-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, dbawF0bLjE+ZzE7Z0U0JmnuyPnwfwrklLDRtNkEx/HSzMBPosmMu0lY3Ki4m3zeO sUsaQK3lsXtyeG3oYSZ6KQ== 0000950136-95-000197.txt : 199506280000950136-95-000197.hdr.sgml : 19950628 ACCESSION NUMBER: 0000950136-95-000197 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950430 FILED AS OF DATE: 19950627 SROS: NONE 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: 95549540 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 SEMIANNUAL REPORT INTERCAPITAL INSURED MUNICIPAL BOND TRUST Two World Trade Center New York, New York 10048 DEAR SHAREHOLDER: - ------------------------------------------------------------------------------- Fixed-income market conditions have steadily improved since late last year. Bonds began to rally in November 1994 on signs of slower economic growth in the wake of a progressively tighter Federal Reserve monetary policy. The recent trend toward lower long-term interest rates is in marked contrast to most of 1994 when rapidly rising rates created one of the most severe bear markets for bonds in recent history. MUNICIPAL MARKET CONDITIONS Long-term municipal bond yields, as tracked by The Bond Buyer Revenue Bond Index*, dropped from a high of 7.37 percent in November 1994 to 6.29 percent at the end of April 1995. This 108 basis point decline in yield corresponded to a 13 percent price increase for 30-year municipal bonds. Short-term municipal interest rates remained basically unchanged over the past six months. Thus, the yield spread or difference between short-term and long-term municipal bond interest rates narrowed as long rates declined. The seasonal demand for municipals in December more than offset the uncertainty caused by the Orange County, California bankruptcy filing. The market anticipated cash inflows from the reinvestment of coupons and the proceeds from bond calls and maturities in January at a time of scarce supply. Tax-exempt bonds outperformed U.S. Treasury bonds through February 1995. The ratio of the Revenue Bond Index yield to the 30-year U.S. Treasury yield fell from a high of 92 percent in November to 84 percent at the end of February. A declining ratio means that municipal bond prices have been stronger than U.S. Treasury prices. Tax reform proposals that advanced the concept of a flat tax were partially responsible for municipals underperforming Treasuries in March and April. By the end of April, the Revenue/Treasury yield ratio had risen to 86 percent. The pace of new-issue underwriting over the first four months of 1995 was 40 percent below the same period last year. With bond maturities and calls estimated to exceed new issues coming to market in 1995 the outstanding supply of municipal securities is expected to decline. This imbalance should continue to strengthen municipal market conditions. PERFORMANCE The net asset value (NAV) of InterCapital Insured Municipal Bond Trust (IMB) increased from $14.16 to $14.94 per share during the six-month period ended April 30, 1995. Based on this NAV change plus reinvestment of tax-free dividends totaling $0.525 per share, the Trust's total NAV return for the period was 9.46 percent. Concurrently, the Trust's market price on the New York Stock Exchange rose from $12.875 to $14.50 per share. Based on this stock price change and reinvestment of dividends, the Trust's total market return for the period was 16.92 percent. The Trust began the period trading at a 9.1 percent discount to NAV and closed at a 2.9 percent discount. - --------------- * 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 and AA+ to A- by Standard & Poor's. PORTFOLIO STRUCTURE As of April 30, 1995, IMB's long-term investments were diversified among 10 municipal sectors and 39 issuers. The three largest sectors - mortgage revenue-single family, refunded, and transportation revenue bonds - represented 55 percent of net assets. The average maturity and call protection of the Trust's long-term holdings were 23 years and 7 years, respectively. At the end of the period, the Trust's net assets totaled $108 million. Each position in the portfolio was backed either by triple "A" bond insurers or U.S. government guaranteed securities. Municipal bond insurance supports timely payment of principal and interest. As of April 30, 1995, the distribution of credit enhancements was:
MUNICIPAL CREDIT ENHANCEMENTS PERCENT - ----------------------------------------------------- --------- AMBAC Indemnity Corporation (AMBAC) .................. 10% Financial Guaranty Insurance Company (FGIC) ......... 26 Financial Security Assurance Inc. (FSA) .............. 18 Municipal Bond Investors Assurance Corporation (MBIA) 36 GNMA-Backed Obligations .............................. 10
THE IMPACT OF LEVERAGING The Trust's common shares continue to be leveraged. As reported previously, leverage is created through the issuance of auction rate preferred shares (ARPS). The ARPS auction periods normally range between one week and one year. Proceeds from ARPS underwritings are used to purchase additional long-term municipal bonds. Following the payment of ARPS dividends, the common shares earn incremental income when the portfolio yield is higher than the cost of the preferred shares (dividend plus operating and remarketing expenses). Although higher short-term interest rates have narrowed the yield spread, ARPS continue to provide positive incremental income to common shareholders. Leverage also impacts net asset value. ARPS normally account for one-third of a leveraged municipal bond fund's underwritten capital structure. This produces a volatility factor for common shares of 1.5 times the price change of bonds held in the portfolio. Since the value of the preferred shares does not fluctuate, the NAV of the common shares reflects the full market price change of the portfolio's investments. As bond prices eroded in 1994 the degree of leverage and volatility increased. The purchase and retirement of ARPS mitigated the impact of leverage. However, as bonds rallied in 1995, leverage improved performance. Over the last six months, the Trust purchased and retired $5 million in par amount of ARPS. Currently, $30 million ARPS are outstanding. Additional ARPS purchases may occur if ARPS become unprofitable (negative yield spread) or the degree of leverage increases beyond its normal range. DIVIDEND RESERVES To more accurately reflect the income being earned by the Trust, on January 27, 1995 the monthly dividend was reduced from $0.0925 to $0.085 per share. At the end of April 1995, the Trust had undistributed net investment income of $0.040 per share versus $0.074 per share on October 31, 1994. This dividend reserve or "cushion" helps sustain the Trust's current monthly dividend. Higher yields in future ARPS auctions and ARPS retirements may further erode the cushion. Declines in this cushion may cause the Trust to further adjust the common-share dividend. LOOKING AHEAD Slower economic growth in 1995 and the extent of the Federal Reserve Board's previous interest rate moves have improved bond market expectations. Investor demand for municipal securities should also be sustained by significant bond maturities, calls for redemption and diminished new-issue supply. Changing market conditions and the profitability of ARPS are among the factors that will continue to determine the Trust's future level of income and influence its market price. The Trust's procedure for reinvestment of all dividends and distributions on common shares is through purchase 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, 1995, the Trust purchased 13,000 shares of common stock at a weighted average discount of 9.49 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. 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 INTERCAPITAL INSURED MUNICIPAL BOND TRUST PORTFOLIO OF INVESTMENTS April 30, 1995 (unaudited) - -----------------------------------------------------------------------------
