-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HXQao+311XJBqMzMaRQPpJv75Ljgn3fY0DQXKr7T20974vVsOd4H2vGe2vdHC2oU KdLFvLL6iJoMKruThAb2aQ== 0000950123-96-003136.txt : 19960620 0000950123-96-003136.hdr.sgml : 19960620 ACCESSION NUMBER: 0000950123-96-003136 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960619 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERCAPITAL INSURED MUNICIPAL BOND TRUST CENTRAL INDEX KEY: 0000861185 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06053 FILM NUMBER: 96582895 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CTR CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123922550 MAIL ADDRESS: STREET 1: TWO WORLD TRADE CENTER CITY: NEW YORK STATE: NY ZIP: 10048 FORMER COMPANY: FORMER CONFORMED NAME: ALLSTATE MUNICIPAL PREMIUM INCOME TRUST II DATE OF NAME CHANGE: 19901202 N-30D 1 INTERCAPITAL INSURED MUNICIPAL BOND TRUST 1 INTERCAPITAL INSURED MUNICIPAL BOND TRUST Two World Trade Center, New York, LETTER TO THE SHAREHOLDERS April 30, 1996 New York 10048 DEAR SHAREHOLDER: During the first six months of InterCapital Insured Municipal Bond Trust's current fiscal year, interest rates initially declined, but reversed direction in February and began to move higher. Last year's favorable bond market environment was created by proposals to achieve a balanced federal budget within five to seven years and by continued easing of Federal Reserve Board monetary policy. However, budget negotiations reached a political impasse early in 1996 and federal offices were partially closed. This had an adverse impact on bonds. Concerns also developed about an increase in the pace of the economic recovery, which was marked by unexpectedly strong job growth in March and rising commodity prices. The bond market reacted to these developments by pushing yields sharply higher. MUNICIPAL MARKET CONDITIONS Long-term municipal revenue bond yields as tracked by The Bond Buyer Revenue Bond Index* moved from 6.02 percent in October 1995 to a low of 5.63 percent in January 1996. Interest rates subsequently began to rise in mid-February on signs of stronger economic growth and renewed inflationary fears. The Index yield reached 6.16 percent in April. Yields on one-year municipal notes declined from 3.82 percent to 3.70 percent over the past six months. The yield pickup for extending maturities from one-to-thirty years was 246 basis points at the end of April. The risk of flat-tax legislation had caused the ratio of Revenue Bond Index yields to 30-year U.S. Treasury bond yields to rise from 85 to 94 percent between March and September 1995. However, as the prospects of a flat tax faded, the ratio improved to 92 percent by the end of April. A declining ratio means that municipal bond prices have - --------------------- *The Bond Buyer Revenue Bond Index is an arithmetic average of the yields of 25 selected municipal revenue bonds with 30-year maturities. Credit ratings of these bonds range from Aa1 to Baa1 by Moody's Investors Service, Inc., and AA+ to A- by Standard & Poor's Corp. 2 INTERCAPITAL INSURED MUNICIPAL BOND TRUST LETTER TO THE SHAREHOLDERS April 30, 1996, continued outperformed U.S. Treasury prices. Over the previous eight-year period prior to the flat-tax debate, long-term municipal yields averaged 89 percent of U.S. Treasury yields. Municipal underwriting activity was fueled by the trend of lower interest rates in 1995. Between November 1995 and April 1996, new issue volume increased 45 percent versus the same period a year ago. Despite a resurgence in underwriting, dealers have continued to withdraw from the municipal business. PERFORMANCE The Trust's net asset value (NAV) declined from $15.41 to $15.06 per share during the six-month period ended April 30, 1996. Based on this NAV change plus reinvestment of tax-free dividends totaling $0.45 per share, the Trust's total return was 0.93 percent. Over the same period, the Trust's market price on the New York Stock Exchange declined from $14.625 to $13.125 per