<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS April 30, 1997
Two World Trade Center, New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the semi-annual report on the operations of
InterCapital Insured Municipal Bond Trust (IMB) for the period ended April
30, 1997.
Economic growth moderated during the third quarter of 1996, causing
fixed-income yields to move lower through November. However, an acceleration
of economic activity led by consumer spending developed in the fourth quarter
of 1996 and continued into the first quarter of 1997. This contributed to
rising interest rates between December and April. On March 25, 1997, the
Federal Reserve Board raised the federal-funds rate
25 basis points to 5.50 percent in a preemptive move against a possible
acceleration in the rate of inflation. Subsequently, the fixed-income markets
began to anticipate the possibility of additional rate hikes by the Fed.
MUNICIPAL MARKET CONDITIONS
Municipal yields followed the trend of Treasury yields, but were less
volatile. Long-term insured revenue bond yields moved as low as
BOND YIELDS 1994-1997
<TABLE>
<CAPTION>
Insured Municipal
30-Year Insured Revenue Yields
Municipal 30-year U.S. as a Percentage of
Revenue Yields Treasury Yields U.S. Treasury Yields
<S> <C> <C> <C>
5.45 6.35 0.8586
Jan '94 5.29 6.24 0.8481
5.64 6.66 0.8468
6.19 7.09 0.8728
6.24 7.31 0.854
6.23 7.43 0.8387
6.31 7.61 0.8293
6.15 7.4 0.8314
6.17 7.45 0.828
6.42 7.82 0.8212
6.66 7.97 0.8356
6.99 8 0.8738
6.65 7.88 0.8438
Jan '95 6.42 7.7 0.834
6.12 7.44 0.8222
6.07 7.43 0.8167
6.05 7.34 0.8245
5.84 6.65 0.8784
6 6.62 0.9066
5.99 6.85 0.875
5.98 6.65 0.8997
5.97 6.5 0.9184
5.79 6.33 0.915
5.61 6.13 0.9151
5.49 5.95 0.923
Jan '96 5.42 6.03 0.8989
5.55 6.47 0.8577
5.89 6.67 0.8835
5.94 6.91 0.8601
5.99 6.99 0.8571
5.86 6.87 0.8529
5.77 6.97 0.8278
5.82 7.12 0.8176
5.71 6.92 0.8248
5.6 6.64 0.8431
5.45 6.35 0.8583
5.56 6.64 0.8372
Jan '97 5.63 6.79 0.8293
5.53 6.8 0.8129
5.83 7.1 0.8216
5.74 6.96 0.8251
</TABLE>
Source: Bloomberg L.P.
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS April 30, 1997, continued
FIVE LARGEST SECTORS AS OF APRIL 30, 1997
(% OF NET ASSETS)
HOUSING 31%
REFUNDED 13%
TRANSPORTATION 10%
HOSPITAL 9%
EDUCATION 9%
ALL OTHERS 28%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CREDIT ENHANCEMENTS AS OF APRIL 30, 1997
(% OF TOTAL LONG-TERM INVESTMENTS)
AMBAC 6%
FGIC 25%
FSA 19%
GNMA 9%
MBIA 41%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CALL STRUCTURE AS OF APRIL 30, 1997
(% OF TOTAL LONG-TERM PORTFOLIO)
1999 1.9%
2000 27.7%
2001 44.3%
2002 5.1%
2003 1.9%
2004 0.0%
2005 5.7%
2006+ 13.4%
X-AXIS LABEL: "YEAR CALLABLE"
Y-AXIS LABEL: "PERCENT CALLABLE"
WEIGHTED AVERAGE CALL PROTECTION: 5 YEARS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS April 30, 1997, continued
5.45 percent in November 1996, before rising to 5.75 percent in April 1997.
Similarly, yields on one-year municipal notes moved from 3.70 to 3.95 percent
over the past six months. The yield curve pick-up for extending maturities
from 1 to 30 years inceased to 180 basis points.
