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