<PAGE> 1
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
Strong economic growth in the fourth quarter of 1993 and a shift in Federal
Reserve Board monetary policy in February of 1994 caused the fixed-income
markets to reverse direction and led to the sharpest increase in interest rates
in more than six years. At the beginning of the year, market concerns about
inflation developed as the economy approached full employment and commodity
prices moved upward. The Federal Reserve Board responded by tightening monetary
policy. Since early February, the central bank has raised the federal-funds
rate -- the interest rate banks charge each other for overnight loans -- 250
basis points from 3.00 percent to 5.50 percent in six separate moves through
November. Between May and November, the discount rate -- the interest rate the
Federal Reserve charges member banks for loans -- increased 175 basis points to
4.75 percent.
During InterCapital Insured Municipal Bond Trust's (NYSE symbol: IMB)
fiscal year ended October 31, 1994, long-term municipal bond yields, as
measured by The Bond Buyer Revenue Bond Index,* rose 139 basis points from 5.56
percent to 6.95 percent. In February and March yields jumped 89 basis points
from 5.50 percent to 6.39 percent in response to the Federal Reserve Board's
initial tightening and subsequent municipal bond selling pressure. A semblance
of stability returned to the market between June and August. After Labor Day,
however, continued economic growth, aggressive tax-loss selling, heavy
mutual-fund redemptions and excessive dealer inventory led to further municipal
market deterioration. The total yield increase of 139 basis points during the
fiscal year was equivalent to a 17 percent price decline for a 30-year
municipal bond. One-third of this price decline occurred in September and
October.
The municipal market was also influenced by supply and demand conditions.
New-issue underwriting totaled a record $290 billion in 1993. The pace of
new-issue activity over the first 10 months of 1994, however, slowed 44 percent.
The estimated issuance for 1994 is $160 billion. By way of comparison, bond
maturities and calls for redemption are expected to reach $190 billion this year
resulting in a reduction in the amount of municipal debt outstanding. This
scarcity would normally be expected to improve the relative performance of
municipal bonds under stable-to-improving interest rate conditions.
PERFORMANCE
The Trust's net asset value (NAV) declined from $16.75 to $14.16 per share
during the fiscal year ended October 31, 1994. Based on this change and
reinvestment of tax-free dividends totaling $1.21 per share, the Trust's total
return for the fiscal year was -8.83 percent. Concurrently, the Trust's market
price on the New York Stock Exchange declined from $17.875 to $12.875 per share.
Based on this market change and reinvestment of dividends, the Trust's total
return for the fiscal year was -22.37 percent. The Trust began the fiscal year
trading at a 6.7 percent premium to NAV and closed at a 9.1 percent discount to
NAV.
- ---------------
* The Bond Buyer Revenue Bond Index is an arithmetic average of the yields of 25
selected municipal revenue bonds with 30-year maturities. Credit ratings of
these bonds range from Aa1 to Baa1 by Moody's and AA+ to A- by Standard &
Poor's.
<PAGE> 2
PORTFOLIO STRUCTURE
As of October 31, 1994, the portfolio's long-term investments were
diversified among 9 municipal sectors and 39 credits. The three largest sectors
were housing, hospital, and transportation revenue bonds, representing 54
percent of net assets. The average maturity and call protection of the Trust's
long-term holdings was 23 years and 7 years, respectively. Bonds subject to the
alternative minimum tax (AMT) represented approximately 29 percent of net
assets. At the end of the period, the Trust had net assets in excess of $109
million.
Each position in the portfolio was backed either by bond insurers that are
rated Aaa by Moody's Investors Service, Inc. and/or AAA by Standard & Poor's
Corp. or by U.S. government-guaranteed securities. This is to ensure the timely
payment of principal and interest. Additionally, holdings representing 12
percent of the portfolio had been prerefunded and were further secured by
escrows of U.S. government securities. As of October 31, 1994, the distribution
of long-term credit enhancements was:
<TABLE>
<CAPTION>
Credit Enhancements Percent
-------------------------------------------------------------------------- -------
<S> <C>
AMBAC Indemnity Corporation (AMBAC)....................................... 10%
Financial Guaranty Insurance Company (FGIC)............................... 25
Financial Security Assurance Inc.(FSA).................................... 18
Municipal Bond Investors Assurance Corporation (MBIA)..................... 36
U.S. Treasury Escrow or GNMA-Backed Obligations........................... 11
</TABLE>
THE IMPACT OF LEVERAGING
As reported previously, the Trust's common shares are leveraged. Leverage
was created through the issuance of auction rate preferred shares (ARPS). The
ARPS's auction periods normally range between one week and one year. Proceeds
from ARPS underwritings were 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 costs of the ARPS
(yield plus operating and remarketing expenses). Although rising short-term
interest rates have narrowed the yield spread this year, ARPS continue to
provide positive incremental income to common shareholders.