The ratio of 30-year insured revenue bond yields to 30-year U.S. Treasury
yields declined from 86 percent at the end of October 1996 to 82 percent in
April 1997. A declining ratio means that municipals have outperformed
Treasuries, but have become relatively more expensive. The annual range of
the ratio has averaged from 81 to 92 percent over the past three years.
New-issue municipal volume was down 6 percent during the first four months of
1997. However, underwriting volume for the full year is expected to exceed
bond maturities and redemptions.
PERFORMANCE
Over the six-month period ended April 30, 1997, the Trust's net asset value
(NAV) moved from $15.35 to $15.16. Based on this NAV change plus reinvestment
of tax-free dividends totaling $0.48 per share, the Trust's total NAV return
was 2.10 percent. IMB's market price on the New York Stock Exchange moved
from $14.125 to $14.75 per share. Based on this change in market price plus
reinvestment of tax-free dividends, IMB's total market return was 7.89
percent. On April 30, 1997, the Trust was trading at a 3 percent discount to
NAV. Undistributed net investment income available for dividends increased from
$0.117 to $0.125 per share.
PORTFOLIO STRUCTURE
The Trust remained fully invested in long-term municipal bonds during the
period. Investments were diversified among 11 long-term sectors and 38
credits. IMB's average maturity was 20 years. The distribution of call dates
in the portfolio produced an average call protection of 5 years. To assure
the timely payment of principal and interest, each position in the portfolio
was backed by triple "A" rated bond insurance or U.S. Government-guaranteed
securities.
THE IMPACT OF LEVERAGING
As we have discussed previously, the total income available for distribution
to common shareholders includes incremental income provided by the Trust's
outstanding Auction Rate Preferred Shares (ARPS). ARPS dividends reflect
prevailing short-term interest rates on maturities normally ranging from one
week to one year. Incremental income to common shares depends on two factors:
first, the amount of ARPS outstanding, and second, the spread between the
portfolio's cost yield and ARPS expenses (ARPS auction rate and expenses).
The greater the spread and the amount of ARPS outstanding, the greater the
amount of incremental income available for distribution to common
shareholders. The level of net investment income available for distribution
to common shareholders varies with the level of short-term interest rates.
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS April 30, 1997, continued
IMB's only ARPS series yielded 3.76 percent during the six months ended April
30, 1997. The series totaled $30 million and represented 28 percent of net
assets. Over the same period, ARPS leverage contributed $0.07 per share to
common share earnings.
LOOKING AHEAD
With the collapse of flat-tax proposals, municipal bonds have improved
relative to U.S. Treasury securities. Although tax-free yields are currently
somewhat "rich" in their historical relationship with Treasury yields, the
long-term benefit of tax-exemption remains intact.
The Trust's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps to
support the market value of the Trust's shares. In addition, we would like to
remind you that the Trustees have approved a procedure whereby the Trust,
when appropriate, may purchase shares in the open market or in privately
negotiated transactions at a price not above market value or net asset value,
whichever is lower at the time of purchase. During the six-month period ended
April 30, 1997, IMB purchased and retired 24,000 shares of beneficial
interest at a weighted average market discount of 6.52 percent. The Trust may
also utilize procedures to reduce or eliminate the amount of outstanding
ARPS, including their purchase in the open market or in privately negotiated
transactions.
