<PAGE> 1
Two World Trade Center, New York, New York 10048
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS October 31, 1995
DEAR SHAREHOLDER:
Bonds have rallied significantly since late last year. Progressive
tightening of monetary policy by the Federal Reserve Board over the 12
months through February 1995 led to slower economic growth and caused bonds
to advance. The trend toward lower long-term interest rates this year was
also aided in July by a 25 basis point reduction in the federal-funds rate
(the interest rate banks charge each other for overnight loans).
MUNICIPAL MARKET CONDITIONS
Long-term municipal bond yields declined from a high of 7.37 percent in
November 1994 to 6.02 percent at the end of October 1995, as tracked by The
Bond Buyer Revenue Bond Index*. This 135 basis point decline in yield
corresponded to an 11 percent price increase for callable municipal bonds
with 30-year maturities. Similarly, yields on 1-year municipal notes moved
from 4.51 percent to 3.82 percent. The yield pickup for extending maturity
from 1- to 30-years was 220 basis points.
Tax-exempt bonds began the year by outperforming U.S. Treasury bonds, but
then deteriorated on a relative basis. The ratio of the Revenue Bond Index
yield to the 30-year U.S. Treasury bond yield moved from 89 percent in
December 1994 to 84 percent by the end of February 1995. A declining ratio
means that municipal bond prices have been stronger than U.S. Treasury
prices. In the spring the municipal market began to discount the risk of
comprehensive changes in the tax code created by flat tax rhetoric from
Washington. This caused the yield ratio to reach a high of 95 percent
during the summer. Over the past 10 years, long municipal yields have
averaged 89 percent of U.S. Treasury yields.
The municipal market continued to experience consolidation in 1995.
Municipal underwriting in the first 10 months of the year was down
- ---------------
*The Bond Buyer Revenue Bond Index is an arithmetic average
of the yields of 25 selected municipal revenue bonds with 30-year
maturities. Credit ratings of these bonds range from Aa1 to Baa1 by Moody's
Investors Service, Inc., and AA+ to A- by Standard & Poor's Corp.
<PAGE> 2
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS October 31, 1995, continued
16 percent from the same period in 1994. This change followed a 44 percent drop
in volume for all of 1994. The effect of lower volume and profitability was also
apparent in the decisions of several major dealers to withdraw from the
municipal business.
TAX REFORM
Flat-tax advocates have generated increased publicity for their proposals and
have affected the municipal market since early 1995. Most of the discussion on
proposed tax-reform measures is based on theoretical concepts, containing broad
assumptions and lacking specific details. Basically, the various plans raise
questions about the fairness of changing from a progressive to a regressive tax
structure. Low flat-tax rate plans call for the elimination of deductions of
mortgage interest, charitable contributions, property taxes, and state and local
income taxes. Should politicians make tax reform a central issue in the 1996
elections, media coverage will expand from the financial page to the front page.
If that happens, municipal bonds could come under further pressure. For example,
when major tax reform turmoil occurred in 1986, municipal yields briefly
exceeded taxable yields.
In addition to the market risk associated with the flat-tax proposals, municipal
credits would also be negatively affected. If mortgage interest and property tax
deductions were eliminated, municipalities would experience a decline in their
property tax base. The loss of state and local income tax deductions would
increase the relative economic disadvantage that high-tax states already face.
The flat tax represents a shift in tax accountability from the federal to local
governments. Taxpayer recognition of the extent of changes under consideration
may impede the passage of comprehensive tax reform.
FUND PERFORMANCE
The net asset value (NAV) of InterCapital Insured Municipal Bond Trust (IMB)
rose from $14.16 to $15.41 per share during the fiscal year ended October 31,
1995. Based on this NAV change plus reinvestment of tax-free dividends totaling
$1.04 per share, the Trust's total return was 16.98 percent. Over the same
period, IMB's market price on the New York Stock Exchange appreciated 13.6
percent from $12.875 to $14.625 per share. Based on this market price change and
reinvestment of tax-free dividends, the Trust's total return was 22.10 percent.
IMB began the fiscal year trading at a 9 percent discount to NAV and closed at a
5 percent discount. Undistributed net investment income totaled $0.026 per share
on October 31, 1995 versus $0.074 per share a year ago. Since the amount of
IMB's undistributed net investment income continued to shrink during the summer,
the Trustees voted to reduce the monthly dividend from $0.085 to $0.075 per
share beginning with the November 1995 payment. This revised dividend rate more
accurately reflects the Trust's current earnings.
