-----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, CpRfHmII+IB3IW4wljU0xxWgrHQ1Cn+U1r2fmkmn3YlrhL5e9WOajpLT7E6iIwnx Gpwwgk/uWvQOTUyWwa4IaA== 0000950136-97-000774.txt : 19970627 0000950136-97-000774.hdr.sgml : 19970627 ACCESSION NUMBER: 0000950136-97-000774 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970626 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: 97630491 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 LETTER TO THE SHAREHOLDERS April 30, 1997 Two World Trade Center, New York, New York 10048 DEAR SHAREHOLDER: We are pleased to present the semi-annual report on the operations of InterCapital Insured Municipal Bond Trust (IMB) for the period ended April 30, 1997. Economic growth moderated during the third quarter of 1996, causing fixed-income yields to move lower through November. However, an acceleration of economic activity led by consumer spending developed in the fourth quarter of 1996 and continued into the first quarter of 1997. This contributed to rising interest rates between December and April. On March 25, 1997, the Federal Reserve Board raised the federal-funds rate 25 basis points to 5.50 percent in a preemptive move against a possible acceleration in the rate of inflation. Subsequently, the fixed-income markets began to anticipate the possibility of additional rate hikes by the Fed. MUNICIPAL MARKET CONDITIONS Municipal yields followed the trend of Treasury yields, but were less volatile. Long-term insured revenue bond yields moved as low as BOND YIELDS 1994-1997
Insured Municipal 30-Year Insured Revenue Yields Municipal 30-year U.S. as a Percentage of Revenue Yields Treasury Yields U.S. Treasury Yields 5.45 6.35 0.8586 Jan '94 5.29 6.24 0.8481 5.64 6.66 0.8468 6.19 7.09 0.8728 6.24 7.31 0.854 6.23 7.43 0.8387 6.31 7.61 0.8293 6.15 7.4 0.8314 6.17 7.45 0.828 6.42 7.82 0.8212 6.66 7.97 0.8356 6.99 8 0.8738 6.65 7.88 0.8438 Jan '95 6.42 7.7 0.834 6.12 7.44 0.8222 6.07 7.43 0.8167 6.05 7.34 0.8245 5.84 6.65 0.8784 6 6.62 0.9066 5.99 6.85 0.875 5.98 6.65 0.8997 5.97 6.5 0.9184 5.79 6.33 0.915 5.61 6.13 0.9151 5.49 5.95 0.923 Jan '96 5.42 6.03 0.8989 5.55 6.47 0.8577 5.89 6.67 0.8835 5.94 6.91 0.8601 5.99 6.99 0.8571 5.86 6.87 0.8529 5.77 6.97 0.8278 5.82 7.12 0.8176 5.71 6.92 0.8248 5.6 6.64 0.8431 5.45 6.35 0.8583 5.56 6.64 0.8372 Jan '97 5.63 6.79 0.8293 5.53 6.8 0.8129 5.83 7.1 0.8216 5.74 6.96 0.8251
Source: Bloomberg L.P. INTERCAPITAL INSURED MUNICIPAL BOND TRUST LETTER TO THE SHAREHOLDERS April 30, 1997, continued FIVE LARGEST SECTORS AS OF APRIL 30, 1997 (% OF NET ASSETS) HOUSING 31% REFUNDED 13% TRANSPORTATION 10% HOSPITAL 9% EDUCATION 9% ALL OTHERS 28% PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. CREDIT ENHANCEMENTS AS OF APRIL 30, 1997 (% OF TOTAL LONG-TERM INVESTMENTS) AMBAC 6% FGIC 25% FSA 19% GNMA 9% MBIA 41% PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE. CALL STRUCTURE AS OF APRIL 30, 1997 (% OF TOTAL LONG-TERM PORTFOLIO) 1999 1.9% 2000 27.7% 2001 44.3% 2002 5.1% 2003 1.9% 2004 0.0% 2005 5.7% 2006+ 13.4% X-AXIS LABEL: "YEAR CALLABLE" Y-AXIS LABEL: "PERCENT CALLABLE" WEIGHTED AVERAGE CALL PROTECTION: 5 YEARS INTERCAPITAL INSURED MUNICIPAL BOND TRUST LETTER TO THE SHAREHOLDERS April 30, 1997, continued 5.45 percent in November 1996, before rising to 5.75 percent in April 1997. Similarly, yields on one-year municipal notes moved from 3.70 to 3.95 percent over the past six months. The yield curve pick-up for extending maturities from 1 to 30 years inceased to 180 basis points. The ratio of 30-year insured revenue bond yields to 30-year U.S. Treasury yields declined from 86 percent at the end of October 1996 to 82 percent in April 1997. A declining ratio means that municipals have outperformed Treasuries, but have become relatively more expensive. The annual range of the ratio has averaged from 81 to 92 percent over the past three years. New-issue municipal volume was down 6 percent during the first four months of 1997. However, underwriting volume for the full year is expected to exceed bond maturities and redemptions. PERFORMANCE Over the six-month period ended April 30, 1997, the Trust's net asset value (NAV) moved from $15.35 to $15.16. Based on this NAV