The leveraged capital structure of closed-end municipal bond funds
additionally impacts NAV. ARPS normally account for one-third of a 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. The common
stock's NAV per share reflects the full price change of the portfolio's
investments since the value of the preferred shares does not fluctuate.
As the bond market has eroded, the degree of leverage and volatility has
increased. The purchase and retirement of ARPS counteracts this trend. During
the fiscal year, IMB purchased and retired $5 million in par amount of ARPS, so
that $35 million in ARPS remain outstanding. Additional ARPS purchases may occur
if the degree of leverage increases or ARPS profitability (spread) declines
significantly.
DIVIDEND RESERVES
At the end of the fiscal year, IMB had undistributed net investment income
of $0.074 per share available for future distributions. This dividend reserve or
"cushion" helped sustain the Trust's current
<PAGE> 3
monthly dividend. Higher yields in future ARPS auctions and ARPS retirements may
further erode the cushion. Declines in the dividend reserve may cause the Trust
to adjust the common share dividend.
LOOKING AHEAD
The overall direction of interest rates will primarily be determined by the
strength of the economy, the trend of inflation and the Federal Reserve Board's
responses. These conditions may continue to move interest rates higher through
mid-1995. Investor demand for municipal securities should 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 determine the Trust's future level of income and influence the
direction of the common stock market price.
The Trust's procedure for reinvestment of all dividends and distributions
on common shares is by purchase in the open market. This method helps to support
the market value of the Trust's shares. In addition, the Trustees have approved
a procedure whereby the Trust, when appropriate, purchases 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. 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,
Charles A. Fiumefreddo
Chairman of the Board
<PAGE> 4
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(in Coupon Maturity
thousands) Rate Date Value
--------- ------ --------- -------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (92.8%)
GENERAL OBLIGATION (5.4%)
$ 5,000 Cook County, Illinois, Ser 1992 A (MBIA Insured)....... 6.60 % 11/15/22 $ 4,829,750
1,000 North Las Vegas, Nevada, Ser 3/1/91 (FGIC Insured)
(Prerefunded)........................................ 7.125 4/ 1/11 1,088,320
--------- -------------
6,000 5,918,070
--------- -------------
EDUCATIONAL FACILITIES REVENUE (6.3%)
6,000 Massachusetts Health & Educational Facilities
Authority, Boston University Ser K & L (MBIA
Insured)............................................. 6.66 10/ 1/31 5,894,340
1,000 Pennsylvania Higher Educational Facilities Authority,
Duquesne University Refg Ser A of 1991 (MBIA
Insured)............................................. 6.75 4/ 1/20 1,000,000
--------- -------------
7,000 6,894,340
--------- -------------
ELECTRIC REVENUE (5.1%)
1,000 Grand Haven, Michigan, Refg 1993 Ser (MBIA Insured).... 5.25 7/ 1/16 827,400
3,000 Piedmont Municipal Power Agency, South Carolina,
1991 Refg Ser (FGIC Insured)......................... 6.50 1/ 1/11 2,975,910
2,000 Snohomish County Public Utility District #1,
Washington, 1993 Ser (FGIC Insured).................. 6.00 1/ 1/18 1,793,020
--------- -------------
6,000 5,596,330
--------- -------------
HOSPITAL REVENUE (12.4%)
2,000 Connecticut Health & Educational Facilities Authority,
Yale - New Haven Hospital Ser F (MBIA Insured)....... 7.10 7/ 1/25 2,053,100
3,000 Jacksonville Health Facilities Authority, Florida, New
Children's Hospital at Baptist Medical Center Ser
1991 (MBIA Insured).................................. 7.00 6/ 1/21 3,095,310
3,000 Illinois Health Facilities Authority, Memorial Medical
Center Ser 1989 (MBIA Insured)....................... 6.75 10/ 1/11 3,006,210
1,000 St Cloud, Minnesota, The Saint Cloud Hospital Ser 1990
B (AMBAC Insured) (Prerefunded)...................... 7.00 7/ 1/20 1,090,820
1,000 Nebraska Investment Finance Authority, Methodist Health
System Inc Ser 1991 (MBIA Insured)................... 7.00 3/ 1/06 1,065,460
3,000 Bucks County Industrial Development Authority,
Pennsylvania, Grand View Hospital Ser of 1991