<PAGE> 3
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS October 31, 1995, continued
PORTFOLIO STRUCTURE
On October 31, 1995, IMB's long-term portfolio was diversified among 11
long-term municipal sectors and 37 credits. The three largest
sectors -- mortgage - single family, transportation and industrial
development/pollution control revenue bonds -- represented 53 percent of the
portfolio. The average maturity and call protection of the Trust's long-term
holdings were 23 and 6 years, respectively. Net assets exceeded $110 million.
Each position in the portfolio was backed by triple "A" rated bond insurers or
U.S. government-guaranteed securities. This is to ensure the timely payment of
principal and interest. The distribution of credit enhancements is illustrated
on the right.
<TABLE>
<CAPTION>
Credit Enhancements as of October 31, 1995
(% of Total Long-Term Investments)
<S> <C>
FGIC 24%
AMBAC 6%
MBIA 41%
GNMA 11%
FSA 18%
</TABLE>
THE IMPACT OF LEVERAGING
As discussed in previous reports, the total income available for distribution to
common shareholders includes incremental income provided by Auction Rate
Preferred Share (ARPS) leverage. ARPS dividends reflect prevailing short-term
interest rates on maturities normally ranging from one week to one year.
Incremental income to common shares depends on two factors: first, the spread
between the interest earned on the long-term bonds in the established portfolio
of investments and the ARPS auction rate plus ARPS expenses; second, the amount
of ARPS outstanding. The greater the amount of ARPS outstanding, the greater the
amount of incremental income available for distribution to common shareholders.
The profitability of ARPS declined in 1994 and the first half of 1995. ARPS
yields have moved somewhat lower since the Federal Reserve Board's initial
easing in July 1995. A reduction in the amount of ARPS outstanding -- to control
the portfolio's price volatility last year -- also diminished incremental income
to common shares. Currently, $30 million in ARPS are outstanding. This
represents 27 percent of net assets.
<PAGE> 4
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS October 31, 1995, continued
LOOKING AHEAD
The slower pace of economic growth in 1995 and the Federal Reserve Board's
previous interest rate moves have improved bond-market expectations. The
decreasing supply of new issues, combined with significant maturities and calls
for redemption, should continue to be positive for the municipal market.
However, tax-reduction proposals are likely to continue to receive publicity and
may cloud the outlook for tax-exempt bonds. With long-term municipal securities
yielding more than 90 percent of the yield on U.S. Treasuries, the market has
already begun the process of discounting the risk that a flat tax might
eventually become law.
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 fiscal year ended October 31, 1995,
the Trust purchased and retired 13,000 shares of common stock at a weighted
average market 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/ C. FIUMEFREDDO
- ----------------------
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE> 5
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On October 31, 1995, an annual meeting of the Trust's shareholders was held for
the purpose of voting on three separate matters, the results of which were as
follows:
(1) ELECTION OF TRUSTEES BY ALL SHAREHOLDERS:
<TABLE>
<S> <C>
Jack F. Bennett
For............................................................................................ 3,770,196
Withheld....................................................................................... 103,905
Michael Bozic
For............................................................................................ 3,767,658
Withheld....................................................................................... 106,443
</TABLE>
ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS:
<TABLE>
<S> <C>
Charles A. Fiumefreddo
For............................................................................................ 348
Withheld....................................................................................... --
</TABLE>
The following Trustees were not standing for reelection at this meeting:
Edwin J. Garn, John R. Haire, Dr. Manuel H. Johnson, Paul Kolton,
Michael E. Nugent, Philip J. Purcell and John L. Schroeder.