share. Based on this market price change and reinvestment of tax-free dividends, the Trust's total return was -7.32 percent. The Trust began the period trading at a 5 percent discount to NAV and closed at a 13 percent discount. Undistributed net investment income improved to $0.071 per share on April 30, 1996 versus $0.026 per share six months ago. PORTFOLIO STRUCTURE The Trust's $108 million of net assets were diversified among 11 long-term municipal sectors and 37 credits. The five largest sectors represented 71 percent of net assets. The average maturity and call protection of the Trust's long-term portfolio were 23 and 5 years, respectively. Each position in the portfolio was backed by triple "A" rated bond insurers or U.S. government guaranteed securities. This is to insure the timely payment of principal and interest. FIVE LARGEST SECTORS CREDIT ENHANCEMENTS AS OF APRIL 30, 1996 AS OF APRIL 30, 1996 (% OF NET ASSETS) (% OF TOTAL LONG-TERM INVESTMENTS) MORTGAGE 30% MBIA 40% MDR/PCR 11% FGIC 25% TRANSPORTATION 11% FSA 18% REFUNDED 10% GNMA 10% HOSPITAL 9% AMBAC 7% OTHER 29% 3 INTERCAPITAL INSURED MUNICIPAL BOND TRUST LETTER TO THE SHAREHOLDERS April 30, 1996, continued THE IMPACT OF LEVERAGING As discussed in previous reports, the total income available for distribution to common shareholders includes incremental income provided by the Trust's outstanding Auction Rate Preferred Shares (ARPS). ARPS dividends reflect prevailing short-term interest rates on maturities normally ranging from one week to one year. Incremental income to common shares depends on two factors: first, the spread between interest earned on the long-term bonds in the established portfolio of investments and the ARPS auction rate plus ARPS expenses; second, the amount of ARPS outstanding. The greater the amount of ARPS outstanding, the greater the amount of incremental income normally available for distribution to common shareholders. ARPS yields ranged between 3.39 and 4.75 percent during the six months ended April 30, 1996. Over the same period, ARPS leverage contributed $0.06 per share to common share earnings. As of April 30, 1996, $30 million in ARPS were outstanding, which represented 28 percent of net assets. LOOKING AHEAD Tax-reduction proposals may receive additional publicity. However, the balance between the supply of new issues and demand created by maturities and calls for redemption should remain positive for the municipal market. Long-term municipal securities currently yield 90 percent of the yield on U.S. Treasury securities and may be expected to move in tandem with the Treasury market. The Trust's procedure for reinvestment of all dividends and distributions on common shares is through purchases in the open market. This method helps to support the market value of the Trust's shares. In addition, we would like to remind you that the Trustees have approved a procedure whereby the Trust, when appropriate, may purchase shares in the open market or in privately negotiated transactions at a price not above market value or net asset value, whichever is lower at the time of purchase. During the six-month period ended April 30, 1996, the Trust purchased and retired 48,000 shares of common stock at a weighted average market discount of 9.84 percent. The Trust may also utilize procedures to reduce or eliminate the amount of outstanding ARPS, including their purchase in the open market or in privately negotiated transactions. 4 INTERCAPITAL INSURED MUNICIPAL BOND TRUST LETTER TO THE SHAREHOLDERS April 30, 1996, continued We appreciate your ongoing support of InterCapital Insured Municipal Bond Trust and look forward to continuing to serve your investment needs. Very truly yours, /s/ CHARLES A. FIUMEFREDDO - -------------------------- CHARLES A. FIUMEFREDDO Chairman of the Board 5 INTERCAPITAL INSURED MUNICIPAL BOND TRUST PORTFOLIO OF INVESTMENTS April 30, 1996 (unaudited)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------------ MUNICIPAL BONDS (97.5%) General Obligation (4.8%) $ 5,000 Cook County, Illinois, Ser 1992 A (MBIA).............................. 