(AMBAC Insured) (Prerefunded)........................ 7.00 7/ 1/11 3,270,420
--------- -------------
13,000 13,581,320
--------- -------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (10.0%)
2,500 Jasper County, Indiana, Northern Indiana Public Service
Co Collateralized Ser 1991 (MBIA Insured)............ 7.10 7/ 1/17 2,540,000
1,000 Rockport, Indiana, Indiana & Michigan Power Co Ser B
(Secondary FGIC Insured)............................. 7.60 3/ 1/16 1,063,890
1,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991
(MBIA Insured)....................................... 7.00 6/ 1/31 1,012,570
</TABLE>
<PAGE> 5
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(in Coupon Maturity
thousands) Rate Date Value
--------- ------ --------- -------------
<C> <S> <C> <C> <C>
$ 3,000 New Hampshire Industrial Development Authority, Canal
Electric Co (AMT) (FGIC Insured)..................... 7.375% 12/ 1/20 $ 3,100,050
3,000 New York State Environmental Facilities Corporation,
Jamaica Water Supply Co Ser 1989 (AMT)
(Secondary AMBAC Insured)............................ 7.625 4/ 1/29 3,186,090
--------- -------------
10,500 10,902,600
--------- -------------
MORTGAGE REVENUE - SINGLE FAMILY (30.6%)
1,815 District of Columbia Housing Finance Agency,
GNMA Collateralized Ser 1988 E (AMT)................. 7.70 12/ 1/22 1,836,453
315 Hawaii Housing Finance & Development Corporation,
Ser 1989 A (AMT) (Bifurcated FSA Insured)............ 7.70 7/ 1/29 318,043
1,305 Sedgwick & Shawnee County, Kansas, GNMA Collateralized
1990 Ser B (AMT) (AMBAC Insured)..................... 7.80 6/ 1/22 1,321,913
5,000 Maine Housing Authority, Ser 1991 A
(Bifurcated FSA Insured)............................. 7.40 11/15/22 5,059,500
5,000 Massachusetts Housing Finance Agency, Ser 14
(Bifurcated FSA Insured)............................. 7.60 12/ 1/14 5,075,000
1,580 Michigan Housing Development Authority, Ser 1990 D
(AMT) (Bifurcated FSA Insured)....................... 7.65 12/ 1/19 1,628,711
2,350 Minnesota Housing Finance Agency, Ser 1990 A (AMT)
(Bifurcated FSA Insured)............................. 7.85 7/ 1/22 2,385,250
1,885 Missouri Housing Development Commission, GNMA-Backed
1991 Ser A (AMT)..................................... 7.375 8/ 1/23 1,907,281
7,100 Nebraska Investment Finance Authority, GNMA-Backed 1990
Ser 1 & 2 (AMT)...................................... 7.631 9/ 1/30 7,314,491
620 New Jersey Housing & Mortgage Finance Agency, Home
Buyer Ser E (MBIA Insured)........................... 7.65 10/ 1/16 623,956
1,910 Tennessee Housing Development Agency, Homeownership
Issue S (AMT) (Secondary MBIA Insured)............... 7.625 7/ 1/22 1,952,211
3,935 Wisconsin Housing & Economic Development Authority,
Homeownership 1991 Ser A (Bifurcated FSA Insured).... 7.50 9/ 1/17 4,044,668
--------- -------------
32,815 33,467,477
--------- -------------
RESOURCE RECOVERY REVENUE (2.1%)
2,200 Connecticut Resource Recovery Authority,
--------- Mid-Connecticut 1985 Ser B (MBIA Insured)............ 7.875 11/15/12 2,349,138
-------------
TRANSPORTATION FACILITIES REVENUE (10.6%)
3,000 Hawaii, Airports Second Ser 1990 (AMT) (FGIC Insured).. 7.50 7/ 1/20 3,118,080
2,000 Wayne County, Michigan, Detroit Metropolitan Wayne
County Airport Sub Lien Ser 1991 B (AMT) (MBIA
Insured)............................................. 6.75 12/ 1/21 1,969,280
</TABLE>
<PAGE> 6
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount
(in Coupon Maturity
thousands) Rate Date Value
--------- ------ --------- -------------
<C> <S> <C> <C> <C>
$ 5,000 New Hampshire, Turnpike 1991 Refg Ser B & C
(FGIC Insured)....................................... 6.805% 11/ 1/17 $ 4,974,050
1,500 Port of Portland, Oregon, Portland International
Airport Ser Seven B (AMT) (MBIA Insured)............. 7.10 7/ 1/21 1,517,430
--------- -------------
11,500 11,578,840
--------- -------------
WATER & SEWER REVENUE (10.3%)
2,000 Castaic Lake Water Agency, California, Ser 1990 COPs
(MBIA Insured) (Prerefunded)......................... 7.125 8/ 1/16 2,192,780
5,000 Eastern Municipal Water District, California, Water &
Sewer Ser 1991 COPs (FGIC Insured) (Prerefunded)..... 6.50 7/ 1/20 5,330,850
2,250 Broward County, Florida, Utility Ser 1991 (FGIC
Insured)............................................. 6.00 10/ 1/20 2,091,150