(2) CONTINUANCE OF THE CURRENTLY EFFECTIVE INVESTMENT MANAGEMENT AGREEMENT:
<TABLE>
<S> <C>
For............................................................................................ 3,622,155
Against........................................................................................ 64,790
Abstain........................................................................................ 187,156
</TABLE>
(3) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS:
<TABLE>
<S> <C>
For............................................................................................ 3,714,516
Against........................................................................................ 19,568
Abstain........................................................................................ 140,017
</TABLE>
<PAGE> 6
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS October 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (97.9%)
General Obligation (4.8%)
$ 5,000 Cook County, Illinios, Ser 1992 A (MBIA)................................. 6.60 % 11/15/22 $ 5,325,200
- -------- ----------
Educational Facilities Revenue (6.7%)
6,000 Massachusetts Health & Educational Facilities Authority, Boston University
1991 Ser K & L (MBIA)................................................... 6.66 10/01/31 6,346,740
1,000 Pennsylvania Higher Educational Facilities Authority, Duquesne University
Refg Ser A of 1991 (MBIA)............................................... 6.75 04/01/20 1,084,060
- -------- ----------
7,000 7,430,800
- -------- ----------
Electric Revenue (4.7%)
3,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg Ser (FGIC).... 6.50 01/01/11 3,210,600
2,000 Snohomish County Public Utility District #1, Washington, 1993 Ser
(FGIC).................................................................. 6.00 01/01/18 2,013,820
- -------- ----------
5,000 5,224,420
- -------- ----------
Hospital Revenue (8.9%)
2,000 Connecticut Health & Educational Facilities Authority, Yale-New Haven
Hospital Ser F (MBIA)................................................... 7.10 07/01/25 2,207,120
3,000 Jacksonville Health Facilities Authority, Florida, New Children's
Hospital at Baptist Medical Center Ser 1991 (MBIA)...................... 7.00 06/01/21 3,325,230
3,000 Illinois Health Facilities Authority, Memorial Medical Center Ser 1989
(MBIA).................................................................. 6.75 10/01/11 3,218,850
1,000 Nebraska Investment Finance Authority, Methodist Health System Inc
Ser 1991 (MBIA)......................................................... 7.00 03/01/06 1,126,960
- -------- ----------
9,000 9,878,160
- -------- ----------
Industrial Development/Pollution Control (10.5%)
2,500 Jasper County, Indiana, Northern Indiana Public Service Co Collateralized
Ser 1991 (MBIA)......................................................... 7.10 07/01/17 2,772,900
1,000 Rockport, Indiana, Indiana & Michigan Power Co Ser B (Secondary FGIC).... 7.60 03/01/16 1,144,790
1,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA)............. 7.00 06/01/31 1,111,000
3,000 New Hampshire Industrial Development Authority, Canal Electric Co
(AMT) (FGIC)............................................................ 7.375 12/01/20 3,339,930
3,000 New York State Environmental Facilities Corporation, Jamaica Water Supply
Co Ser 1989 (AMT) (Secondary AMBAC)..................................... 7.625 04/01/29 3,295,020
- -------- ----------
10,500 11,663,640
- -------- ----------
Mortgage Revenue - Single Family (30.6%)
1,790 District of Columbia Housing Finance Agency, GNMA Collateralized
Ser 1988 E (AMT) (MBIA)................................................. 7.70 12/01/22 1,894,697
285 Hawaii Housing Finance & Development Corporation, Ser 1989 A (AMT)
(Bifurcated FSA)........................................................ 7.70 07/01/29 303,930
1,175 Sedgwick & Shawnee County, Kansas, GNMA Collateralized 1990 Ser B
(AMT) (AMBAC)........................................................... 7.80 06/01/22 1,261,386
5,000 Maine Housing Authority, Ser 1991 A (Bifurcated FSA)..................... 7.40 11/15/22 5,339,100
4,955 Massachusetts Housing Finance Agency, Ser 14 (Bifurcated FSA)............ 7.60 12/01/14 5,331,431
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS October 31, 1995, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 1,580 Michigan Housing Development Authority, Ser 1990 D (AMT) (Bifurcated
FSA).................................................................... 7.65 % 12/01/19 $ 1,677,470
2,075 Minnesota Housing Finance Agency, Ser 1990 A (AMT) (Bifurcated FSA)...... 7.85 07/01/22 2,218,445
1,885 Missouri Housing Development Commission, GNMA-Backed 1991 Ser A (AMT).... 7.375 08/01/23 1,992,257
6,400 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser 1 & 2 (AMT).. 7.631 09/10/30 6,888,064
620 New Jersey Housing & Mortgage Finance Agency, Home Buyer Ser E (MBIA).... 7.65 10/01/16 667,560
1,910 Tennessee Housing Development Agency, Homeownership Issue S (AMT)
(Secondary MBIA)........................................................ 7.625 07/01/22 2,049,124
3,935 Wisconsin Housing & Economic Development Authority, Homeownership
1991 Ser A (Bifurcated FSA)............................................. 7.50 09/01/17 4,228,079
- -------- ----------
31,610 33,851,543
- -------- ----------
Resource Recovery Revenue (2.2%)
2,200 Connecticut Resource Recovery Authority, Mid-Connecticut 1985 Ser B
(MBIA).................................................................. 7.875 11/15/12 2,347,554