We appreciate your ongoing support of InterCapital Insured Municipal Bond
Trust and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (97.0%)
General Obligation (5.0%)
$5,000 Cook County, Illinois, Ser 1992 A (MBIA) ....................... 6.60 % 11/15/22 $ 5,380,800
------ -----------
Educational Facilities Revenue (8.7%)
6,000 Massachusetts Health & Educational Facilities Authority,
Boston University 1991 Ser K & L (MBIA) ........................ 6.66 10/01/31 6,355,980
2,000 New York State Dormitory Authority, St John's University Ser
1996 (MBIA) .................................................... 5.70 07/01/26 1,966,320
1,000 Pennsylvania Higher Educational Facilities Authority, Duquesne
University Refg Ser A of 1991 (MBIA) ........................... 6.75 04/01/20 1,057,900
------ -----------
9,000 9,380,200
------ -----------
Electric Revenue (4.8%)
3,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg Ser
(FGIC) ......................................................... 6.50 01/01/11 3,192,720
2,000 Snohomish County Public Utility District #1, Washington, 1993
Ser (FGIC) ..................................................... 6.00 01/01/18 2,003,460
------ -----------
5,000 5,196,180
------ -----------
Hospital Revenue (8.8%)
3,000 Jacksonville Health Facilities Authority, Florida, New
Children's Hospital at Baptist Medical Center Ser 1991 (MBIA) .. 7.00 06/01/21 3,240,330
3,000 Illinois Health Facilities Authority, Memorial Medical Center
Ser 1989 (MBIA) ................................................ 6.75 10/01/11 3,199,980
2,000 University of Missouri, Health Ser 1996 A (AMBAC) ............... 5.50 11/01/16 1,948,680
1,000 Nebraska Investment Finance Authority, Methodist Health System
Inc 1991 (MBIA) ................................................ 7.00 03/01/06 1,089,150
------ -----------
9,000 9,478,140
------ -----------
Industrial Development/Pollution Control Revenue (7.5%)
2,500 Jasper County, Indiana, Northern Indiana Public Service Co
Collateralized Ser 1991 (MBIA) ................................. 7.10 07/01/17 2,706,325
1,000 Rockport, Indiana, Indiana & Michigan Power Co Ser B (Secondary
FGIC) .......................................................... 7.60 03/01/16 1,095,160
1,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA) .... 7.00 06/01/31 1,080,500
3,000 New Hampshire Industrial Development Authority, Canal Electric
Co (AMT)(FGIC) ................................................. 7.375 12/01/20 3,256,590
------ -----------
7,500 8,138,575
------ -----------
Mortgage Revenue - Multi-Family (2.8%)
3,000 New York State Housing Finance Agency, 1996 Ser A Refg (FSA) .... 6.10 11/01/15 3,050,490
------ -----------
Mortgage Revenue - Single Family (28.1%) ........................
1,715 District of Columbia Housing Finance Agency, GNMA Collateralized
Ser 1988 E (AMT) ............................................... 7.70 12/01/22 1,793,856
200 Hawaii Housing Finance & Development Corporation, Ser 1989 A
(AMT)(Bifurcated FSA) .......................................... 7.70 07/01/29 208,404
990 Sedgwick & Shawnee County, Kansas, GNMA Collateralized 1990 Ser
B (AMT)(AMBAC) ................................................. 7.80 06/01/22 1,042,104
5,000 Maine Housing Authority, Ser 1991 A (Bifurcated FSA) ............ 7.40 11/15/22 5,264,950
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS April 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
$4,720 Massachusetts Housing Finance Agency, Ser 14 (Bifurcated FSA) ... 7.60 % 12/01/14 $4,969,688
695 Michigan Housing Development Authority, Ser 1990 D (AMT)
(Bifurcated FSA) ............................................... 7.65 12/01/19 707,107
1,930 Minnesota Housing Finance Agency, Ser 1990 A (AMT)(Bifurcated
