AMBAC Insured)......... 6.00 7/ 1/20 9,628,900
7,000 Northern California Transmission Agency, California-Oregon Transmission
Refg Ser 1993 A (MBIA Insured)....................................... 5.25 5/ 1/20 6,041,770
Sacramento Municipal Utility District,
3,500 Refg 1993 Ser D (FGIC Insured)....................................... 5.25 11/15/12 3,125,745
4,000 Refg 1993 Ser D INFLOS (MBIA Insured)................................ 8.07 + 11/15/15 3,410,000
6,000 Southern California Public Power Authority, Power 1993 Sub Refg Ser
Inverse Floaters (FGIC Insured)...................................... 7.67 + 7/ 1/17 4,950,000
- - ----------- -------------
45,500 41,128,465
- - ----------- -------------
HOSPITAL REVENUE (6.3%)
4,150 Bakersfield, Adventist Health West Ser 1993 (MBIA Insured)............. 5.50 3/ 1/19 3,735,457
3,000 California Health Facilities Financing Authority, Children's
Hospital-San Diego Ser 1993 (MBIA Insured)........................... 5.75 7/ 1/23 2,773,140
California Statewide Communities Development Authority,
5,000 Motion Picture & Television Fund COPs (AMBAC Insured)................ 5.375 1/ 1/20 4,397,450
5,000 UniHealth America 1993 Ser A COPs (AMBAC Insured).................... 5.50 10/ 1/14 4,575,800
2,000 Marysville, Fremont-Rideout Health Group Refg Ser 1993-A
(AMBAC Insured)...................................................... 5.55 1/ 1/13 1,855,060
- - ----------- -------------
19,150 17,336,907
- - ----------- -------------
PUBLIC FACILITIES REVENUE (12.7%)
13,000 Alameda County, Santa Rita Jail 1993 Refg COPs (MBIA Insured).......... 5.70 12/ 1/14 12,191,530
7,000 Beverly Hills Public Financing Authority, Lease
1993 Refg Ser A INFLOS (MBIA Insured)................................ 8.22 + 6/ 1/15 6,020,000
California Public Works Board, Dept of Corrections
9,000 Refg 1993 Ser B (MBIA Insured)....................................... 5.50 12/ 1/12 8,309,880
5,000 Refg 1993 Ser A (AMBAC Insured)...................................... 5.50 12/ 1/19 4,195,600
5,000 Modesto, Community Center Refg 1993 Ser A COPs (AMBAC Insured)......... 5.00 11/ 1/23 4,151,000
- - ----------- -------------
39,000 34,868,010
- - ----------- -------------
TAX ALLOCATION REVENUE (17.3%)
10,000 Long Beach Financing Authority, Ser 1992 (AMBAC Insured)............... 5.50 11/ 1/22 8,946,800
10,000 Orange Redevelopment Agency, Southwest Refg Issue of 1993 A (AMBAC
Insured)............................................................. 5.70 10/ 1/23 9,200,500
7,500 Port Hueneme Redevelopment Agency, Central Community 1993 Refg
(AMBAC Insured)...................................................... 5.50 5/ 1/23 6,714,150
10,000 Poway Redevelopment Agency, Paguay Redev Sub Refg Ser 1993
(FGIC Insured)....................................................... 5.50 12/15/23 8,931,300
6,000 Riverside Redevelopment Agency, Merged Refg 1993 Ser A (MBIA
Insured)............................................................. 5.625 8/ 1/23 5,461,200
5,000 Santa Clara Redevelopment Agency, Bayshore North 1992 Refg
(AMBAC Insured)...................................................... 5.75 7/ 1/14 4,726,000
4,000 Simi Valley Public Financing Authority, 1993 Refg (MBIA Insured)....... 5.50 9/ 1/15 3,653,040
- - ----------- -------------
52,500 47,632,990
- - ----------- -------------
</TABLE>
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS APRIL 30, 1994 (UNAUDITED) (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - ----------- ---------- --------- -------------
<C> <S> <C> <C> <C>
TRANSPORTATION FACILITIES REVENUE (11.2%)
$ 14,000 Los Angeles County Metropolitan Transportation Authority, Sales
Tax Refg Ser 1993-A (MBIA Insured)........................... 5.625% 7/ 1/18 $ 12,801,040