6.60 % 11/15/22 $ 5,218,400 - -------- ------------ Educational Facilities Revenue (6.7%) 6,000 Massachusetts Health & Educational Facilities Authority, Boston University 1991 Ser K & L (MBIA)..................................... 6.66 10/01/31 6,230,100 1,000 Pennsylvania Higher Educational Facilities Authority, Duquesne University Refg Ser A of 1991 (MBIA)................................. 6.75 04/01/20 1,054,940 - -------- ---------- 7,000 7,285,040 - -------- ------------ Electric Revenue (4.7%) 3,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg Ser (FGIC)............................................................... 6.50 01/01/11 3,155,070 2,000 Snohomish County Public Utility District #1, Washington, 1993 Ser (FGIC)............................................................... 6.00 01/01/18 1,966,500 - -------- ---------- 5,000 5,121,570 - -------- ------------ Hospital Revenue (9.0%) 2,000 Connecticut Health & Educational Facilities Authority, Yale-New Haven Hospital Ser F (MBIA)................................................ 7.10 07/01/25 2,157,260 3,000 Jacksonville Health Facilities Authority, Florida, New Children's Hospital at Baptist Medical Center Ser 1991 (MBIA)................... 7.00 06/01/21 3,263,550 3,000 Illinois Health Facilities Authority, Memorial Medical Center Ser 1989 (MBIA)............................................................... 6.75 10/01/11 3,165,750 1,000 Nebraska Investment Finance Authority, Methodist Health System Inc Ser 1991 (MBIA).......................................................... 7.00 03/01/06 1,092,950 - -------- ---------- 9,000 9,679,510 - -------- ------------ Industrial Development/Pollution Control Revenue (10.6%) 2,500 Jasper County, Indiana, Northern Indiana Public Service Co Collateralized Ser 1991 (MBIA)....................................... 7.10 07/01/17 2,711,850 1,000 Rockport, Indiana, Indiana & Michigan Power Co Ser B (Secondary FGIC)................................................................ 7.60 03/01/16 1,118,790 1,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA).......... 7.00 06/01/31 1,094,410 3,000 New Hampshire Industrial Development Authority, Canal Electric Co (AMT) (FGIC)......................................................... 7.375 12/01/20 3,273,150 3,000 New York State Environmental Facilities Corporation, Jamaica Water Supply Co Ser 1989 (AMT) (Secondary AMBAC)........................... 7.625 04/01/29 3,229,230 - -------- ---------- 10,500 11,427,430 - -------- ------------ Mortgage Revenue - Single Family (30.4%) 1,765 District of Columbia Housing Finance Agency, GNMA Collateralized Ser 1988 E (AMT)......................................................... 7.70 12/01/22 1,850,991 260 Hawaii Housing Finance & Development Corporation, Ser 1989 A (AMT) (Bifurcated FSA)..................................................... 7.70 07/01/29 271,859 1,100 Sedgwick & Shawnee County, Kansas, GNMA Collateralized 1990 Ser B (AMT) (AMBAC)........................................................ 7.80 06/01/22 1,151,832 5,000 Maine Housing Authority, Ser 1991 A (Bifurcated FSA).................. 7.40 11/15/22 5,253,700 4,835 Massachusetts Housing Finance Agency, Ser 14 (Bifurcated FSA)......... 7.60 12/01/14 5,114,705
SEE NOTES TO FINANCIAL STATEMENTS 6 INTERCAPITAL INSURED MUNICIPAL BOND TRUST PORTFOLIO OF INVESTMENTS April 30, 1996 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE $ 1,580 Michigan Housing Development Authority, Ser 1990 D (AMT) (Bifurcated FSA)..................................................... 7.65 % 12/01/19 $ 1,648,082 2,050 Minnesota Housing Finance Agency, Ser 1990 A (AMT) (Bifurcated FSA)... 7.85 07/01/22 2,150,716 1,885 Missouri Housing Development Commission, GNMA-Backed 1991 Ser A (AMT)................................................................ 