change plus reinvestment of tax-free dividends totaling $0.48 per share, the Trust's total NAV return was 2.10 percent. IMB's market price on the New York Stock Exchange moved from $14.125 to $14.75 per share. Based on this change in market price plus reinvestment of tax-free dividends, IMB's total market return was 7.89 percent. On April 30, 1997, the Trust was trading at a 3 percent discount to NAV. Undistributed net investment income available for dividends increased from $0.117 to $0.125 per share. PORTFOLIO STRUCTURE The Trust remained fully invested in long-term municipal bonds during the period. Investments were diversified among 11 long-term sectors and 38 credits. IMB's average maturity was 20 years. The distribution of call dates in the portfolio produced an average call protection of 5 years. To assure the timely payment of principal and interest, each position in the portfolio was backed by triple "A" rated bond insurance or U.S. Government-guaranteed securities. THE IMPACT OF LEVERAGING As we have discussed previously, 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 amount of ARPS outstanding, and second, the spread between the portfolio's cost yield and ARPS expenses (ARPS auction rate and expenses). The greater the spread and the amount of ARPS outstanding, the greater the amount of incremental income available for distribution to common shareholders. The level of net investment income available for distribution to common shareholders varies with the level of short-term interest rates. INTERCAPITAL INSURED MUNICIPAL BOND TRUST LETTER TO THE SHAREHOLDERS April 30, 1997, continued IMB's only ARPS series yielded 3.76 percent during the six months ended April 30, 1997. The series totaled $30 million and represented 28 percent of net assets. Over the same period, ARPS leverage contributed $0.07 per share to common share earnings. LOOKING AHEAD With the collapse of flat-tax proposals, municipal bonds have improved relative to U.S. Treasury securities. Although tax-free yields are currently somewhat "rich" in their historical relationship with Treasury yields, the long-term benefit of tax-exemption remains intact. 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, 1997, IMB purchased and retired 24,000 shares of beneficial interest at a weighted average market discount of 6.52 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, 1997 (unaudited)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------------- MUNICIPAL BONDS (97.0%) General Obligation (5.0%) $5,000 Cook County, Illinois, Ser 1992 A (MBIA) ....................... 6.60 % 11/15/22 $ 5,380,800 ------ ----------- Educational Facilities Revenue (8.7%) 6,000 Massachusetts Health & Educational Facilities Authority, Boston University 1991 Ser K & L (MBIA) ........................ 6.66 10/01/31 6,355,980 2,000 New York State Dormitory Authority, St John's University Ser 1996 (MBIA) .................................................... 5.70 07/01/26 1,966,320 1,000 Pennsylvania Higher Educational Facilities Authority, Duquesne University Refg Ser A of 1991 (MBIA) ........................... 6.75 04/01/20 1,057,900 ------ ----------- 9,000 9,380,200 ------ ----------- Electric Revenue (4.8%) 3,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg Ser (FGIC) ......................................................... 6.50 01/01/11 3,192,720 2,000 Snohomish County Public Utility District #1, Washington, 1993 Ser (FGIC) ..................................................... 6.00 01/01/18 2,003,460 ------ ----------- 5,000 5,196,180 ------ ----------- Hospital Revenue (8.8%) 3,000 Jacksonville Health Facilities Authority, Florida, New Children's Hospital at Baptist Medical Center Ser 1991 (MBIA) .. 7.00 06/01/21 3,240,330 3,000 Illinois Health Facilities Authority, Memorial Medical Center Ser 1989 (MBIA) ................................................ 6.75 10/01/11 3,199,980 2,000 University of Missouri, Health Ser 1996 A (AMBAC) ............... 5.50 11/01/16 1,948,680 1,000 Nebraska Investment Finance Authority, Methodist Health System Inc 1991 (MBIA) ................................................ 