13,500 Los Angeles County Transportation Commission, Second Sr Ser
1992-A
(MBIA Insured)............................................... 6.00 7/ 1/23 12,978,360
5,000 San Francisco Airports Commission, San Francisco Intl Airport
Second Ser Refg Issue 2 (MBIA Insured)....................... 6.75 5/ 1/20 5,176,650
- - ----------- ------------
32,500 30,956,050
- - ----------- ------------
WATER & SEWER REVENUE (20.8%)
10,000 California Department of Water Resources, Central Valley Ser L
(Secondary MBIA Insured)..................................... 5.75 12/ 1/19 9,304,800
2,805 Contra Costa Water Authority, Water Treatment Refg 1993 Ser A
(FGIC Insured)............................................... 5.75 10/ 1/14 2,647,359
7,000 Eastern Municipal Water District, Ser 1993 A COPs (FGIC
Insured)..................................................... 5.25 7/ 1/23 6,007,050
10,000 Los Angeles, Wastewater Refg Ser 1993-A (MBIA Insured)......... 5.80 6/ 1/21 9,353,500
3,000 Oceanside, Water Refg COPs (AMBAC Insured)..................... 5.70 8/ 1/14 2,811,540
2,000 Oxnard Financing Authority, Wastewater Refg Ser 1993 (FGIC
Insured)..................................................... 5.25 6/ 1/20 1,725,780
2,250 Palmdale Water District, Little Rock Dam Ser 1993 A COPs (MBIA
Insured)..................................................... 5.75 10/ 1/23 2,085,097
3,500 Redding Joint Powers Financing Authority, Wastewater Refg 1992
Ser A (FGIC Insured)......................................... 6.00 12/ 1/11 3,451,140
3,100 San Elijo Joint Powers Authority, 1993 Refg (FGIC Insured)..... 5.00 3/ 1/20 2,571,667
5,000 Santa Maria, Local Water & Refg Ser 1993 COPs (FGIC Insured)... 5.50 8/ 1/21 4,487,550
9,000 South County Regional Wastewater Authority, Reg 1, Wastewater &
Cap Impr Morgan Hill Ser 1992-B (FGIC Insured)............... 5.50 8/ 1/22 8,043,390
5,000 West & Central Basin Financing Authority, Water Ser 1992 (AMBAC
Insured)..................................................... 6.125 8/ 1/22 4,903,900
- - ----------- ------------
62,655 57,392,773
- - ----------- ------------
OTHER REVENUE (1.6%)
5,000 Puerto Rico Telephone Authority, Refg Ser M RIBS (MBIA
Insured)..................................................... 7.989+ 1/16/15 4,293,750
- - ----------- ------------
281,205 TOTAL CALIFORNIA EXEMPT MUNICIPAL BONDS
- - ----------- (IDENTIFIED COST $276,923,897)............................... 256,261,770
------------
CALIFORNIA EXEMPT SHORT-TERM MUNICIPAL OBLIGATIONS (4.9%)
4,000 California Health Facilities Financing Authority, St Joseph
Health Ser B
(Tender 5/2/94).............................................. 2.85* 7/ 1/13 4,000,000
5,400 Irvine Assessment District #89-10, Impr (Tender 5/2/94)........ 2.95* 9/ 2/15 5,400,000
4,000 Orange County Sanitation Districts, Capital Impr COPs Ser
1990-92 A
(Tender 5/2/94).............................................. 2.95* 8/ 1/15 4,000,000
- - ----------- ------------
13,400 TOTAL CALIFORNIA EXEMPT SHORT-TERM MUNICIPAL OBLIGATIONS
- - ----------- (IDENTIFIED COST $13,400,000)................................
13,400,000
------------
$ 294,605 TOTAL INVESTMENTS (IDENTIFIED COST $290,323,897) (A)........... 97.9% 269,661,770
- - -----------
- - -----------
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES................. 2.1 5,727,995
--------- ------------
NET ASSETS..................................................... 100.0% $275,389,765
--------- ------------
--------- ------------
<FN>
- - ---------------
+ CURRENT COUPON RATE FOR RESIDUAL INTEREST BONDS. THIS RATE RESETS
PERIODICALLY AS THE AUCTION RATE ON THE RELATED SHORT-TERM SECURITIES
FLUCTUATES.
* VARIABLE OR FLOATING RATE SECURITY. COUPON RATE SHOWN REFLECTS CURRENT
RATE.