7.375 08/01/23 1,986,865 6,300 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser 1 & 2 (AMT)................................................................ 7.631 09/10/30 6,661,683 620 New Jersey Housing & Mortgage Finance Agency, Home Buyer Ser E (MBIA)............................................................... 7.65 10/01/16 642,959 1,910 Tennessee Housing Development Agency, Homeownership Issue S (AMT) (Secondary MBIA)..................................................... 7.625 07/01/22 1,993,180 3,935 Wisconsin Housing & Economic Development Authority, Homeownership 1991 Ser A (Bifurcated FSA)............................................... 7.50 09/01/17 4,140,958 - -------- ------------ 31,240 32,867,530 - -------- ------------ Resource Recovery Revenue (2.1%) 2,200 Connecticut Resource Recovery Authority, Mid-Connecticut 1985 Ser B (MBIA)............................................................... 7.875 11/15/12 2,308,658 - -------- ------------ Transportation Facilities Revenue (11.4%) 3,000 Hawaii, Airports Second Ser 1990 (AMT) (FGIC)......................... 7.50 07/01/20 3,277,770 2,000 Wayne County, Michigan, Detroit Metropolitan Wayne County Airport Sub Lien Ser 1991 B (AMT) (MBIA)..................................... 6.75 12/01/21 2,079,100 5,000 New Hampshire, Turnpike 1991 Refg Ser B & C (FGIC).................... 6.805 11/01/17 5,368,550 1,500 Port of Portland, Oregon, Portland International Airport Ser Seven B (AMT) (MBIA)......................................................... 7.10 07/01/21 1,618,590 - -------- ------------ 11,500 12,344,010 - -------- ------------ Water & Sewer Revenue (5.7%) 2,250 Broward County, Florida, Utility Ser 1991 (FGIC)...................... 6.00 10/01/20 2,256,053 4,000 Norfolk, Virginia, Water Ser 1995 (MBIA).............................. 5.875 11/01/20 3,931,200 - -------- ------------ 6,250 6,187,253 - -------- ------------ Other Revenue (1.8%) 2,000 Las Cruces, New Mexico, Ser 1995 (AMT) (MBIA)......................... 5.50 12/01/15 1,879,000 - -------- ------------ Refunded (10.3%) 2,000 Castaic Lake Water Agency, California, Ser 1990 COPs (MBIA)........... 7.125 08/01/00++ 2,235,720 5,000 Eastern Municipal Water District, California, Water & Sewer Ser 1991 COPs (FGIC).......................................................... 6.50 07/01/01++ 5,511,300 3,000 Bucks County Industrial Development Authority, Pennsylvania, Grand View Hospital Ser of 1991 (AMBAC).................................... 7.00 07/01/01++ 3,360,330 - -------- ------------ 10,000 11,107,350 - -------- ------------ 99,690 TOTAL MUNICIPAL BONDS (Identified Cost $99,076,233)............................................ 105,425,751 - -------- ------------
SEE NOTES TO FINANCIAL STATEMENTS 7 INTERCAPITAL INSURED MUNICIPAL BOND TRUST PORTFOLIO OF INVESTMENTS April 30, 1996 (unaudited) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ------------------------------------------------------------------------------------------------------------------------------ SHORT-TERM MUNICIPAL OBLIGATION (0.7%) $ 800 Massachusetts, Dedicated Income Tax Ser 1990 B (Demand 05/01/96) - -------- (Identified Cost $800,000)........................................... 3.90*% 12/01/97 $ 800,000 ------------ $100,490 TOTAL INVESTMENTS (Identified Cost $99,876,233)(a).................................... 98.2% 106,225,751 ======== CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.......................................... 1.8 1,958,643 ------ ------------ NET ASSETS............................................................................. 100.0% $108,184,394 ====== ============
- --------------------- AMT Alternative Minimum Tax. COPs Certificates of Participation. ++ Prerefunded to call date shown. * Current coupon of variable rate security. (a) The aggregate cost for federal income tax purposes approximates identified cost. The aggregate gross unrealized appreciation was $6,371,915 and the aggregate gross unrealized depreciation was $22,397, resulting in net unrealized appreciation of $6,349,518.