2,000 Norfolk, Virginia, Water Ser 1993 (AMBAC Insured)...... 5.375 11/15/23 1,617,600
--------- -------------
11,250 11,232,380
--------- -------------
100,265 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $99,901,415)........... 101,520,495
--------- -------------
SHORT-TERM MUNICIPAL OBLIGATION (3.7%)
4,000 Harris County Health Facilities Development
--------- Corporation, Texas, Methodist Hospital Ser 1994
(Tender 11/1/94) (Identified Cost $4,000,000)........ 3.40* 12/ 1/25 4,000,000
-------------
$ 104,265 TOTAL INVESTMENTS
======== (IDENTIFIED COST $103,901,415) (a).......................... 96.5% 105,520,495
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES................ 3.5 3,856,859
----- -------------
NET ASSETS.................................................... 100.0% $ 109,377,354
===== =============
</TABLE>
- ---------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Variable or floating rate security. Coupon rate shown reflects current
rate.
(a) The aggregate cost for federal income tax purposes is $103,901,415; the
aggregate gross unrealized appreciation is $2,711,053 and the aggregate
gross unrealized depreciation is $1,091,973, resulting in net unrealized
appreciation of $1,619,080.
See Notes to Financial Statements
- --------------------------------------------------------------------------------
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
California......... 6.9%
Connecticut........ 4.1
District of
Columbia.......... 1.7
Florida............ 4.7
Hawaii............. 3.1
Illinois........... 7.2
Indiana............ 3.3
Kansas............. 2.1
Maine.............. 4.6
Massachusetts...... 10.0
Michigan........... 4.0
Minnesota.......... 3.2
Missouri........... 1.7
Nebraska........... 7.7
Nevada............. 1.0
New Hampshire...... 7.4
New Jersey......... 0.6
New York........... 2.9
Oregon............. 1.4
Pennsylvania....... 3.9
South Carolina..... 2.7
Tennessee.......... 1.8
Texas.............. 3.7
Virginia........... 1.5
Washington......... 1.6
Wisconsin.......... 3.7
----
Total.............. 96.5%
====
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 7
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
- -----------------------------------------------------------
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $103,901,415) (Note 1)... $ 105,520,495
Cash........................................ 207,152
Receivable for:
Interest.................................. 2,022,739
Investments sold.......................... 1,748,080
Deferred organizational expenses (Note 1)... 10,735
Prepaid expenses............................ 18,247
-------------
TOTAL ASSETS........................ 109,527,448
-------------
LIABILITIES:
Payable for:
Common shares of beneficial interest
purchased............................... 38,466
Investment management fee (Note 2)........ 34,364
Accrued expenses (Note 3)................... 77,264
-------------
TOTAL LIABILITIES................... 150,094
-------------
NET ASSETS:
Preferred shares of beneficial interest,
(1,000,000 shares authorized of non-
participating $.01 par value, 700 shares
outstanding) (Note 4)..................... 35,000,000
-------------
Common shares of beneficial interest
(unlimited shares authorized of $.01 par
value, 5,251,113 shares outstanding) (Note
5)........................................ 72,515,371
Net unrealized appreciation on
investments............................... 1,619,080
Accumulated undistributed net investment
income.................................... 389,522
Accumulated net realized loss on
investments............................... (146,619)
-------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS...................... 74,377,354
-------------
TOTAL NET ASSETS.................... $ 109,377,354
=============
NET ASSET VALUE PER COMMON SHARE,
($74,377,354 divided by 5,251,113 common
shares outstanding)....................... $14.16
=====
<CAPTION>
STATEMENT OF OPERATIONS
For the year ended October 31, 1994
- -----------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME........................... $ 7,858,670
-------------
EXPENSES
Investment management fee (Note 2)...... 424,351
Auction commission fees................. 146,937
Professional fees....................... 103,916
Shareholder reports and notices......... 33,543
Transfer agent fees and expenses (Note