PRINCIPAL AMOUNT (IN COUPON MATURITY THOUSANDS) RATE DATE VALUE ----------- -------- ---------- -------------- MUNICIPAL BONDS (97.0%) GENERAL OBLIGATION (4.7%) $ 5,000 Cook County, Illinios, Ser 1992 A (MBIA) ........................6.60 % 11/15/22 $ 5,131,400 - ----------- -------------- EDUCATIONAL FACILITIES REVENUE (6.7%) 6,000 Massachusetts Health & Educational Facilities Authority, Boston University 1991 Ser K & L (MBIA) ........................6.60 10/01/31 6,202,020 1,000 Pennsylvania Higher Educational Facilities Authority, Duquesne University Refg Ser A of 1991 (MBIA) ...........................6.75 04/01/20 1,036,860 - ----------- -------------- 7,000 7,238,880 - ----------- -------------- ELECTRIC REVENUE (5.5%) 1,000 Grand Haven, Michigan, Refg 1993 Ser (MBIA) .....................5.25 07/01/16 900,700 3,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg Ser (FGIC) .........................................................6.50 01/01/11 3,105,720 2,000 Snohomish County Public Utility District #1, Washington, 1993 Ser (FGIC) .....................................................6.00 01/01/18 1,918,540 - ----------- -------------- 6,000 5,924,960 - ----------- -------------- HOSPITAL REVENUE (8.9%) 2,000 Connecticut Health & Educational Facilities Authority, Yale-New Haven Hospital Ser F (MBIA) ....................................7.10 07/01/25 2,167,680 3,000 Jacksonville Health Facilities Authority, Florida, New Children's Hospital at Baptist Medical Center Ser 1991 (MBIA) .7.00 06/01/21 3,215,070 3,000 Illinois Health Facilities Authority, Memorial Medical Center Ser 1989 (MBIA) ................................................6.75 10/01/11 3,147,630 1,000 Nebraska Investment Finance Authority, Methodist Health System Inc Ser 1991 (MBIA) ............................................7.00 03/01/06 1,096,430 - ----------- -------------- 9,000 9,626,810 - ----------- -------------- INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (10.4%) 2,500 Jasper County, Indiana, Northern Indiana Public Service Co Collateralized Ser 1991 (MBIA) .................................7.10 07/01/17 2,660,400 1,000 Rockport, Indiana, Indiana & Michigan Power Co Ser B (Secondary FGIC) ..........................................................7.60 03/01/16 1,105,460 1,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA) ...7.00 06/01/31 1,074,340 3,000 New Hampshire Industrial Development Authority, Canal Electric Co (AMT) (FGIC) ................................................7.375 12/01/20 3,214,170 3,000 New York State Environmental Facilities Corporation, Jamaica Water Supply Co Ser 1989 (AMT) (Secondary AMBAC) ...............7.625 04/01/29 3,227,610 - ----------- -------------- 10,500 11,281,980 - ----------- -------------- MORTGAGE REVENUE - SINGLE FAMILY (31.4%) 1,815 District of Columbia Housing Finance Agency, GNMA Collateralized Ser 1988 E (AMT) ...............................................7.70 12/01/22 1,917,184 305 Hawaii Housing Finance & Development Corporation, Ser 1989 A (AMT) (Bifurcated FSA) ..............................7.70 07/01/29 319,542 1,240 Sedgwick & Shawnee County, Kansas, GNMA Collateralized 1990 Ser B (AMT) (AMBAC) ................................................7.80 06/01/22 1,312,131 5,000 Maine Housing Authority, Ser 1991 A (Bifurcated FSA) ...........7.40 11/15/22 5,275,050 5,000 Massachusetts Housing Finance Agency, Ser 14 (Bifurcated FSA) ..7.60 12/01/14 5,315,850 1,580 Michigan Housing Development Authority, Ser 1990 D (AMT) (Bifurcated FSA) ...............................................7.65 12/01/19 1,678,624
INTERCAPITAL INSURED MUNICIPAL BOND TRUST PORTFOLIO OF INVESTMENTS April 30, 1995 (unaudited) (continued) - ----------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT (IN COUPON MATURITY THOUSANDS) RATE DATE VALUE ----------- -------- ---------- -------------- $ 2,205 Minnesota Housing Finance Agency, Ser 1990 A (AMT) (Bifurcated FSA) ...........................................................7.85 % 07/01/22 $ 2,331,854 1,885 Missouri Housing Development Commission, GNMA-Backed 1991 Ser A (AMT) ..........................................................7.375 08/01/23 1,957,233 6,600 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser 1 & 2 (AMT) ........................................................7.631 09/10/30 6,983,064 620 New Jersey Housing & Mortgage Finance