(A) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $290,323,897; THE
AGGREGATE GROSS AND NET UNREALIZED DEPRECIATION IS $20,662,127.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1994 (UNAUDITED)
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (identified
cost $290,323,897) (Note 1)................... $ 269,661,770
Cash............................................ 593,870
Interest receivable............................. 5,179,573
Deferred organizational expenses (Note 1)....... 27,560
Prepaid expenses and other assets............... 81,891
---------------
TOTAL ASSETS........................... 275,544,664
---------------
LIABILITIES:
Investment management fee payable (Note 2)...... 95,819
Accrued expenses (Note 3)....................... 59,080
---------------
TOTAL LIABILITIES...................... 154,899
---------------
NET ASSETS:
Preferred shares of beneficial interest
(1,000,000 shares authorized of
non-participating $.01 par value,
2,000 shares outstanding (Note 4))............ 100,000,000
---------------
Common shares of beneficial interest (unlimited
shares authorized of $.01 par value,
14,084,813 shares outstanding (Note 5))....... 195,811,006
Accumulated undistributed net realized loss on
investments................................... (957,038)
Net unrealized depreciation on investments...... (20,662,127)
Accumulated undistributed net investment
income........................................ 1,197,924
---------------
NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS................... 175,389,765
---------------
TOTAL NET ASSETS....................... $ 275,389,765
---------------
---------------
NET ASSET VALUE PER COMMON SHARE, ($175,389,765
divided by 14,084,813 common shares
outstanding).................................. $12.45
</TABLE>
STATEMENT OF OPERATIONS FOR THE SIX MONTHS
ENDED APRIL 30, 1994 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME............................... $ 8,499,868
--------------
EXPENSES
Investment management fee (Note 2).......... 517,602
Auction commission fees..................... 148,906
Professional fees........................... 43,422
Auction agent fees.......................... 31,753
Transfer agent fees and expenses............ 31,456
Registration fees........................... 17,254
Trustees' fees and expenses (Note 3)........ 12,302
Shareholder reports and notices............. 11,516
Organizational expenses (Note 1)............ 3,569
Other....................................... 10,572
--------------
TOTAL EXPENSES......................... 828,352
--------------
NET INVESTMENT INCOME................ 7,671,516
--------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
(Note 1):
Net realized loss on investments............ (961,518)
Net change in unrealized appreciation on
investments............................... (33,186,989)
--------------
NET LOSS ON INVESTMENTS................ (34,148,507)
--------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS.................... $ (26,476,991)
--------------
--------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE FOR THE PERIOD
SIX MONTHS FEBRUARY 26, 1993
ENDED THROUGH
APRIL 30, 1994 OCTOBER 31, 1993
(UNAUDITED) (NOTE 1)
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income....................... $ 7,671,516 $ 8,675,744
Net realized gain (loss) on investments..... (961,518) 75,016
Net change in unrealized appreciation on
investments................................ (33,186,989) 12,524,862
----------------- -----------------
Net increase (decrease) in net assets
resulting from operations............... (26,476,991) 21,275,622
----------------- -----------------
Dividends to preferred shareholders from net
investment income............................ (1,375,711) (1,505,835)
Dividends and distributions to common
shareholders from:
Net investment income..................... (6,131,326) (6,136,464)
Net realized gain on investments.......... (70,536) -0-
----------------- -----------------
Total dividends and distributions....... (7,577,573) (7,642,299)
----------------- -----------------
Transactions in common shares of beneficial
interest (Note 5)............................ (314,707) 196,025,704
----------------- -----------------
Gross proceeds from issuance of preferred
shares (Note 4).............................. -0- 100,000,000
----------------- -----------------
Total increase (decrease)............... (34,369,271) 309,659,027
NET ASSETS:
Beginning of period........................... 309,759,036 100,009
----------------- -----------------
END OF PERIOD (including undistributed net
investment income of $1,197,924 and
$1,033,445, respectively).................... $275,389,765 $309,759,036
----------------- -----------------
----------------- -----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- - --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- InterCapital California Insured
Municipal Income Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended, as a non-diversified closed-end management investment
company. It was organized on November 2, 1992 as a Massachusetts business trust
and had no operations until February 26, 1993 other than matters related to the
sale and issuance of 7,113 common shares of beneficial interest to Dean Witter
InterCapital Inc. (the "Investment Manager").
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued for the
Trust by an outside independent pricing service approved by the Trustees.
The pricing service has informed the Trust that in valuing the Trust's
portfolio securities, it uses both a computerized grid matrix of tax-exempt
securities and evaluations by its staff, in each case based on information
concerning market transactions and quotations from dealers which reflect the
bid side of the market each day. The Trust's portfolio securities are thus
valued by reference to a combination of transactions and quotations for the
same or other securities believed to be comparable in quality, coupon,
maturity, type of issue, call provisions, trading characteristics and other
features deemed to be relevant.