Bond Insurance: AMBAC AMBAC Indemnity Corporation. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation. - -------------------------------------------------------------------------------- GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percent of Net Assets April 30, 1996 California............... 7.2% Connecticut.............. 4.1 District of Columbia..... 1.7 Florida.................. 5.1 Hawaii................... 3.3 Illinois................. 7.8 Indiana.................. 3.5 Kansas................... 2.1 Maine.................... 4.9 Massachusetts............ 11.3% Michigan................. 3.4 Minnesota................ 2.0 Missouri................. 1.8 Nebraska................. 7.2 New Hampshire............ 8.0 New Jersey............... 0.6 New Mexico............... 1.7 New York................. 3.0 Oregon................... 1.5% Pennsylvania............. 4.1 South Carolina........... 2.9 Tennessee................ 1.8 Virginia................. 3.6 Washington............... 1.8 Wisconsin................ 3.8 ----- Total.................... 98.2% =====
SEE NOTES TO FINANCIAL STATEMENTS 8 INTERCAPITAL INSURED MUNICIPAL BOND TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES April 30, 1996 (unaudited) ASSETS: Investments in securities, at value (identified cost $99,876,233)........................................ $106,225,751 Cash.................................................................. 52,693 Interest receivable................................................... 2,011,948 Prepaid expenses...................................................... 18,358 ------------ TOTAL ASSETS...................................................... 108,308,750 ------------ LIABILITIES: Investment management fee payable..................................... 33,376 Accrued expenses...................................................... 90,980 ------------ TOTAL LIABILITIES................................................. 124,356 ------------ NET ASSETS: Preferred shares of beneficial interest (1,000,000 shares authorized of non-participating $.01 par value, 600 shares outstanding)......... 30,000,000 ------------ Common shares of beneficial interest (unlimited shares authorized of $.01 par value, 5,190,113 shares outstanding)........................ 71,679,416 Net unrealized appreciation........................................... 6,349,518 Accumulated undistributed net investment income....................... 368,112 Accumulated net realized loss......................................... (212,652) ------------ NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS...................... 78,184,394 ------------ TOTAL NET ASSETS.................................................. $108,184,394 ============ NET ASSET VALUE PER COMMON SHARE ($78,184,394 divided by 5,190,113 common shares outstanding)......... $15.06 ======
SEE NOTES TO FINANCIAL STATEMENTS 9 INTERCAPITAL INSURED MUNICIPAL BOND TRUST FINANCIAL STATEMENTS, continued STATEMENT OF OPERATIONS For the six months ended April 30, 1996 (unaudited) NET INVESTMENT INCOME: INTEREST INCOME........................................................ $ 3,508,736 ----------- EXPENSES Investment management fee.............................................. 193,566 Professional fees...................................................... 59,875 Auction commission fees................................................ 37,639 Trustees' fees and expenses............................................ 27,946 Transfer agent fees and expenses....................................... 17,420 Shareholder reports and notices........................................ 15,710 Registration fees...................................................... 8,325 Auction agent fees..................................................... 5,799 Custodian fees......................................................... 2,870 Organizational expenses................................................ 2,669 Other.................................................................. 8,215 ----------- TOTAL EXPENSES BEFORE EXPENSE OFFSET............................... 380,034 LESS: EXPENSE OFFSET............................................... (2,836) ----------- TOTAL EXPENSES AFTER EXPENSE OFFSET................................ 377,198 ----------- NET INVESTMENT INCOME.............................................. 3,131,538 ----------- NET REALIZED AND UNREALIZED LOSS: Net realized loss...................................................... (3,836) Net change in unrealized appreciation.................................. (2,088,637) ----------- NET LOSS........................................................... (2,092,473) ----------- NET INCREASE........................................................... $ 1,039,065 ===========