7.00 03/01/06 1,089,150 ------ ----------- 9,000 9,478,140 ------ ----------- Industrial Development/Pollution Control Revenue (7.5%) 2,500 Jasper County, Indiana, Northern Indiana Public Service Co Collateralized Ser 1991 (MBIA) ................................. 7.10 07/01/17 2,706,325 1,000 Rockport, Indiana, Indiana & Michigan Power Co Ser B (Secondary FGIC) .......................................................... 7.60 03/01/16 1,095,160 1,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA) .... 7.00 06/01/31 1,080,500 3,000 New Hampshire Industrial Development Authority, Canal Electric Co (AMT)(FGIC) ................................................. 7.375 12/01/20 3,256,590 ------ ----------- 7,500 8,138,575 ------ ----------- Mortgage Revenue - Multi-Family (2.8%) 3,000 New York State Housing Finance Agency, 1996 Ser A Refg (FSA) .... 6.10 11/01/15 3,050,490 ------ ----------- Mortgage Revenue - Single Family (28.1%) ........................ 1,715 District of Columbia Housing Finance Agency, GNMA Collateralized Ser 1988 E (AMT) ............................................... 7.70 12/01/22 1,793,856 200 Hawaii Housing Finance & Development Corporation, Ser 1989 A (AMT)(Bifurcated FSA) .......................................... 7.70 07/01/29 208,404 990 Sedgwick & Shawnee County, Kansas, GNMA Collateralized 1990 Ser B (AMT)(AMBAC) ................................................. 7.80 06/01/22 1,042,104 5,000 Maine Housing Authority, Ser 1991 A (Bifurcated FSA) ............ 7.40 11/15/22 5,264,950 SEE NOTES TO FINANCIAL STATEMENTS INTERCAPITAL INSURED MUNICIPAL BOND TRUST PORTFOLIO OF INVESTMENTS April 30, 1997 (unaudited) continued PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------------- $4,720 Massachusetts Housing Finance Agency, Ser 14 (Bifurcated FSA) ... 7.60 % 12/01/14 $4,969,688 695 Michigan Housing Development Authority, Ser 1990 D (AMT) (Bifurcated FSA) ............................................... 7.65 12/01/19 707,107 1,930 Minnesota Housing Finance Agency, Ser 1990 A (AMT)(Bifurcated FSA) ........................................................... 7.85 07/01/22 2,028,565 1,885 Missouri Housing Development Commission, GNMA-Backed 1991 Ser A (AMT) .......................................................... 7.375 08/01/23 1,989,825 5,200 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser 1 & 2 (AMT) ........................................................ 7.631 09/10/30 5,480,332 620 New Jersey Housing & Mortgage Finance Agency, Home Buyer Ser E (MBIA) ......................................................... 7.65 10/01/16 645,097 1,910 Tennessee Housing Development Agency, Homeownership Issue S (AMT)(Secondary MBIA) .......................................... 7.625 07/01/22 2,013,465 3,935 Wisconsin Housing & Economic Development Authority, Homeownership 1991 Ser A (Bifurcated FSA) ...................... 7.50 09/01/17 4,147,529 ------- ----------- 28,800 30,290,922 ------- ----------- Transportation Facilities Revenue (10.1%) 3,000 Hawaii, Airports Second Ser 1990 (AMT)(FGIC) .................... 7.50 07/01/20 3,260,040 2,000 Wayne County, Michigan, Detroit Metropolitan Wayne County Airport Sub Lien Ser 1991 B (AMT)(MBIA) ........................ 6.75 12/01/21 2,131,180 5,000 New Hampshire, Turnpike 1991 Refg Ser B & C (FGIC) .............. 6.805 11/01/17 5,462,700 ------- ----------- 10,000 10,853,920 ------- ----------- Water & Sewer Revenue (5.8%) 2,250 Broward County, Florida, Utility Ser 1991 (FGIC) ................ 6.00 10/01/20 2,267,190 4,000 Norfolk, Virginia, Water Ser 1995 (MBIA) ........................ 5.875 11/01/20 4,020,200 ------- ----------- 6,250 6,287,390 ------- ----------- Other Revenue (1.8%) 2,000 Las Cruces, New Mexico, Ser 1995 (AMT)(MBIA) .................... 5.50 12/01/15 1,903,800 ------- ----------- Refunded (13.6%) 2,000 Castaic Lake Water Agency, California, Ser 1990 COPs (MBIA) ..... 7.125 08/01/00++ 2,189,720 5,000 Eastern Municipal Water District, California, Water & Sewer Ser 1991 COPs (FGIC) ............................................... 6.50 07/01/01++ 5,431,100 2,000 Connecticut Health & Educational Facilities Authority, Yale-New Haven Hospital Ser F (MBIA) .................................... 