Agency, Home Buyer Ser E (MBIA) .........................................................7.65 10/01/16 659,116 1,910 Tennessee Housing Development Agency, Homeownership Issue S (AMT) (Secondary MBIA) .........................................7.625 07/01/22 2,025,345 3,935 Wisconsin Housing & Economic Development Authority, Homeownership 1991 Ser A (Bifurcated FSA) ......................7.50 09/01/17 4,158,390 - ----------- -------------- 32,095 33,933,383 - ----------- -------------- RESOURCE RECOVERY REVENUE (2.2%) 2,200 Connecticut Resource Recovery Authority, Mid-Connecticut 1985 Ser B (MBIA) ...................................................7.875 11/15/12 2,353,736 - ----------- -------------- TRANSPORTATION FACILITIES REVENUE (11.3%) 3,000 Hawaii, Airports Second Ser 1990 (AMT) (FGIC) ...................7.50 07/01/20 3,230,310 2,000 Wayne County, Michigan, Detroit Metropolitan Wayne County Airport Sub Lien Ser 1991 B (AMT) (MBIA) .......................6.75 12/01/21 2,073,580 5,000 New Hampshire, Turnpike 1991 Refg Ser B & C (FGIC) ..............6.805 11/01/17 5,344,650 1,500 Port of Portland, Oregon, Portland International Airport Ser Seven B (AMT) (MBIA) ...........................................7.10 07/01/21 1,604,325 - ----------- -------------- 11,500 12,252,865 - ----------- -------------- WATER & SEWER REVENUE (3.7%) 2,250 Broward County, Florida, Utility Ser 1991 (FGIC) ................6.00 10/01/20 2,213,842 2,000 Norfolk, Virginia, Water Ser 1993 (AMBAC) .......................5.375 11/01/23 1,812,600 - ----------- -------------- 4,250 4,026,442 - ----------- -------------- REFUNDED (12.2%) 2,000 Castaic Lake Water Agency, California, Ser 1990 COPs (MBIA) ....7.125 08/01/16 2,234,880 5,000 Eastern Municipal Water District, California, Water & Sewer Ser 1991 COPs (FGIC) ...............................................6.50 07/01/20 5,439,600 1,000 St Cloud, Minnesota, The Saint Cloud Hospital Ser 1990 B (AMBAC) 7.00 07/01/20 1,108,500 1,000 North Las Vegas, Nevada, Ser 03/01/91 (FGIC) ....................7.125 04/01/11 1,109,250 3,000 Bucks County Industrial Development Authority, Pennsylvania, Grand View Hospital Ser of 1991 (AMBAC) ........................7.00 07/01/11 3,349,140 - ----------- -------------- 12,000 13,241,370 - ----------- -------------- 99,545 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $99,160,698) ................................. 105,011,826 - ----------- --------------
INTERCAPITAL INSURED MUNICIPAL BOND TRUST PORTFOLIO OF INVESTMENTS April 30, 1995 (unaudited) (continued) - ----------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT (IN COUPON MATURITY THOUSANDS) RATE DATE VALUE ----------- -------- ---------- -------------- SHORT-TERM MUNICIPAL OBLIGATIONS (1.2%) $ 1,000 East Baton Rouge, Louisiana, Exxon Corp Ser 1993 (Tender 05/01/95) ......................................................4.90%* 03/01/22 $1,000,000 300 Louisiana Offshore Terminal Authority, LOOP Inc Ser 1992 A (Tender 05/01/95) ..............................................5.10 * 09/01/08 300,000 - ----------- -------------- 1,300 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS (IDENTIFIED COST $1,300,000) ..... 1,300,000 - ----------- -------------- $100,845 TOTAL INVESTMENTS (IDENTIFIED COST $100,460,698) (A)............ 98.2% 106,311,826 ========== CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ................ 1.8 1,948,734 ------- ------------- NET ASSETS .....................................................100.0% $108,260,560 ======== ============= - --------------- Bond Insurance: - --------------- AMBAC AMBAC Indemnity Corporation. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA Municipal Bond Investors Assurance Corporation. AMT Alternative Minimum Tax. COPs Certificates of Participation. * Variable or floating rate securities. Coupon rate shown reflects current rate. (a) The aggregate cost for federal income tax purposes is $100,460,698; the aggregate gross unrealized appreciation is $6,141,484 and the aggregate gross unrealized depreciation is $290,356, resulting in net unrealized appreciation of $5,851,128.