FSA) ........................................................... 7.85 07/01/22 2,028,565
1,885 Missouri Housing Development Commission, GNMA-Backed 1991 Ser A
(AMT) .......................................................... 7.375 08/01/23 1,989,825
5,200 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser 1 &
2 (AMT) ........................................................ 7.631 09/10/30 5,480,332
620 New Jersey Housing & Mortgage Finance Agency, Home Buyer Ser E
(MBIA) ......................................................... 7.65 10/01/16 645,097
1,910 Tennessee Housing Development Agency, Homeownership Issue S
(AMT)(Secondary MBIA) .......................................... 7.625 07/01/22 2,013,465
3,935 Wisconsin Housing & Economic Development Authority,
Homeownership 1991 Ser A (Bifurcated FSA) ...................... 7.50 09/01/17 4,147,529
------- -----------
28,800 30,290,922
------- -----------
Transportation Facilities Revenue (10.1%)
3,000 Hawaii, Airports Second Ser 1990 (AMT)(FGIC) .................... 7.50 07/01/20 3,260,040
2,000 Wayne County, Michigan, Detroit Metropolitan Wayne County
Airport Sub Lien Ser 1991 B (AMT)(MBIA) ........................ 6.75 12/01/21 2,131,180
5,000 New Hampshire, Turnpike 1991 Refg Ser B & C (FGIC) .............. 6.805 11/01/17 5,462,700
------- -----------
10,000 10,853,920
------- -----------
Water & Sewer Revenue (5.8%)
2,250 Broward County, Florida, Utility Ser 1991 (FGIC) ................ 6.00 10/01/20 2,267,190
4,000 Norfolk, Virginia, Water Ser 1995 (MBIA) ........................ 5.875 11/01/20 4,020,200
------- -----------
6,250 6,287,390
------- -----------
Other Revenue (1.8%)
2,000 Las Cruces, New Mexico, Ser 1995 (AMT)(MBIA) .................... 5.50 12/01/15 1,903,800
------- -----------
Refunded (13.6%)
2,000 Castaic Lake Water Agency, California, Ser 1990 COPs (MBIA) ..... 7.125 08/01/00++ 2,189,720
5,000 Eastern Municipal Water District, California, Water & Sewer Ser
1991 COPs (FGIC) ............................................... 6.50 07/01/01++ 5,431,100
2,000 Connecticut Health & Educational Facilities Authority, Yale-New
Haven Hospital Ser F (MBIA) .................................... 7.10 07/01/00++ 2,175,400
1,425 Port of Portland, Oregon, Portland International Airport Ser
Seven B (AMT)(MBIA) ............................................ 7.10 01/01/12++ 1,632,138
3,000 Bucks County Industrial Development Authority, Pennsylvania,
Grand View Hospital Ser of 1991 (AMBAC) ........................ 7.00 07/01/01++ 3,298,080
------- -----------
13,425 14,726,438
------- -----------
98,975 TOTAL MUNICIPAL BONDS (Identified Cost $98,131,988) .................................. 104,686,855
------- -----------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS April 30, 1997 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL OBLIGATION (0.5%)
$ 500 Missouri Health & Educational Facilities Authority, Washington
University Ser 1996 C (Demand 05/01/97 )(Identified Cost
$500,000) ...................................................... 4.00%* 09/01/30 $ 500,000
------- ------------
$99,475 TOTAL INVESTMENTS (Identified Cost $98,631,988) (a) ...................... 97.5% 105,186,855
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ........................... 2.5 2,680,472
----- ------------
NET ASSETS ............................................................... 100.0% $107,867,327
===== ============
</TABLE>
- --------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
++ Prerefunded to call date shown.
* Current coupon of variable rate demand obligation.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$6,585,517 and the aggregate gross unrealized depreciation is
$30,650, resulting in net unrealized appreciation of $6,554,867.