- -------- ----------
Transportation Facilities Revenue (11.4%)
3,000 Hawaii, Airports Second Ser 1990 (AMT) (FGIC)............................ 7.50 07/01/20 3,344,130
2,000 Wayne County, Michigan, Detroit Metropolitan Wayne County Airport Sub
Lien Ser 1991 B (AMT) (MBIA)............................................ 6.75 12/01/21 2,139,240
5,000 New Hampshire, Turnpike 1991 Refg Ser B & C (FGIC)....................... 6.805 11/01/17 5,513,750
1,500 Port of Portland, Oregon, Portland International Airport Ser Seven B
(AMT) (MBIA)............................................................ 7.10 07/01/21 1,654,830
- -------- ----------
11,500 12,651,950
- -------- ----------
Water & Sewer Revenue (5.7%)
2,250 Broward County, Florida, Utility Ser 1991 (FGIC)......................... 6.00 10/01/20 2,281,117
4,000 Norfolk, Virginia, Water Ser 1995 (MBIA)................................. 5.875 11/01/20 4,032,560
- -------- ----------
6,250 6,313,677
- -------- ----------
Other Revenue (2.2%)
2,500 Las Cruces, New Mexico, Ser 1995 (AMT) (MBIA) (WI)....................... 5.50 12/01/15 2,389,025
- -------- ----------
Refunded (10.2%)
2,000 Castaic Lake Water Agency, California, Ser 1990 COPs (MBIA).............. 7.125 08/01/16 2,271,980
5,000 Eastern Municipal Water District, California, Water & Sewer Ser 1991 COPs
(FGIC).................................................................. 6.50 07/01/20 5,604,700
3,000 Bucks County Industrial Development Authority, Pennsylvania, Grand View
Hospital Ser of 1991 (AMBAC)............................................ 7.00 07/01/11 3,425,970
- -------- ----------
10,000 11,302,650
- -------- ----------
100,560 TOTAL MUNICIPAL BONDS (Identified Cost $99,940,464).............................................. 108,378,619
- -------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS October 31, 1995, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATIONS (2.5%)
$ 1,700 Massachusetts, Dedicated Income Tax Ser 1990 B (Demand 11/01/95)......... 3.70 %* 12/01/97 $ 1,700,000
1,100 Washington Health Care Facilities Authority, Sisters of Providence Ser
1985 B (Demand 11/01/95)................................................ 3.90* 10/01/05 1,100,000
- -------- ----------
2,800 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS (Identified Cost $2,800,000).............................. 2,800,000
- -------- ----------
$103,360 TOTAL INVESTMENTS (Identified Cost $102,740,464) (a)..................................... 100.4% 111,178,619
========
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS........................................... (0.4) (460,880)
---- ----------
NET ASSETS............................................................................... 100.0% $110,717,739
====== ============
</TABLE>
- ---------------------
<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
WI Security purchased on a when issued basis.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes is $102,740,464; the aggregate gross and net unrealized
appreciation is $8,438,155.
</TABLE>
Bond Insurance:
<TABLE>
<C> <S>
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
------------------------------------------------------------------------------
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
October 31, 1995
<TABLE>
<S> <C>
California........ 7.1%
Connecticut....... 4.1
District of
Columbia......... 1.7
Florida........... 5.1
Hawaii............ 3.3
Illinois.......... 7.7
Indiana........... 3.5
Kansas............ 2.1
Maine............. 4.8
Massachusetts..... 12.1%
Michigan.......... 3.4
Minnesota......... 2.0
Missouri.......... 1.8
Nebraska.......... 7.2
New Hampshire..... 8.0
New Jersey........ 0.6
New Mexico........ 2.2
New York.......... 3.0
Oregon............ 1.5%
Pennsylvania...... 4.1
South Carolina.... 2.9
Tennessee......... 1.9
Virginia.......... 3.7
Washington........ 2.8
Wisconsin......... 3.8
------
Total............. 100.4%
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
ASSETS:
Investments in securities, at value
(identified cost $102,740,464)....................................... $111,178,619
Cash.................................................................. 135,324
Interest receivable................................................... 1,902,890
Deferred organizational expenses...................................... 2,669
Prepaid expenses...................................................... 8,868
----------
TOTAL ASSETS...................................................... 113,228,370
----------
LIABILITIES:
Payable for:
Investments purchased............................................. 2,391,424
Investment management fee......................................... 34,965
Accrued expenses...................................................... 84,242
----------
TOTAL LIABILITIES................................................. 2,510,631
----------
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........................................... 8,438,155
Accumulated undistributed net investment income....................... 136,919
Accumulated net realized loss......................................... (208,816)
----------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS...................... 80,717,739
----------
TOTAL NET ASSETS.................................................. $110,717,739
==========
NET ASSET VALUE PER COMMON SHARE
($80,717,739 divided by 5,238,113 common shares outstanding)......... $15.41
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the year ended October 31, 1995
NET INVESTMENT INCOME:
INTEREST INCOME........................................................ $ 7,069,881
---------
EXPENSES
Investment management fee.............................................. 378,608
Professional fees...................................................... 106,647
Auction commission fees................................................ 76,822
Transfer agent fees and expenses....................................... 30,486
Trustees' fees and expenses............................................ 26,385
Shareholder reports and notices........................................ 24,211
Registration fees...................................................... 18,292
Auction agent fees..................................................... 17,241
Organizational expenses................................................ 8,067
Custodian fees......................................................... 6,067
Other.................................................................. 15,937
---------
TOTAL EXPENSES BEFORE EXPENSE OFFSET............................... 708,763
LESS: EXPENSE OFFSET............................................... (6,028)
---------
TOTAL EXPENSES AFTER EXPENSE OFFSET................................ 702,735
---------
NET INVESTMENT INCOME.............................................. 6,367,146
---------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss...................................................... (62,197)
Net change in unrealized appreciation.................................. 6,819,075
---------
NET GAIN........................................................... 6,756,878
---------
NET INCREASE........................................................... $13,124,024
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
<S> <C> <C>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31,
1995 1994
------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................. $ 6,367,146 $ 7,028,394
Net realized loss................................. (62,197) (67,514)
Net change in unrealized appreciation............. 6,819,075 (12,965,757)
---------- ----------
NET INCREASE (DECREASE)....................... 13,124,024 (6,004,877)
---------- ----------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Preferred......................................... (1,196,552) (1,207,800)
Common............................................ (5,423,197) (6,360,938)
---------- ----------
TOTAL......................................... (6,619,749) (7,568,738)
---------- ----------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Preferred......................................... (5,000,000) (5,000,000)
Common............................................ (163,890) (79,556)
---------- ----------
TOTAL......................................... (5,163,890) (5,079,556)
---------- ----------
TOTAL INCREASE (DECREASE)..................... 1,340,385 (18,653,171)
NET ASSETS:
Beginning of period............................... 109,377,354 128,030,525
---------- ----------
END OF PERIOD
(Including undistributed net investment income
of $136,919 and $389,522, respectively)....... $110,717,739 $109,377,354
========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 12
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1995
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 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
<PAGE> 13
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued
federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent they exceed
net investment income and net realized capital gains for tax purposes, they are
reported as distributions of paid-in-capital.
E. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Trust's common shares in the
amount of $40,281 which have been reimbursed for the full amount thereof. Such
expenses 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 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, 1995 aggregated
$6,234,800 and $6,103,190, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At October 31, 1995, the Trust had transfer agent fees
and expenses payable of approximately $2,300.
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 year ended October 31, 1995 included
in Trustees' fees and expenses in the Statement of Operations amounted to
$7,391. At October 31, 1995,
<PAGE> 14
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued
the Trust had an accrued pension liability of $16,414 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,
1995, 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
SHARES* RATE* RESET DATE DIVIDEND RATES**
- ------- ----- ---------- ----------------
<S> <C> <C> <C>
600 3.77% 11/01/95 3.55% - 6.25%
</TABLE>
- ---------------------
* As of October 31, 1995.
** For the year ended October 31, 1995.
Subsequent to October 31, 1995 and up through December 5, 1995, the Trust paid
dividends at rates ranging from 3.73% to 4.125% in the aggregate amount of
$108,918.
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.
<PAGE> 15
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued
5. COMMON SHARES OF BENEFICIAL INTEREST
Transactions in common shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL
PAID IN
PAR EXCESS OF
SHARES VALUE PAR VALUE
--------- ------- -----------
<S> <C> <C> <C>
Balance, 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, October 31, 1995.................................................. 5,238,113 $52,381 $72,299,100
======= ====== =========
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* The Trustees have voted to retire the shares purchased.
