<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST Two World Trade Center, New York,
LETTER TO THE SHAREHOLDERS April 30, 1998 New York 10048
DEAR SHAREHOLDER:
We are pleased to present the semiannual report on the operations of
InterCapital Insured Municipal Bond Trust (IMB) for the period ended April 30,
1998.
Since last fall domestic economic growth has been tempered by the deflationary
impact of the Asian financial crisis. U.S. employment conditions strengthened
and the unemployment rate declined to its lowest level since 1970. Inflation
remained subdued despite the robust economy. In part this was the result of
productivity gains and the lower costs of oil and other imports. Foreign
currency turmoil strengthened the value of the U.S. dollar and created demand
for U.S. Treasury securities. Municipal bonds followed the trend of Treasuries
and yields declined to levels last seen 20 years ago. The bond market rally was
also aided by prospects of the first federal budget surplus in more than two
decades.
MUNICIPAL MARKET CONDITIONS
Long-term insured index yields ended April 1998 at 5.35 percent after reaching
a low of 5.15 percent in December and January. Over the past 12 months the
insured index yield has declined from 5.75 percent.
MMD 30 YEAR AAA INSURED AND TREASURY YIELD
DATE AAA INS TSY % RELATIONSHIP
- ---- ------- --- --------------
12/31/93 5.40% 6.34% 85.17%
01/31/94 5.40 6.24 86.54%
02/28/94 5.80 6.66 87.09%
03/31/94 6.40 7.09 90.27%
04/29/94 6.35 7.32 86.75%
05/31/94 6.25 7.43 84.12%
06/30/94 6.50 7.61 85.41%
07/29/94 6.25 7.39 84.57%
08/31/94 6.30 7.45 84.56%
09/30/94 6.55 7.81 83.87%
10/31/94 6.75 7.96 84.80%
11/30/94 7.00 8.00 87.50%
12/30/94 6.75 7.88 85.66%
01/31/95 6.40 7.70 83.12%
02/28/95 6.15 7.44 82.66%
03/31/95 6.15 7.43 82.77%
04/28/95 6.20 7.34 84.47%
05/31/95 5.80 6.66 87.09%
06/30/95 6.10 6.62 92.15%
07/31/95 6.10 6.86 88.92%
08/31/95 6.00 6.66 90.09%
09/29/95 5.95 6.48 91.82%
10/31/95 5.75 6.33 90.84%
11/30/95 5.50 6.14 89.58%
12/29/95 5.35 5.94 90.07%
01/31/96 5.40 6.03 89.55%
02/29/96 5.60 6.46 86.69%
03/29/96 5.85 6.66 87.84%
04/30/96 5.95 6.89 86.36%
05/31/96 6.05 6.99 86.55%
06/28/96 5.90 6.89 85.63%
07/31/96 5.85 6.97 83.93%
08/30/96 5.90 7.11 82.98%
09/30/96 5.70 6.93 82.25%
10/31/96 5.65 6.64 85.09%
11/29/96 5.50 6.35 86.61%
12/31/96 5.60 6.63 84.46%
01/31/97 5.70 6.79 83.95%
02/28/97 5.65 6.80 83.09%
03/31/97 5.90 7.10 83.10%
04/30/97 5.75 6.94 82.85%
05/30/97 5.65 6.91 81.77%
06/30/97 5.60 6.78 82.60%
07/30/97 5.30 6.30 84.13%
08/31/97 5.50 6.61 83.21%
09/30/97 5.40 6.40 84.38%
10/31/97 5.35 6.15 86.99%
11/30/97 5.30 6.05 87.60%
12/31/97 5.15 5.92 86.99%
01/31/98 5.15 5.80 88.79%
02/28/98 5.20 5.92 87.84%
03/31/98 5.25 5.93 88.53%
04/30/98 5.35 5.95 89.92%
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS April 30, 1998, continued
LARGEST SECTORS AS OF APRIL 30, 1998
(% OF NET ASSETS)
REFUNDED 26%
TRANSPORTATION 10%
EDUCATION 9%
IDR/PCR* 7%
ELECTRIC 6%
WATER & SEWER 6%
ALL OTHER 7%
MORTGAGE 29%
* INDUSTRIAL DEVELOPEMENT/POLLUTION CONTROL REVENUE.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CREDIT ENHANCEMENTS AS OF APRIL 30, 1998
(% OF TOTAL LONG-TERM PORTFOLIO)
FGIC 25%
FSA 18%
GNMA 8%
AMBAC 6%
MBIA 43%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
CALL STRUCTURE AS OF APRIL 30, 1998 WEIGHTED AVERAGE
(% OF TOTAL LONG-TERM PORTFOLIO) CALL PROTECTION: 4 YEARS
PERCENT CALLABLE
0% 2% 26% 44% 5% 2% 0% 6% 12% 0% 1% 2%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009+
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
2
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS April 30, 1998, continued
The yield on one-year notes was 3.75 percent at the end of April 1998. Thus,
the yield pickup for extending maturities from 1 to 30 years was 160 basis
points.
The overall decline in interest rates led to an increase in new-issue municipal
volume. In contrast, the U.S. Treasury's borrowing needs declined with the
reduction in the deficit. Under these conditions, the municipal rally lagged
the rally in Treasuries. The ratio of municipal yields to Treasury yields
improved from 87 percent in October to almost 90 percent in April. A year ago
the ratio was a relatively rich 83 percent. A rising ratio means that
municipals have underperformed Treasuries but have become relatively more
attractive.