Bond Insurance:
- ---------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
April 30, 1997
California 7.1%
Connecticut 2.0
District of Columbia 1.7
Florida 5.1
Hawaii 3.2
Illinois 7.9
Indiana 3.5
Kansas 2.0
Maine 4.9
Massachusetts 10.5%
Michigan 2.6
Minnesota 1.9
Missouri 4.1
Nebraska 6.1
New Hampshire 8.1
New Jersey 0.6
New Mexico 1.8
New York 4.6
Oregon 1.5%
Pennsylvania 4.0
South Carolina 3.0
Tennessee 1.9
Virginia 3.7
Washington 1.9
Wisconsin 3.8
----
Total 97.5%
====
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $98,631,988)......................................... $105,186,855
Cash................................................................... 806,396
Interest receivable.................................................... 2,071,789
Prepaid expenses ...................................................... 35,449
------------
TOTAL ASSETS......................................................... 108,100,489
------------
LIABILITIES:
Payable for:
Dividends to preferred shareholders.................................. 92,712
Investment management fee............................................ 35,121
Accrued expenses ...................................................... 105,329
------------
TOTAL LIABILITIES.................................................... 233,162
------------
NET ASSETS:
Preferred shares of beneficial interest (1,000,000 shares authorized
of non-participating $.01 par value, 600 shares outstanding) ......... 30,000,000
------------
Common shares of beneficial interest (unlimited shares authorized of
$.01 par value, 5,137,563 shares outstanding)......................... 70,937,934
Net unrealized appreciation ........................................... 6,554,867
Accumulated undistributed net investment income........................ 642,552
Accumulated net realized loss.......................................... (268,026)
------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ........................ 77,867,327
------------
TOTAL NET ASSETS .................................................... $107,867,327
============
NET ASSET VALUE PER COMMON SHARE
($77,867,327 divided by 5,137,563 common shares outstanding) ......... $15.16
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME....................... $ 3,426,662
-----------
EXPENSES
Investment management fee............. 189,248
Auction commission fees............... 55,788
Professional fees..................... 55,292
Shareholder reports and notices ...... 16,770
Transfer agent fees and expenses ..... 12,822
Trustees' fees and expenses........... 9,473
Registration fees..................... 7,954
Auction agent fees.................... 6,002
Custodian fees........................ 2,754
Other................................. 8,156
-----------
TOTAL EXPENSES ..................... 364,259
LESS: EXPENSE OFFSET .............. (2,724)
-----------
NET EXPENSES ....................... 361,535
-----------
NET INVESTMENT INCOME .............. 3,065,127
-----------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss..................... (10,299)
Net change in unrealized
appreciation......................... (1,045,442)
-----------
NET LOSS............................ (1,055,741)
-----------
NET INCREASE.......................... $ 2,009,386
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 1997 OCTOBER 31, 1996
- ------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ............................. $ 3,065,127 $ 6,271,605
Net realized loss.................................. (10,299) (48,911)
Net change in unrealized appreciation.............. (1,045,442) (837,846)
------------ ------------
NET INCREASE..................................... 2,009,386 5,384,848
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Preferred ......................................... (559,362) (1,123,038)
Common ............................................ (2,469,177) (4,679,522)
------------ ------------
TOTAL............................................ (3,028,539) (5,802,560)
------------ ------------
Decrease from transactions in common shares of
beneficial interest............................... (345,470) (1,068,077)
------------ ------------
NET DECREASE..................................... (1,364,623) (1,485,789)
NET ASSETS:
Beginning of period................................ 109,231,950 110,717,739
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$642,552 and $605,964, respectively)............. $107,867,327 $109,231,950
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1997 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
InterCapital Insured Municipal Bond Trust (the "Trust") is registered under
the Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The Trust's investment objective is to provide
current income which is exempt from federal income tax. The Trust was
organized as a Massachusetts business trust on February 27, 1990 and
commenced operations on February 28, 1991.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued by an outside
independent pricing service approved by the Trustees. The pricing service has
informed the Trust that in valuing the portfolio securities, it uses both a
computerized matrix of tax-exempt securities and evaluations by its staff, in
each case based on information concerning market transactions and quotations
from dealers which reflect the bid side of the market each day. The portfolio
securities are thus valued by reference to a combination of transactions and
quotations for the same or other securities believed to be comparable in
quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. Short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. The Trust amortizes premiums and accretes discounts over the life of
the respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1997 (unaudited) continued
income and net realized capital gains are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the capital
accounts based on their federal tax-basis treatment; temporary differences do
not require reclassification. Dividends and distributions which exceed net
investment income and net realized capital gains for financial reporting
purposes but not for tax purposes are reported as dividends in excess of net
investment income or distributions in excess of net realized capital gains.