3).................................... 33,004
Trustees' fees and expenses (Note 3).... 29,789
Auction agent fees...................... 19,115
Registration fees....................... 15,502
Organizational expenses (Note 1)........ 8,048
Other................................... 16,071
-------------
TOTAL EXPENSES...................... 830,276
-------------
NET INVESTMENT INCOME............. 7,028,394
-------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS (Note 1):
Net realized loss on investments........ (67,514)
Net change in unrealized appreciation on
investments........................... (12,965,757)
-------------
NET LOSS ON INVESTMENTS............. (13,033,271)
-------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS....... $ (6,004,877)
=============
</TABLE>
See Notes to Financial Statements
<PAGE> 8
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
year ended year ended
October 31, October 31,
1994 1993
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income....................................................... $ 7,028,394 $ 7,389,718
Net realized loss on investments............................................ (67,514) (79,012)
Net change in unrealized appreciation on investments........................ (12,965,757) 10,799,649
------------- -------------
Net increase (decrease) in net assets resulting from operations......... (6,004,877) 18,110,355
------------- -------------
Dividends to preferred shareholders from net investment income................ (1,207,800) (1,244,752)
Dividends and distributions to common shareholders from:
Net investment income....................................................... (6,360,938) (6,623,786)
Net realized gain on investments............................................ -- (209,233)
------------- -------------
Total dividends and distributions....................................... (7,568,738) (8,077,771)
------------- -------------
Decrease from transactions in shares of beneficial interest (Notes 4 & 5):
Common...................................................................... (79,556) --
Preferred................................................................... (5,000,000) --
------------- -------------
Total transactions...................................................... (5,079,556) --
------------- -------------
Total increase (decrease)............................................... (18,653,171) 10,032,584
NET ASSETS:
Beginning of period........................................................... 128,030,525 117,997,941
------------- -------------
END OF PERIOD (including undistributed net investment income of $389,522 and
$929,866, respectively)..................................................... $ 109,377,354 $ 128,030,525
============= =============
</TABLE>
See Notes to Financial Statements
<PAGE> 9
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 on the identified cost
method. The Trust amortizes premiums and 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.
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 have been deferred and are being
amortized by the Trust on the straight-line method over a period not to
exceed five years from the commencement of operations.
<PAGE> 10
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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 year ended October 31, 1994 aggregated $13,838,125 and
$22,245,455, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At October 31, 1994, the Trust had transfer agent fees
and expenses payable of approximately $2,800.
On January 1, 1994, the Trust adopted an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Trust who will
have served as an independent Trustee 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 year ended October 31, 1994, included in Trustees' fees and expenses in the
Statement of Operations amounted to $9,946. At October 31, 1994, the Trust had
an accrued pension liability of $9,738 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 year ended October 31, 1994, the Trust purchased and retired 100 shares in
the amount of $5,000,000.
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
Range of
Reset Dividend
Shares* Rate* Date Rates**
---- ------ -------- --------------
<S> <C> <C> <C>
700 3.35% 11/2/94 3.02% - 3.35%
</TABLE>
- ---------------
* As of October 31, 1994.