SEE NOTES TO FINANCIAL STATEMENTS 10 INTERCAPITAL INSURED MUNICIPAL BOND TRUST FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED APRIL 30, OCTOBER 31, 1996 1995 - --------------------------------------------------------------------------------------- (unaudited) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................ $ 3,131,538 $ 6,367,146 Net realized loss.................................... (3,836) (62,197) Net change in unrealized appreciation................ (2,088,637) 6,819,075 ------------ ------------ NET INCREASE..................................... 1,039,065 13,124,024 ------------ ------------ DIVIDENDS FROM NET INVESTMENT INCOME: Preferred............................................ (551,856) (1,196,552) Common............................................... (2,348,489) (5,423,197) ------------ ------------ TOTAL............................................ (2,900,345) (6,619,749) ------------ ------------ TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST: Preferred............................................ -- (5,000,000) Common............................................... (672,065) (163,890) ------------ ------------ TOTAL............................................ (672,065) (5,163,890) ------------ ------------ TOTAL INCREASE (DECREASE)........................ (2,533,345) 1,340,385 NET ASSETS: Beginning of period.................................. 110,717,739 109,377,354 ------------ ------------ END OF PERIOD (Including undistributed net investment income of $368,112 and $136,919, respectively)............. $108,184,394 $110,717,739 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS 11 INTERCAPITAL INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) 1. ORGANIZATION AND ACCOUNTING POLICIES InterCapital Insured Municipal Bond Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company. The Trust was organized as a Massachusetts business trust on February 27, 1990 and commenced operations on February 28, 1991. The following is a summary of significant accounting policies: A. VALUATION OF INVESTMENTS -- Portfolio securities are valued by an outside independent pricing service approved by the Trustees. The pricing service has informed the Trust that in valuing the portfolio securities, it uses both a computerized matrix of tax-exempt securities and evaluations by its staff, in each case based on information concerning market transactions and quotations from dealers which reflect the bid side of the market each day. The portfolio securities are thus valued by reference to a combination of transactions and quotations for the same or other securities believed to be comparable in quality, coupon, maturity, type of issue, call provisions, trading characteristics and other features deemed to be relevant. Short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost. B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. The Trust amortizes premiums and accretes discounts over the life of the respective securities. Interest income is accrued daily. C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable and nontaxable income to its shareholders. Accordingly, no federal income tax provision is required. D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends and distributions to its shareholders on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their 12 INTERCAPITAL INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized capital gains. To the extent they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in-capital. E. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc. (the "Investment Manager") paid the organizational expenses of the Trust's common shares in the amount of $40,281 which have been reimbursed for the full amount thereof. Such expenses were fully amortized as of February 29, 1996. 2. INVESTMENT MANAGEMENT AGREEMENT Pursuant to an Investment Management Agreement, the Trust pays a management fee, calculated weekly and payable monthly, by applying the annual rate of 0.35% to the Trust's weekly net assets. Under the terms of the Agreement, in addition to managing the Trust's investments, the Investment Manager maintains certain of the Trust's books and records and furnishes, at its own expense, office space, facilities, equipment, clerical, bookkeeping and certain legal services and pays the salaries of all personnel, including officers of the Trust who are employees of the Investment Manager. The Investment Manager also bears the cost of telephone services, heat, light, power and other utilities provided to the Trust. 3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES The proceeds from sales of portfolio securities, excluding short-term investments, for the six months ended April 30, 1996 aggregated $846,875. Dean Witter Trust Company, an affiliate of the Investment Manager, is the Trust's transfer agent. At April 30, 1996, the Trust had transfer agent fees and expenses payable of approximately $2,100. The Trust has 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, 1996 included in Trustees' fees and expenses in the Statement of Operations amounted to $19,667. At April 30, 1996, the 13 INTERCAPITAL INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued Trust had an accrued pension liability of $35,326 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 approval of the common shareholders. On April 11, 1991, the Trust issued 800 shares of Auction Rate Preferred Shares ("Preferred Shares") for gross total proceeds of $40,000,000. The preferred shares have a liquidation value of $50,000 per share plus the redemption premium, if any, plus accumulated but unpaid dividends, whether or not declared, thereon to the date of distribution. The Trust may redeem such shares, in whole or in part, at the original purchase price of $50,000 per share plus accumulated but unpaid dividends, whether or not declared, thereon to the date of redemption. Dividends, which are cumulative, are reset through auction procedures.