To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of
paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Trust pays a management fee, calculated
weekly and payable monthly, by applying the annual rate of 0.35% to the
Trust's weekly net assets.
Under the terms of the Agreement, in addition to managing the Trust's
investments, the Investment Manager maintains certain of the Trust's books
and records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Trust who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Trust.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the six months ended April 30, 1997
aggregated $1,971,340 and $1,236,448, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At April 30, 1997, the Trust had transfer agent fees
and expenses payable of approximately $2,600.
The Trust has an unfunded noncontributory defined benefit pension plan
covering all independent Trustees of the Trust who will have served as
independent Trustees for at least five years at the time of retirement.
Benefits under this plan are based on years of service and compensation
during the last five years of service. Aggregate pension costs for the six
months ended April 30, 1997 included in Trustees' fees and expenses in the
Statement of Operations amounted to $2,344. At April 30, 1997, the Trust had
an accrued pension liability of $37,944 which is included in accrued expenses
in the Statement of Assets and Liabilities.
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1997 (unaudited) continued
4. PREFERRED SHARES OF BENEFICIAL INTEREST
The Trust is authorized to issue up to 1,000,000 non-participating preferred
shares of beneficial interest having a par value of $.01 per share, in one or
more series, with rights as determined by the Trustees, without approval of
the common shareholders. The Trust has issued Auction Rate Preferred Shares
("Preferred Shares") which have a liquidation value of $50,000 per share plus
the redemption premium, if any, plus accumulated but unpaid dividends,
whether or not declared, thereon to the date of distribution. The Trust may
redeem such shares, in whole or in part, at the original purchase price of
$50,000 per share plus accumulated but unpaid dividends, whether or not
declared, thereon to the date of redemption.
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
AMOUNT IN RESET RANGE OF
SHARES* THOUSANDS* RATE* DATE DIVIDEND RATES**
------- ---------- ----- ---- ----------------
<S> <C> <C> <C> <C>
600 30,000 3.76% 07/03/97 3.76%
</TABLE>
- --------------
* AS OF APRIL 30, 1997.
** FOR THE SIX MONTHS ENDED APRIL 30, 1997.
Subsequent to April 30, 1997 and up through June 6, 1997, the Trust paid
dividends at a rate of 3.76% in the aggregate amount of $191,604.
The Trust is subject to certain restrictions relating to the preferred
shares. Failure to comply with these restrictions could preclude the Trust
from declaring any distributions to common shareholders or purchasing common
shares and/or could trigger the mandatory redemption of preferred shares at
liquidation value.
The preferred shares, which are entitled to one vote per share, generally
vote with the common shares but vote separately as a class to elect two
Trustees and on any matters affecting the rights of the preferred shares.