7.10 07/01/00++ 2,175,400 1,425 Port of Portland, Oregon, Portland International Airport Ser Seven B (AMT)(MBIA) ............................................ 7.10 01/01/12++ 1,632,138 3,000 Bucks County Industrial Development Authority, Pennsylvania, Grand View Hospital Ser of 1991 (AMBAC) ........................ 7.00 07/01/01++ 3,298,080 ------- ----------- 13,425 14,726,438 ------- ----------- 98,975 TOTAL MUNICIPAL BONDS (Identified Cost $98,131,988) .................................. 104,686,855 ------- ----------- SEE NOTES TO FINANCIAL STATEMENTS INTERCAPITAL INSURED MUNICIPAL BOND TRUST PORTFOLIO OF INVESTMENTS April 30, 1997 (unaudited) continued PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE - ---------------------------------------------------------------------------------------------------------------- SHORT-TERM MUNICIPAL OBLIGATION (0.5%) $ 500 Missouri Health & Educational Facilities Authority, Washington University Ser 1996 C (Demand 05/01/97 )(Identified Cost $500,000) ...................................................... 4.00%* 09/01/30 $ 500,000 ------- ------------ $99,475 TOTAL INVESTMENTS (Identified Cost $98,631,988) (a) ...................... 97.5% 105,186,855 =========== CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ........................... 2.5 2,680,472 ----- ------------ NET ASSETS ............................................................... 100.0% $107,867,327 ===== ============
- -------------- AMT Alternative Minimum Tax. COPs Certificates of Participation. ++ Prerefunded to call date shown. * Current coupon of variable rate demand obligation. (a) The aggregate cost for federal income tax purposes approximates identified cost. The aggregate gross unrealized appreciation is $6,585,517 and the aggregate gross unrealized depreciation is $30,650, resulting in net unrealized appreciation of $6,554,867. 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, 1997 California 7.1% Connecticut 2.0 District of Columbia 1.7 Florida 5.1 Hawaii 3.2 Illinois 7.9 Indiana 3.5 Kansas 2.0 Maine 4.9 Massachusetts 10.5% Michigan 2.6 Minnesota 1.9 Missouri 4.1 Nebraska 6.1 New Hampshire 8.1 New Jersey 0.6 New Mexico 1.8 New York 4.6 Oregon 1.5% Pennsylvania 4.0 South Carolina 3.0 Tennessee 1.9 Virginia 3.7 Washington 1.9 Wisconsin 3.8 ---- Total 97.5% ==== SEE NOTES TO FINANCIAL STATEMENTS INTERCAPITAL INSURED MUNICIPAL BOND TRUST FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES April 30, 1997 (unaudited)
ASSETS: Investments in securities, at value (identified cost $98,631,988)......................................... $105,186,855 Cash................................................................... 806,396 Interest receivable.................................................... 2,071,789 Prepaid expenses ...................................................... 35,449 ------------ TOTAL ASSETS......................................................... 108,100,489 ------------ LIABILITIES: Payable for: Dividends to preferred shareholders.................................. 92,712 Investment management fee............................................ 35,121 Accrued expenses ...................................................... 105,329 ------------ TOTAL LIABILITIES.................................................... 233,162 ------------ 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, 5,137,563 shares outstanding)......................... 70,937,934 Net unrealized appreciation ........................................... 6,554,867 Accumulated undistributed net investment income........................ 642,552 Accumulated net realized loss.......................................... (268,026) ------------ NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ........................ 77,867,327 ------------ TOTAL NET ASSETS .................................................... $107,867,327 ============ NET ASSET VALUE PER COMMON SHARE ($77,867,327 divided by 5,137,563 common shares outstanding) ......... $15.16 ======
SEE NOTES TO FINANCIAL STATEMENTS INTERCAPITAL INSURED MUNICIPAL BOND TRUST FINANCIAL STATEMENTS, continued STATEMENT OF OPERATIONS For the six months ended April 30, 1997 (unaudited)