RESET RANGE OF SHARES* RATE* DATE DIVIDEND RATES** - -------- ----- --------- ---------------- 600 3.85% 05/01/96 3.32% - 4.75%
- --------------------- * As of April 30, 1996. ** For the six months ended April 30, 1996. Subsequent to April 30, 1996 and up through June 5, 1996, the Trust paid dividends at rates ranging from 3.588% to 3.85% in the aggregate amount of $106,542. 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 purchasing 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. 14 INTERCAPITAL INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued 5. COMMON SHARES OF BENEFICIAL INTEREST Transactions in common shares of beneficial interest were as follows:
CAPITAL PAID IN EXCESS OF SHARES PAR VALUE PAR VALUE --------- ---------- ------------- Balance, October 31, 1994....................................................... 5,251,113 $ 52,511 $72,462,860 Treasury shares purchased and retired (weighted average discount 9.49%)*........ (13,000) (130) (163,760) --------- ------- ----------- Balance, October 31, 1995....................................................... 5,238,113 52,381 72,299,100 Treasury shares purchased and retired (weighted average discount 9.84%)*........ (48,000) (480) (671,585) --------- ------- ----------- Balance, April 30, 1996......................................................... 5,190,113 $ 51,901 $71,627,515 ========= ======= ===========
- --------------------- * The Trustees have voted to retire the shares purchased. 6. FEDERAL INCOME TAX STATUS At October 31, 1995, the Trust had a net capital loss carryover of approximately $209,000, to offset future capital gains to the extent provided by regulations, which are available through October 31 of the following years:
AMOUNTS IN THOUSANDS -------------------------------- 2001 2002 2003 TOTAL ---- ---- ---- ----- $79 $68 $62 $209 === === === ====
7. DIVIDENDS TO COMMON SHAREHOLDERS The Trust declared the following dividends from net investment income:
DECLARATION AMOUNT RECORD PAYABLE DATE PER SHARE DATE DATE - --------------- --------- ------------- -------------- April 23, 1996. $ 0.075 May 3, 1996 May 17, 1996 May 28, 1996... $ 0.075 June 7, 1996 June 21, 1996
15 INTERCAPITAL INSURED MUNICIPAL BOND TRUST FINANCIAL HIGHLIGHTS Selected ratios and per share data for a common share of beneficial interest outstanding throughout each period:
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED OCTOBER 31** APRIL 30, --------------------------------- 1996** 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------------------- (unaudited) PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period............................. $ 15.41 $ 14.16 $ 16.75 $ 14.84 -------- ------ ------ ------ Net investment income............................................ 0.60 1.22 1.34 1.41 Net realized and unrealized gain (loss).......................... (0.39) 1.30 (2.49) 2.04 -------- ------ ------ ------ Total from investment operations................................. 0.21 2.52 (1.15) 3.45 -------- ------ ------ ------ Less dividends and distributions from: Net investment income......................................... (0.45) (1.04) (1.21) (1.26) Common share equivalent of dividends paid to preferred shareholders................................................. (0.11) (0.23) (0.23) (0.24) Net realized gain............................................. -- -- -- (0.04) -------- ------ ------ ------ Total dividends and distributions................................ (0.56) (1.27) (1.44) (1.54) Offering costs charged against capital........................... -- -- -- -- -------- ------ ------ ------ Net asset value, end of period................................... $ 15.06 $ 15.41 $ 14.16 $ 16.75 ======== ======= ======= ======= Market value, end of period...................................... $13.125 $14.625 $12.875 $17.875 ======== ======= ======= ======= TOTAL INVESTMENT RETURN+......................................... (7.32)%(1) 22.10% (22.37)% 17.74% RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS: Total expenses before expense offset............................. 0.94%(2)(4) 0.91%(3) 1.03% 1.01% Net investment income before preferred stock dividends........... 