See Notes to Financial Statements - ----------------------------------------------------------------------------- GEOGRAPHIC SUMMARY OF INVESTMENTS Based on Market Value as a Percent of Net Assets April 30, 1995 (unaudited) - -----------------------------------------------------------------------------
California .......... 7.1% Connecticut ......... 4.2 District of Columbia 1.8 Florida ............. 5.0 Hawaii .............. 3.3 Illinois ............ 7.6 Indiana ............. 3.5 Kansas .............. 2.2% Louisiana ........... 1.2 Maine ............... 4.9 Massachusetts ....... 10.6 Michigan ............ 4.3 Minnesota ........... 3.2 Missouri ............ 1.8 Nebraska ............ 7.4% Nevada .............. 1.0 New Hampshire ....... 7.9 New Jersey .......... 0.6 New York ............ 3.0 Oregon .............. 1.5 Pennsylvania ........ 4.0 South Carolina ...... 2.9% Tennessee ........... 1.9 Virginia ............ 1.7 Washington .......... 1.8 Wisconsin ........... 3.8 ------ Total ............... 98.2% ======
INTERCAPITAL INSURED MUNICIPAL BOND TRUST FINANCIAL STATEMENTS - ----------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES April 30, 1995 (unaudited) - -----------------------------------------------------------------------------
ASSETS: Investments in securities, at value (identified cost $100,460,698) ......... $106,311,826 Cash .................................... 77,800 Interest receivable ..................... 1,945,024 Deferred organizational expenses ....... 6,744 Prepaid expenses ........................ 17,601 -------------- TOTAL ASSETS ........................ 108,358,995 -------------- LIABILITIES: Investment management fee payable ...... 31,380 Accrued expenses ........................ 67,055 -------------- TOTAL LIABILITIES ................... 98,435 -------------- 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, 5,238,113 shares outstanding) ........................... 72,351,481 Net unrealized appreciation ............. 5,851,128 Accumulated undistributed net investment income ................................. 210,158 Accumulated net realized loss ........... (152,207) -------------- NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS .............. 78,260,560 -------------- TOTAL NET ASSETS .................... $108,260,560 ============== NET ASSET VALUE PER COMMON SHARE, ($78,260,560 divided by 5,238,113 common shares outstanding) ............. $14.94 ==============
STATEMENT OF OPERATIONS For the six months ended April 30, 1995 (unaudited) - -----------------------------------------------------------------------------
NET INVESTMENT INCOME: INTEREST INCOME ....................... $3,524,718 ------------ EXPENSES Investment management fee ............ 184,538 Professional fees .................... 49,503 Auction commission fees .............. 39,176 Transfer agent fees and expenses .... 19,408 Trustees' fees and expenses .......... 15,723 Registration fees .................... 9,790 Auction agent fees ................... 9,032 Shareholder reports and notices ..... 7,247 Organizational expenses .............. 3,991 Other ................................ 7,977 ------------ TOTAL EXPENSES ...................... 346,385 ------------ NET INVESTMENT INCOME ............... 3,178,333 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized loss .................... (5,588) Net change in unrealized appreciation 4,232,048 ------------ NET GAIN ............................ 4,226,460 ------------ NET INCREASE ........................ $7,404,793 ============
See notes to Financial Statements INTERCAPITAL INSURED MUNICIPAL BOND TRUST FINANCIAL STATEMENTS (continued) - ----------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - -----------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED FOR THE YEAR APRIL 30, 1995 ENDED (UNAUDITED) OCTOBER 31, 1994 ------------------------ ---------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income ........................................ $ 3,178,333 $ 7,028,394 Net realized loss ............................................ (5,588) (67,514) Net change in unrealized appreciation ........................ 4,232,048 (12,965,757) -------------- ---------------- Net increase (decrease) ..................................... 