NET INVESTMENT INCOME: INTEREST INCOME....................... $ 3,426,662 ----------- EXPENSES Investment management fee............. 189,248 Auction commission fees............... 55,788 Professional fees..................... 55,292 Shareholder reports and notices ...... 16,770 Transfer agent fees and expenses ..... 12,822 Trustees' fees and expenses........... 9,473 Registration fees..................... 7,954 Auction agent fees.................... 6,002 Custodian fees........................ 2,754 Other................................. 8,156 ----------- TOTAL EXPENSES ..................... 364,259 LESS: EXPENSE OFFSET .............. (2,724) ----------- NET EXPENSES ....................... 361,535 ----------- NET INVESTMENT INCOME .............. 3,065,127 ----------- NET REALIZED AND UNREALIZED LOSS: Net realized loss..................... (10,299) Net change in unrealized appreciation......................... (1,045,442) ----------- NET LOSS............................ (1,055,741) ----------- NET INCREASE.......................... $ 2,009,386 ===========
SEE NOTES TO FINANCIAL STATEMENTS 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, 1997 OCTOBER 31, 1996 - ------------------------------------------------------------------------------------ (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ............................. $ 3,065,127 $ 6,271,605 Net realized loss.................................. (10,299) (48,911) Net change in unrealized appreciation.............. (1,045,442) (837,846) ------------ ------------ NET INCREASE..................................... 2,009,386 5,384,848 ------------ ------------ DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME: Preferred ......................................... (559,362) (1,123,038) Common ............................................ (2,469,177) (4,679,522) ------------ ------------ TOTAL............................................ (3,028,539) (5,802,560) ------------ ------------ Decrease from transactions in common shares of beneficial interest............................... (345,470) (1,068,077) ------------ ------------ NET DECREASE..................................... (1,364,623) (1,485,789) NET ASSETS: Beginning of period................................ 109,231,950 110,717,739 ------------ ------------ END OF PERIOD (Including undistributed net investment income of $642,552 and $605,964, respectively)............. $107,867,327 $109,231,950 ============ ============
SEE NOTES TO FINANCIAL STATEMENTS INTERCAPITAL INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1997 (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's investment objective is to provide current income which is exempt from federal income tax. The Trust was organized as a Massachusetts business trust on February 27, 1990 and commenced operations on February 28, 1991. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. 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 INTERCAPITAL INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1997 (unaudited) continued 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. 2. INVESTMENT MANAGEMENT AGREEMENT Pursuant to an Investment Management Agreement with Dean Witter InterCapital Inc. (the "Investment Manager"), 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 cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the six months ended April 30, 1997 aggregated $1,971,340 and $1,236,448, respectively. Dean Witter Trust Company, an affiliate of the Investment Manager, is the Trust's transfer agent. At April 30, 1997, the Trust had transfer agent fees and expenses payable of approximately $2,600. 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, 1997 included in Trustees' fees and expenses in the Statement of Operations amounted to $2,344. At April 30, 1997, the Trust had an accrued pension liability of $37,944 which is included in accrued expenses in the Statement of Assets and Liabilities. INTERCAPITAL INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1997 (unaudited) continued 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. The Trust has issued Auction Rate Preferred Shares ("Preferred Shares") which 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.