7.77%(2) 8.16%(3) 8.68% 8.86% Preferred stock dividends........................................ 1.37%(2) 1.53% 1.49% 1.49% Net investment income available to common shareholders........... 6.40%(2) 6.63% 7.19% 7.37% SUPPLEMENTAL DATA: Net assets, end of period, in thousands.......................... $108,184 $110,718 $109,377 $128,031 Asset coverage on preferred shares at end of period.............. 360% 369% 312% 319% Portfolio turnover rate.......................................... --%(1) 6% 12% 6% FOR THE YEAR FOR THE PERIOD ENDED FEBRUARY 28, 1991* OCTOBER 31** THROUGH 1992 OCTOBER 31, 1991** - ---------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period............................. $ 14.66 $14.06 ------ ---------- Net investment income............................................ 1.45 0.86 Net realized and unrealized gain (loss).......................... 0.09 0.70 ------ ---------- Total from investment operations................................. 1.54 1.56 ------ ---------- Less dividends and distributions from: Net investment income......................................... (1.08) (0.52) Common share equivalent of dividends paid to preferred shareholders................................................. (0.26) (0.19) Net realized gain............................................. (0.02) -- ------ ---------- Total dividends and distributions................................ (1.36) (0.71) Offering costs charged against capital........................... -- (0.25) ------ ---------- Net asset value, end of period................................... $ 14.84 $14.66 ====== ========== Market value, end of period...................................... $16.375 $15.50 ====== ========== TOTAL INVESTMENT RETURN+......................................... 13.05% 6.89%(1) RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS: Total expenses before expense offset............................. 0.99% 1.00%(2) Net investment income before preferred stock dividends........... 9.61% 9.16%(2) Preferred stock dividends........................................ 1.70% 1.97%(2) Net investment income available to common shareholders........... 7.91% 7.19%(2) SUPPLEMENTAL DATA: Net assets, end of period, in thousands.......................... $117,998 $117,071 Asset coverage on preferred shares at end of period.............. 295% 293% Portfolio turnover rate.......................................... 7% 16%(1)
- --------------------- * Commencement of operations. ** The per share amounts were computed using an average number of shares outstanding during the period. + Total investment return is based upon the current market value on the last day of each period reported. Dividends and distributions are assumed to be reinvested at the prices obtained under the Trust's dividend reinvestment plan. Total investment return does not reflect brokerage commissions. (1) Not annualized. (2) Annualized. (3) The above expense and net investment income ratios would have been 0.90% and 8.17%, respectively, which reflects 0.01% effect for custody cash credits. (4) The above annualized expense ratio would have been 0.94% after expense offset. SEE NOTES TO FINANCIAL STATEMENTS 16 TRUSTEES Michael Bozic Charles A. Fiumefreddo Edwin J. Garn John R. Haire Dr. Manuel H. Johnson Paul Kolton Michael E. Nugent Philip J. Purcell John L. Schroeder OFFICERS Charles A. Fiumefreddo Chairman and Chief Executive Officer Sheldon Curtis Vice President, Secretary and General Counsel James F. Willison Vice President Thomas F. Caloia Treasurer TRANSFER AGENT Dean Witter Trust Company Harborside Financial Center - Plaza Two Jersey City, New Jersey 07311 INDEPENDENT ACCOUNTANTS Price Waterhouse LLP 1177 Avenue of the Americas New York, New York 10036 INVESTMENT MANAGER Dean Witter InterCapital Inc. Two World Trade Center New York, New York 10048 The financial statements included herein have been taken from the records of the Trust without examination by the independent accountants and accordingly they do not express an opinion thereon. INTERCAPITAL INSURED MUNICIPAL BOND TRUST [PHOTO] SEMIANNUAL REPORT APRIL 30, 1996 -----END PRIVACY-ENHANCED MESSAGE-----