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 Trust amortizes premiums and original issue discounts
on fixed income securities. Additionally, with respect to market discount on
bonds purchased after April 30, 1993, a portion of any capital gain realized
upon disposition is recharacterized as taxable investment income. Realized
gains and losses on security transactions are determined on the identified
cost method. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records
dividends and distributions to its shareholders on the ex-dividend date. The
amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences 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.
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.
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- - --------------------------------------------------------------------------------
E. ORGANIZATIONAL AND OFFERING EXPENSES -- The Trust's Investment Manager
paid the organizational and offering expenses of the Trust's common shares
in the amount of $36,000 and $395,438, respectively, and paid $293,608 in
offering expenses of the Trust's preferred shares. Organizational expenses
have been reimbursed by the Trust for the full amount thereof which have
been deferred and are being amortized by the straight-line method over a
period not to exceed five years from the commencement of operations.
Offering expenses have been reimbursed by the Trust and were charged to
capital at the time of issuance of the Trust's respective shares.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement (the "Agreement") with Dean Witter InterCapital Inc., the Trust pays
its Investment Manager a management fee, calculated weekly and payable monthly,
by applying the annual rate of 0.35% to the Trust's average weekly net assets.
Under the terms of the Agreement, in addition to managing the Trust's
investments, the Investment Manager maintains certain of the Trust's books and
records and furnishes office space and 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 the proceeds from sales of portfolio securities for the six months
ended April 30, 1994, excluding short-term investments, aggregated $9,647,750
and $22,072,100, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At April 30, 1994, the Trust had transfer agent fees and
expenses payable of approximately $6,800.
Dean Witter Distributors Inc., the Trust's principal underwriter and an
affiliate of the Investment Manager, has informed the Trust that it received
approximately $1,531,000 in underwriting discounts and commissions in connection
with the offering of the preferred shares.
On January 1, 1994, the Trust adopted an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Trust who will
have served as independent 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 April 30, 1994, included in Trustees' fees and expenses in
the Statement of Operations, amounted to $3,945. At April 30, 1994, the Trust
had an accrued pension liability of $3,924 which is included in accrued expenses
in the Statement of Assets and Liabilities.
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 the approval of the common shareholders. On April 15,
1993, the Trust issued 2,000 shares of Auction Rate Preferred Shares ("Preferred
Shares") consisting of 500 shares each of Series One through Four for gross
total proceeds of $100,000,000. The preferred shares have a liquidation value of
$50,000 per share plus any accumulated but unpaid dividends plus the redemption
premium, if any, and are redeemable (in whole or in part) on any dividend
payment date.
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- - --------------------------------------------------------------------------------
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
RESET RANGE OF
SHARES SERIES RATE* DATE DIVIDEND RATES**
- - ----------- ------------- ----------- --------- --------------------
<S> <C> <C> <C> <C>
500 1 2.69% 5/6/94 1.80% to 2.875%
500 2 3.04% 7/1/94 3.04 %
500 3 2.875% 6/3/94 2.875%
500 4 2.74% 9/9/94 2.74% to 3.00%
<FN>
- - ------------
* AS OF APRIL 30, 1994.
** FOR THE SIX MONTHS ENDED APRIL 30, 1994.
</TABLE>
The Trust is 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 repurchasing common shares
and/or could trigger the mandatory redemption of preferred shares at liquidation
value.
The preferred shares, which are entitled to one vote per share, generally
vote with the common shares but vote separately as a class to elect two Trustees
and on any matters affecting the rights of the preferred shares.
5. COMMON SHARES OF BENEFICIAL INTEREST -- Transactions in common shares of
beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL PAID IN
PAR VALUE EXCESS OF
SHARES OF SHARES PAR VALUE
----------- ---------- ---------------
<S> <C> <C> <C>
Balance (Note 1)............................................ 7,113 $ 71 $ 99,938
Shares issued at close of public offering on
February 26, 1993*......................................... 13,000,000 130,000 182,254,562
Shares issued on March 25, 1993 to cover over-allotment..... 1,100,000 11,000 15,455,000
Offering costs and underwriting discounts associated with
the issuance of preferred shares........................... (1,824,858)
----------- ---------- ---------------
Balance, October 31, 1993................................... 14,107,113 141,071 195,984,642
Treasury shares purchased and retired (weighted average
discount 1.41%)**.......................................... (22,300) (223) (314,484)
----------- ---------- ---------------
Balance, April 30, 1994..................................... 14,084,813 $ 140,848 $ 195,670,158
----------- ---------- ---------------
----------- ---------- ---------------
<FN>
- - ------------
* NET OF OFFERING COSTS OF $395,438.