</TABLE>
6. FEDERAL INCOME TAX STATUS
At October 31, 1995, the Trust had a net capital loss carryover of approximately
$209,000, to offset future capital gains to the extent provided by regulations,
which are available through October 31 in the following years:
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
-------------------------------------------------------------------------
2001 2002 2003 TOTAL
----- ----- ----- -------
<S> <C> <C> <C>
$79 $68 $62 $209
=== === === ====
</TABLE>
7. DIVIDENDS TO COMMON SHAREHOLDERS
The Trust has declared the following dividends from net investment income:
<TABLE>
<CAPTION>
DECLARATION AMOUNT RECORD PAYABLE
DATE PER SHARE DATE DATE
- ------------------ ---------- ----------------- -----------------
<S> <C> <C> <C>
October 31, 1995 $0.075 November 10, 1995 November 24, 1995
November 28, 1995 $0.075 December 8, 1995 December 22, 1995
</TABLE>
<PAGE> 16
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1995, continued
8. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------------------------
10/31/95 7/31/95 4/30/95 1/31/95
------------------ ---------------- ------------------ -----------------
PER PER PER PER
TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE TOTAL* SHARE
------- ------ ------ ----- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income.................. $ 1,767 $ 0.34 $1,778 $0.34 $ 1,734 $ 0.33 $1,791 $ 0.34
Net investment income.................... 1,589 0.30 1,600 0.31 1,562 0.30 1,616 0.31
Net realized and unrealized gain......... 1,238 0.24 1,292 0.25 1,948 0.37 2,279 0.44
</TABLE>
<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).................................. (4,332) (0.83) 368 0.06 (9,010) (1.71) (59) (0.01)
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* Amounts in thousands.
</TABLE>
<PAGE> 17
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*
THROUGH
FOR THE YEAR ENDED OCTOBER 31 OCTOBER
--------------------------------------- 31,
1995** 1994** 1993** 1992** 1991**
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 14.16 $ 16.75 $ 14.84 $ 14.66 $14.06
------ ------ ------ ------ -----
Net investment income....................................... 1.22 1.34 1.41 1.45 0.86
Net realized and unrealized gain (loss)..................... 1.30 (2.49) 2.04 0.09 0.70
------ ------ ------ ------ -----
Total from investment operations............................ 2.52 (1.15) 3.45 1.54 1.56
------ ------ ------ ------ -----
Less dividends and distributions from:
Net investment income...................................... (1.04) (1.21) (1.26) (1.08) (0.52)
Common share equivalent of dividends paid to preferred
shareholders............................................. (0.23) (0.23) (0.24) (0.26) (0.19)
Net realized gain.......................................... -- -- (0.04) (0.02) --
------ ------ ------ ------ -----
Total dividends and distributions........................... (1.27) (1.44) (1.54) (1.36) (0.71)
Offering costs charged against capital...................... -- -- -- -- (0.25)
------ ------ ------ ------ -----
Net asset value, end of period.............................. $ 15.41 $ 14.16 $ 16.75 $ 14.84 $14.66
====== ====== ====== ====== =====
Market value, end of period................................. $14.625 $12.875 $17.875 $16.375 $15.50
====== ====== ====== ====== =====
TOTAL INVESTMENT RETURN+.................................... 22.10% (22.37)% 17.74% 13.05% 6.89%(1)
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses before expense offset........................ 0.91%(3) 1.03% 1.01% 0.99% 1.00%(2)
Net investment income before preferred stock dividends...... 8.16%(3) 8.68% 8.86% 9.61% 9.16%(2)
Preferred stock dividends................................... 1.53% 1.49% 1.49% 1.70% 1.97%(2)
Net investment income available to common shareholders...... 6.63% 7.19% 7.37% 7.91% 7.19%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $110,718 $109,377 $128,031 $117,998 $117,071
Asset coverage on preferred shares at end of period......... 369% 312% 319% 295% 293%
Portfolio turnover rate..................................... 6% 12% 6% 7% 16%(1)
</TABLE>
- ---------------------
* Commencement of operations.
** The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total investment return is based upon the current market value on the last
day of each period reported. Dividends and distributions are assumed to be
reinvested at the prices obtained under the Trust's dividend reinvestment
plan. Total investment return does not reflect brokerage commissions.
(1) Not annualized.
(2) Annualized.
(3) The above expense and net investment income ratios would have been 0.90%
and 8.17%, respectively, which reflects 0.01% effect
for custody cash credits.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 18
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, 1995, 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 four 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, 1995, by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 5, 1995
--------------------------------------------------------------------
1995 Federal Tax Notice (unaudited)
During the year ended October 31, 1995, the Trust paid the
following per share amounts from tax-exempt income: $1.04 to
common shareholders and $1,985 to preferred shareholders.
<PAGE> 19
(This Page Intentionally Left Blank)
<PAGE> 20
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, 1995