AMOUNT IN RESET RANGE OF SHARES* THOUSANDS* RATE* DATE DIVIDEND RATES** ------- ---------- ----- ---- ---------------- 600 30,000 3.76% 07/03/97 3.76%
- -------------- * AS OF APRIL 30, 1997. ** FOR THE SIX MONTHS ENDED APRIL 30, 1997. Subsequent to April 30, 1997 and up through June 6, 1997, the Trust paid dividends at a rate of 3.76% in the aggregate amount of $191,604. 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. INTERCAPITAL INSURED MUNICIPAL BOND TRUST NOTES TO FINANCIAL STATEMENTS April 30, 1997 (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, 1995.................................................. 5,238,113 $52,381 $72,299,100 Treasury shares purchased and retired (weighted average discount 9.33%)*... (76,550) (765) (1,067,312) --------- ------- ----------- Balance, October 31, 1996 ................................................. 5,161,563 51,616 71,231,788 Treasury shares purchased and retired (weighted average discount 6.52%)*... (24,000) (240) (345,230) --------- ------- ----------- Balance, April 30, 1997 ................................................... 5,137,563 $51,376 $70,886,558 ========= ======= ===========
- -------------- * The Trustees have voted to retire the shares purchased. 6. FEDERAL INCOME TAX STATUS At October 31, 1996, the Trust had a net capital loss carryover of approximately $258,000, to offset future capital gains to the extent provided by regulations, which is available through October 31 of the following years:
AMOUNT IN THOUSANDS ----------------------------------- 2001 2002 2003 2004 ---- ---- ---- ---- $79 $68 $62 $49 === === === ===
7. DIVIDENDS TO COMMON SHAREHOLDERS The Trust declared the following dividends from net investment income:
AMOUNT RECORD PAYABLE DECLARATION DATE PER SHARE DATE DATE ---------------- --------- ------- --------- April 29, 1997 $0.08 May 9, 1997 May 23, 1997 May 27, 1997 $0.08 June 6, 1997 June 20, 1997
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 YEAR ENDED OCTOBER 31* MONTHS ENDED ---------------------------------------------------------------- APRIL 30, 1997* 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------------- (UNAUDITED) PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period ...... $15.35 $ 15.41 $ 14.16 $ 16.75 $ 14.84 $ 14.66 ------ ------- ------- ------- ------- ------- Net investment income...................... 0.60 1.21 1.22 1.34 1.41 1.45 Net realized and unrealized gain (loss) ... (0.20) (0.17) 1.30 (2.49) 2.04 0.09 ------ ------- ------- ------- ------- ------- Total from investment operations........... 0.40 1.04 2.52 (1.15) 3.45 1.54 ------ ------- ------- ------- ------- ------- Less dividends and distributions from: Net investment income..................... (0.48) (0.90) (1.04) (1.21) (1.26) (1.08) Common share equivalent of dividends paid to preferred shareholders........... (0.11) (0.22) (0.23) (0.23) (0.24) (0.26) Net realized gain......................... -- -- -- -- (0.04) (0.02) ------ ------- ------- ------- ------- ------- Total dividends and distributions.......... (0.59) (1.12) (1.27) (1.44) (1.54) (1.36) ------ ------- ------- ------- ------- ------- Anti-dilutive effect of acquiring treasury shares.................................... -- 0.02 -- -- -- -- ------ ------- ------- ------- ------- ------- Net asset value, end of period............. $15.16 $ 15.35 $ 15.41 $ 14.16 $ 16.75 $ 14.84 ====== ======= ======= ======= ======= ======= Market value, end of period................ $14.75 $14.125 $14.625 $12.875 $17.875 $16.375 ====== ======= ======= ======= ======= ======= TOTAL INVESTMENT RETURN+ .................. 7.89%(1) 3.06% 22.10% (22.37)% 17.74% 13.05% RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS: Total expenses............................. 0.93%(2)(3) 0.92% 0.91%(3) 1.03% 1.01% 0.99% Net investment income before preferred stock dividends........................... 7.83%(2) 7.85% 8.16% 8.68% 8.86% 9.61% Preferred stock dividends ................. 1.43%(2) 1.41% 1.53% 1.49% 1.49% 1.70% Net investment income available to common shareholders.............................. 6.40%(2) 6.44% 6.63% 7.19% 7.37% 7.91% SUPPLEMENTAL DATA: Net assets, end of period, in thousands ... $107,867 $109,232 $110,718 $109,377 $128,031 $117,998 Asset coverage on preferred shares at end of period................................. 358% 363% 369% 312% 319% 295% Portfolio turnover rate ................... 1%(1) 5% 6% 12% 6% 7%
- -------------- * 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) Does not reflect the effect of expense offset of 0.01%. SEE NOTES TO FINANCIAL STATEMENTS TRUSTEES - ------------------------------------------------- Michael Bozic Charles A. Fiumefreddo Edwin J. Garn John R. Haire Dr. Manuel H. Johnson Michael E. Nugent Philip J. Purcell John L. Schroeder OFFICERS - ------------------------------------------------- Charles A. Fiumefreddo Chairman and Chief Executive Officer Barry Fink 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 Semiannual Report April 30, 1997 -----END PRIVACY-ENHANCED MESSAGE-----