7,404,793 (6,004,877) -------------- ---------------- Dividends from net investment income: Common ....................................................... (2,751,834) (6,360,938) Preferred .................................................... (605,863) (1,207,800) -------------- ---------------- Total ....................................................... (3,357,697) (7,568,738) -------------- ---------------- Transactions in shares of beneficial interest: Common ....................................................... (163,890) (79,556) Preferred .................................................... (5,000,000) (5,000,000) -------------- ---------------- Total transactions .......................................... (5,163,890) (5,079,556) -------------- ---------------- Total decrease .............................................. (1,116,794) (18,653,171) NET ASSETS: Beginning of period ........................................... 109,377,354 128,030,525 -------------- ---------------- END OF PERIOD (including undistributed net investment income of $210,158 and $389,522, respectively) ...................... $108,260,560 $109,377,354 ============== ================
See Notes to Financial Statements INTERCAPITAL INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS (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 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 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. 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 on securities purchased 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 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. INTERCAPITAL INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) - ------------------------------------------------------------------------------- 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. Such expenses have been deferred and are being amortized by the straight-line method over a period not to exceed five years from the commencement of operations. 2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management Agreement, the Trust pays 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, at its own expense, office space, facilities, equipment, clerical, bookkeeping and certain legal services and pays the salaries of all personnel, including officers of the Trust who are employees of the Investment Manager. The Investment Manager also bears the cost of telephone services, heat, light, power and other utilities provided to the Trust. 3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the six months ended April 30, 1995 aggregated $-0- and $720,000, respectively. Dean Witter Trust Company, an affiliate of the Investment Manager, is the Trust's transfer agent. At April 30, 1995, the Trust had transfer agent fees and expenses payable of approximately $2,700. 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, 1995, included in Trustees' fees and expenses in the Statement of Operations amounted to $5,951. At April 30, 1995, the Trust had an accrued pension liability of $15,212 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. During the six months ended April 30, 1995, the Trust purchased and retired 100 shares in the amount of $5,000,000. INTERCAPITAL INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) - ----------------------------------------------------------------------------- Dividends, which are cumulative, are reset through auction procedures.
RESET RANGE OF SHARES* RATE* DATE DIVIDEND RATES** - --------- ------- --------- ---------------- 600 4.50% 5/03/95 3.35% - 6.25%
- --------------- * As of April 30, 1995. ** For the six months ended April 30, 1995. Subsequent to April 30, 1995 and up through May 9, 1995, the Trust paid dividends to the Series at rates ranging from 4.06% to 4.70%, in the aggregate amount of $148,554. 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. 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, 1992 and October 31, 1993 ....... 5,257,113 $52,571 $72,542,356 Treasury shares purchased and retired (weighted average discount 7.34%)* ............................. (6,000) (60) (79,496) ----------- --------- ------------- 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, April 30, 1995 ............................... 5,238,113 $52,381 $72,299,100 =========== ========= =============
- --------------- * The Trustees have voted to retire the shares purchased. 6. FEDERAL INCOME TAX STATUS -- At October 31, 1994, the Trust had a net capital loss carryover of approximately $147,000 of which $79,000 will be available through October 31, 2001 and $68,000 will be available through October 31, 2002 to offset future capital gains to the extent provided by regulations. INTERCAPITAL INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) - ----------------------------------------------------------------------------- 7. DIVIDENDS TO COMMON SHAREHOLDERS -- The Trust has declared the following dividends from net investment income:
DECLARATION AMOUNT PER DATE SHARE RECORD DATE PAYABLE DATE - -------------- ----------- --------------- -------------- April 25, 1995 $0.085 May 5, 1995 May 19, 1995 June 6, 1995 $0.085 June 16, 1995 June 30, 1995