** THE TRUSTEES HAVE VOTED TO RETIRE THE SHARES REPURCHASED.
</TABLE>
6. DIVIDENDS TO COMMON SHAREHOLDERS -- The Trust declared the following
dividends from net investment income:
<TABLE>
<CAPTION>
DECLARATION AMOUNT PER RECORD PAYABLE
DATE SHARE DATE DATE
- - ---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
April 30, 1994 $ 0.0725 May 6, 1994 May 20, 1994
May 31, 1994 $ 0.0725 June 10, 1994 June 24, 1994
</TABLE>
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- - --------------------------------------------------------------------------------
7. SELECTED QUARTERLY FINANCIAL DATA --
<TABLE>
<CAPTION>
QUARTERS ENDED*
-------------------------------------------
4/30/94 1/31/94
--------------------- --------------------
TOTAL PER SHARE TOTAL PER SHARE
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Total investment income........................................ $ 4,168 $ 0.30 $ 4,332 $ 0.31
Net investment income.......................................... 3,756 0.27 3,915 0.28
Net realized and unrealized gain (loss) on investments.........
(36,281) (2.58) 2,133 0.15
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED*
----------------------------------------------------------------
10/31/93 7/31/93 4/30/93**
-------------------- -------------------- --------------------
TOTAL PER SHARE TOTAL PER SHARE TOTAL PER SHARE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total investment income..................... $ 4,366 $ 0.31 $4,106 $0.29 $ 1,194 $ 0.08
Net investment income....................... 3,942 0.28 3,721 0.27 1,013 0.07
Net realized and unrealized gain on
investments................................ 11,919 0.84 667 0.05 14 -0-
<FN>
- - ------------
* TOTAL EXPRESSED IN THOUSANDS OF DOLLARS.
** FOR THE PERIOD FEBRUARY 26, 1993 (COMMENCEMENT OF OPERATIONS) THROUGH APRIL
30, 1993.
</TABLE>
<PAGE>
INTERCAPITAL CALIFORNIA INSURED MUNICIPAL INCOME TRUST
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 FEBRUARY 26,
MONTHS ENDED 1993*
APRIL 30, 1994 THROUGH
(UNAUDITED) OCTOBER 31, 1993
--------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...................... $ 14.87 $ 14.06
--------------- -----------------
Net investment income................................... 0.55 0.62
Net realized and unrealized gain (loss) on
investments............................................ (2.43) 0.89
--------------- -----------------
Total from investment operations.......................... (1.88) 1.51
--------------- -----------------
Less dividends, distributions and other charges:
Dividends from net investment income.................... (0.43) (0.43)
Common share equivalent of dividends paid to preferred
shareholders........................................... (0.10) (0.11)
Distributions from net realized gains on investments.... (0.01) -0-
Offering costs charged against capital.................. -0- (0.16)
--------------- -----------------
Total dividends, distributions and other charges.......... (0.54) (0.70)
--------------- -----------------
Net asset value, end of period............................ $ 12.45 $ 14.87
--------------- -----------------
--------------- -----------------
Market value, end of period............................... $ 13.625 $ 15.375
--------------- -----------------
--------------- -----------------
TOTAL INVESTMENT RETURN+.................................... (8.70)%(1) 5.39%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................. $275,390 $309,759
Ratios to average net assets of common shareholders:
Total expenses.......................................... 0.84%(2) 0.73%(2)
Net investment income before preferred stock
dividends.............................................. 7.81%(2) 6.39%(2)
Preferred stock dividends............................... 1.40%(2) 1.11%(2)
Net investment income available to common
shareholders........................................... 6.41%(2) 5.28%(2)
Asset coverage on preferred shares at end of period....... 275% 309%
Portfolio turnover rate................................... 3% 2%
<FN>
- - -------------
* COMMENCEMENT OF OPERATIONS.
+ 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 TRUST'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 TRUST WITHOUT EXAMINATION BY THE INDEPENDENT ACCOUNTANTS AND ACCORDINGLY
THEY DO NOT EXPRESS AN OPINION THEREON.
<PAGE>
Trustees
- - ---------------------------------------
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
James F. Willison
VICE PRESIDENT
Thomas F. Caloia
TREASURER
Transfer Agent
- - ---------------------------------------
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
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
CALIFORNIA
INSURED
MUNICIPAL
INCOME
TRUST
Semiannual Report
April 30, 1994
</TEXT>
</DOCUMENT>
</IMS-DOCUMENT>
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