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1997 (unaudited) continued
5. COMMON SHARES OF BENEFICIAL INTEREST
Transactions in common shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL
PAID IN
EXCESS OF
SHARES PAR VALUE PAR VALUE
-------- --------- ---------
<S> <C> <C> <C>
Balance, October 31, 1995.................................................. 5,238,113 $52,381 $72,299,100
Treasury shares purchased and retired (weighted average discount 9.33%)*... (76,550) (765) (1,067,312)
--------- ------- -----------
Balance, October 31, 1996 ................................................. 5,161,563 51,616 71,231,788
Treasury shares purchased and retired (weighted average discount 6.52%)*... (24,000) (240) (345,230)
--------- ------- -----------
Balance, April 30, 1997 ................................................... 5,137,563 $51,376 $70,886,558
========= ======= ===========
</TABLE>
- --------------
* The Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS
At October 31, 1996, the Trust had a net capital loss carryover of
approximately $258,000, to offset future capital gains to the extent provided
by regulations, which is available through October 31 of the following years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
-----------------------------------
2001 2002 2003 2004
---- ---- ---- ----
<S> <C> <C> <C>
$79 $68 $62 $49
=== === === ===
</TABLE>
7. DIVIDENDS TO COMMON SHAREHOLDERS
The Trust declared the following dividends from net investment income:
<TABLE>
<CAPTION>
AMOUNT RECORD PAYABLE
DECLARATION DATE PER SHARE DATE DATE
---------------- --------- ------- ---------
<S> <C> <C> <C>
April 29, 1997 $0.08 May 9, 1997 May 23, 1997
May 27, 1997 $0.08 June 6, 1997 June 20, 1997
</TABLE>
<PAGE>
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 FOR THE YEAR ENDED OCTOBER 31*
MONTHS ENDED ----------------------------------------------------------------
APRIL 30, 1997* 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ...... $15.35 $ 15.41 $ 14.16 $ 16.75 $ 14.84 $ 14.66
------ ------- ------- ------- ------- -------
Net investment income...................... 0.60 1.21 1.22 1.34 1.41 1.45
Net realized and unrealized gain (loss) ... (0.20) (0.17) 1.30 (2.49) 2.04 0.09
------ ------- ------- ------- ------- -------
Total from investment operations........... 0.40 1.04 2.52 (1.15) 3.45 1.54
------ ------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income..................... (0.48) (0.90) (1.04) (1.21) (1.26) (1.08)
Common share equivalent of dividends
paid to preferred shareholders........... (0.11) (0.22) (0.23) (0.23) (0.24) (0.26)
Net realized gain......................... -- -- -- -- (0.04) (0.02)
------ ------- ------- ------- ------- -------
Total dividends and distributions.......... (0.59) (1.12) (1.27) (1.44) (1.54) (1.36)
------ ------- ------- ------- ------- -------
Anti-dilutive effect of acquiring treasury
shares.................................... -- 0.02 -- -- -- --
------ ------- ------- ------- ------- -------
Net asset value, end of period............. $15.16 $ 15.35 $ 15.41 $ 14.16 $ 16.75 $ 14.84
====== ======= ======= ======= ======= =======
Market value, end of period................ $14.75 $14.125 $14.625 $12.875 $17.875 $16.375
====== ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN+ .................. 7.89%(1) 3.06% 22.10% (22.37)% 17.74% 13.05%
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS:
Total expenses............................. 0.93%(2)(3) 0.92% 0.91%(3) 1.03% 1.01% 0.99%
Net investment income before preferred
stock dividends........................... 7.83%(2) 7.85% 8.16% 8.68% 8.86% 9.61%
Preferred stock dividends ................. 1.43%(2) 1.41% 1.53% 1.49% 1.49% 1.70%
Net investment income available to common
shareholders.............................. 6.40%(2) 6.44% 6.63% 7.19% 7.37% 7.91%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ... $107,867 $109,232 $110,718 $109,377 $128,031 $117,998
Asset coverage on preferred shares at end
of period................................. 358% 363% 369% 312% 319% 295%
Portfolio turnover rate ................... 1%(1) 5% 6% 12% 6% 7%
</TABLE>
- --------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total investment return is based upon the current market value on the
last day of each period reported. Dividends and distributions are
assumed to be reinvested at the prices obtained under the Trust's
dividend reinvestment plan. Total investment return does not reflect
brokerage commissions.
(1) Not annualized.
(2) Annualized
(3) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TRUSTEES
- -------------------------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
- -------------------------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- -------------------------------------------------
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- -------------------------------------------------
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- -------------------------------------------------
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
The financial statements included herein have been
taken from the records of the Trust without
examination by the independent accountants and
accordingly they do not express an opinion thereon.
INTERCAPITAL
INSURED
MUNICIPAL
BOND TRUST
Semiannual Report
April 30, 1997