8. SELECTED QUARTERLY FINANCIAL DATA --
QUARTERS ENDED ------------------------------------ 4/30/95 1/31/95 ----------------- ----------------- PER PER TOTAL* SHARE TOTAL* SHARE -------- ------- -------- ------- Total investment income ......... $1,734 $0.33 $1,791 $0.34 Net investment income ........... 1,562 0.30 1,616 0.31 Net realized and unrealized gain 1,947 0.37 2,279 0.43
QUARTERS ENDED ------------------------------------------------------------------------------ 10/31/94 7/31/94 4/30/94 1/31/94 ------------------- ----------------- ------------------- ----------------- PER PER PER PER TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE --------- -------- -------- ------- --------- -------- -------- ------- Total investment income ... $ 1,952 $ 0.37 $1,909 $0.36 $ 1,951 $ 0.37 $2,047 $ 0.39 Net investment income ..... 1,742 0.33 1,706 0.33 1,748 0.33 1,832 0.35 Net realized and unrealized gain (loss) ............... (4,332) (0.83) 368 0.06 (9,010) (1.71) (59) (0.01)
QUARTERS ENDED -------------------------------------------------------------------------- 10/31/93 7/31/93 4/30/93 1/31/93 ----------------- ----------------- ----------------- ----------------- PER PER PER PER TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE -------- ------- -------- ------- -------- ------- -------- ------- Total investment income ... $2,073 $0.39 $2,050 $0.39 $2,075 $0.39 $2,037 $0.39 Net investment income ..... 1,857 0.36 1,840 0.35 1,855 0.35 1,838 0.35 Net realized and unrealized gain ...................... 2,997 0.57 1,972 0.38 2,181 0.41 3,571 0.68
- --------------- * Totals expressed in thousands. 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 FOR THE PERIOD MONTHS ENDED FOR THE YEAR ENDED OCTOBER 31, FEBRUARY 28, 1991* APRIL 30, 1995** ------------------------------ THROUGH (UNAUDITED) 1994 1993 1992 OCTOBER 31, 1991 --------------- ---- ---- ---- ----------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period ........ $ 14.16 $ 16.75 $ 14.84 $ 14.66 $ 14.06 ---------------- ----------- ---------- ---------- ------------------ Net investment income ........................ 0.61 1.34 1.41 1.45 0.86 Net realized and unrealized gain (loss) ..... 0.80 (2.49 ) 2.04 0.09 0.70 ---------------- ----------- ---------- ---------- ------------------ Total from investment operations ............. 1.41 (1.15 ) 3.45 1.54 1.56 ---------------- ----------- ---------- ---------- ------------------ Less dividends and distributions from: Net investment income ....................... (0.52) (1.21 ) (1.26 ) (1.08 ) (0.52) Common share equivalent of dividends paid to preferred shareholders ..................... (0.11) (0.23 ) (0.24 ) (0.26 ) (0.19) Net realized gain ........................... -- -- (0.04 ) (0.02 ) -- ---------------- ----------- ---------- ---------- ------------------ Total dividends and distributions ............ (0.63) (1.44 ) (1.54 ) (1.36 ) (0.71) Offering costs charged against capital ...... -- -- -- -- (0.25) ---------------- ----------- ---------- ---------- ------------------ Net asset value, end of period ............... $ 14.94 $ 14.16 $ 16.75 $ 14.84 $ 14.66 ================ =========== ========== ========== ================== Market value, end of period .................. $ 14.50 $ 12.875 $ 17.875 $ 16.375 $ 15.50 ================ =========== ========== ========== ================== TOTAL INVESTMENT RETURN+ ..................... 16.92%(1) (22.37) % 17.74 % 13.05 % 6.89%(1) RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) .... $108,261 $109,377 $128,031 $117,998 $117,071 Ratios to average net assets of common shareholders: Total expenses .............................. 0.92%(2) 1.03 % 1.01 % 0.99 % 1.00%(2) Net investment income before preferred stock dividends .................................. 8.44%(2) 8.68 % 8.86 % 9.61 % 9.16%(2) Preferred stock dividends ................... 1.61%(2) 1.49 % 1.49 % 1.70 % 1.97%(2) Net investment income available to common shareholders ................................ 6.83%(2) 7.19 % 7.37 % 7.91 % 7.19%(2) Asset coverage on preferred shares at end of period ...................................... 361% 312 % 319 % 295 % 293% Portfolio turnover rate ...................... 0% 12 % 6 % 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 sales charges or brokerage commissions. (1) Not annualized. (2) Annualized. 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. TRUSTEES Jack F. Bennett 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 InterCapital Insured Municipal Bond Trust Semiannual Report April 30, 1995 -----END PRIVACY-ENHANCED MESSAGE-----