** For the year ended October 31, 1994.
Subsequent to October 31, 1994 and up through December 12, 1994, the Trust
paid dividends to the Series at rates ranging from 3.349% to 3.749%, in the
aggregate amount of $128,372.
<PAGE> 11
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
Capital Paid
Par in Excess of
Shares Value Par Value
--------- -------- ------------
<S> <C> <C> <C>
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
========= ======== ============
</TABLE>
- ---------------
* The Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS -- At October 31, 1994, the Trust had net capital
loss carryovers 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.
7. DIVIDENDS TO COMMON SHAREHOLDERS -- The Trust has declared the following
dividends from net investment income --
<TABLE>
<CAPTION>
Amount
per
Declaration Date Share Record Date Payable Date
- ------------------ -------- ------------------- -------------------
<S> <C> <C> <C>
November 1, 1994 $ 0.0925 November 11, 1994 November 25, 1994
November 29, 1994 $ 0.0925 December 9, 1994 December 23, 1994
</TABLE>
<PAGE> 12
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
8. SELECTED QUARTERLY FINANCIAL DATA -- (unaudited)
<TABLE>
<CAPTION>
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
------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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) on investments... (4,332) (0.83) 368 0.06 (9,010) (1.71) (59) (0.01)
<CAPTION>
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
------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 on investments.......... 2,997 0.57 1,972 0.38 2,181 0.41 3,571 0.68
</TABLE>
- ---------------
* Totals expressed in thousands of dollars.
<PAGE> 13
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected ratios and per share data for a common share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
For the
period
February
28, 1991*
For the year ended October 31, through
--------------------------------------- October
1994 1993 1992 31, 1991
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 16.75 $ 14.84 $ 14.66 $ 14.06
--------- --------- --------- ---------
Net investment income............ 1.34 1.41 1.45 0.86
Net realized and unrealized gain
(loss) on investments.......... (2.49) 2.04 0.09 0.70
--------- --------- --------- ---------
Total from investment
operations..................... (1.15) 3.45 1.54 1.56
--------- --------- --------- ---------
Less dividends, distributions and
other charges:
Dividends from net investment
income...................... (1.21) (1.26) (1.08) (0.52)
Common share equivalent of
dividends paid to preferred
shareholders................ (0.23) (0.24) (0.26) (0.19)
Distributions from net realized
gain on investments......... -- (0.04) (0.02) --
Offering costs charged against
capital..................... -- -- -- (0.25)
--------- --------- --------- ---------
Total dividends, distributions
and other charges.............. (1.44) (1.54) (1.36) (0.96)
--------- --------- --------- ---------
Net asset value, end of period... $ 14.16 $ 16.75 $ 14.84 $ 14.66
========= ========= ========= =========
Market value, end of period...... $ 12.875 $ 17.875 $ 16.375 $ 15.50
========= ========= ========= =========
TOTAL INVESTMENT RETURN+......... (22.37)% 17.74% 13.05% 6.89%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)................. $ 109,377 $ 128,031 $ 117,998 $ 117,071
Ratios to average net assets of
common shareholders:
Total expenses................. 1.03% 1.01% 0.99% 1.00%(2)
Net investment income before
preferred stock dividends... 8.68% 8.86% 9.61% 9.16%(2)
Preferred stock dividends...... 1.49% 1.49% 1.70% 1.97%(2)
Net investment income available
to common shareholders...... 7.19% 7.37% 7.91% 7.19%(2)
Asset coverage on preferred
shares at end of period........ 312% 319% 295% 293%
Portfolio turnover rate.......... 12% 6% 7% 16%(1)
</TABLE>
- ---------------
* Commencement of operations.
+ 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
<PAGE> 14
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of InterCapital Insured Municipal Bond Trust
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of InterCapital Insured Municipal Bond
Trust (the "Trust") at October 31, 1994, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended and for the period February 28, 1991 (commencement of
operations) through October 31, 1991, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1994, by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
December 12, 1994
- --------------------------------------------------------------------------------
1994 FEDERAL TAX NOTICE (unaudited)
During the year ended October 31, 1994, the Trust paid the following per
share amounts from tax-exempt income: $1.21 to common shareholders and
$1,510 to preferred shareholders.
- --------------------------------------------------------------------------------
<PAGE> 15
(This Page Intentionally Left Blank)
<PAGE> 16
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
Annual Report
October 31, 1994