Total municipal volume increased 20 percent in 1997. New-issue supply totaled
$220 billion last year, with half the underwritings enhanced with bond
insurance. Refundings represented one-quarter of total new issues. For the
year-to-date, municipal underwriting is up 60 percent with refunding issues
comprising one-third of the total.
PERFORMANCE
During the six-month period ended April 30, 1998, the Trust's net asset value
(NAV) declined from $15.53 to $15.46. Based on this NAV change plus
reinvestment of tax-free dividends totaling $0.49 per share, the Trust's total
NAV return was 2.60 percent. IMB's price on the New York Stock Exchange slipped
from $16.00 to $15.9375 per share. Based on this change in market price plus
reinvestment of dividends, the Trust's total market return was 2.66 percent. On
April 30, 1998 IMB was trading at a 3.09 percent premium to NAV. This means
that the price of common stock was higher than the NAV.
Monthly dividends payable in the second quarter of 1998 were declared in March
and remained unchanged at $0.0825 per share. The level of undistributed net
investment income declined from $0.137 to $0.132 per share over the past six
months.
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 may,
when appropriate, 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. The Trust may also utilize procedures to reduce
or eliminate the amount of outstanding Auction Rate Preferred Shares (ARPS),
including their purchase in the open market or in privately negotiated
transactions.
PORTFOLIO STRUCTURE
The Trust remained fully invested in long-term municipal bonds during the
period. Investments were diversified among 10 long-term sectors and 38
individual credits. As illustrated in the accompanying chart refunded bonds
that will be called within 10 years comprised 26 percent of net assets. IMB's
weighted
3
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
LETTER TO THE SHAREHOLDERS April 30, 1998, continued
average maturity and call protection were 19 and 4 years, respectively. To
assure 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 discussed in previous reports, the total income available for distribution
to common shareholders includes incremental income provided by the Trust's
outstanding ARPS. ARPS dividends reflect prevailing short-term interest rates
on maturities normally ranging from one week to one year. Incremental income to
common shareholders depends on two factors. The first is the amount of ARPS
outstanding, the 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.
During the six-month period, ARPS leverage contributed approximately $0.07 per
share to common share earnings. The Trust's only ARPS series yielded 3.73
percent during the period. The series totaled $30 million and represented 27
percent of net assets.
LOOKING AHEAD
The economic fundamentals are in place for another year of solid, albeit less
spectacular, domestic growth in 1998. Events in Asia have strengthened the U.S.
dollar and contributed to lower interest rates. The Asian financial crisis
seems likely to moderate U.S. economic growth and inflationary pressures. While
this outlook is favorable for municipal bonds it is possible that the Federal
Reserve Board may begin to tighten monetary policy if capacity and labor
constraints cause cost pressures to mount.
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
4
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (97.0%)
Educational Facilities Revenue (8.8%)
$ 6,000 Massachusetts Health & Educational Facilities Authority, Boston
University Ser 1991 Ser K & L (MBIA) ........................... 6.66 % 10/01/31 $ 6,493,920
2,000 New York State Dormitory Authority, St John's University Ser
1996 (MBIA) .................................................... 5.70 07/01/26 2,066,880
1,000 Pennsylvania Higher Educational Facilities Authority, Duquesne
University Refg Ser A of 1991 (MBIA) ........................... 6.75 04/01/20 1,056,660
- ----------- --------------
9,000 9,617,460
- ----------- --------------
Electric Revenue (6.1%)
3,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg Ser
(FGIC) ........................................................ 6.50 01/01/11 3,198,450
1,500 South Carolina Public Service Authority, Santee Cooper 1997 Refg
Ser A (MBIA) ................................................... 5.00 01/01/29 1,421,190
2,000 Snohomish County Public Utility District #1, Washington, 1993
Ser (FGIC) .................................................... 6.00 01/01/18 2,089,040
- ----------- --------------
6,500 6,708,680
- ----------- --------------
Hospital Revenue (1.9%)
2,000 University of Missouri, Health Ser 1996 A (AMBAC) ............... 5.50 11/01/16 2,035,120
- ----------- --------------
Industrial Development/Pollution Control Revenue (7.4%)
2,500 Jasper County, Indiana, Northern Indiana Public Service Co
Collateralized Ser 1991 (MBIA) ................................. 7.10 07/01/17 2,713,850
1,000 Rockport, Indiana, Indiana & Michigan Power Co Ser B (Secondary
FGIC) ......................................................... 7.60 03/01/16 1,092,200
1,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA) ... 7.00 06/01/31 1,084,140
3,000 New Hampshire Industrial Development Authority, Canal Electric
Co (AMT)(FGIC) ................................................. 7.375 12/01/20 3,250,140
- ----------- --------------
7,500 8,140,330
- ----------- --------------
Mortgage Revenue - Multi-Family (2.9%)
2,955 New York State Housing Finance Agency, 1996 Ser A Refg (FSA) ... 6.10 11/01/15 3,184,279
- ----------- --------------
Mortgage Revenue - Single Family (26.3%)
1,645 District of Columbia Housing Finance Agency, GNMA Collateralized
Ser 1988 E (AMT) ............................................... 7.70 12/01/22 1,714,024
145 Hawaii Housing Finance & Development Corporation, Ser 1989 A
(AMT)(Bifurcated FSA) .......................................... 7.70 07/01/29 150,087
915 Sedgwick & Shawnee County, Kansas, GNMA Collateralized 1990 Ser
B (AMT)(AMBAC) ................................................. 7.80 06/01/22 965,334
5,000 Maine Housing Authority, Ser 1991 A (Bifurcated FSA) ............ 7.40 11/15/22 5,305,450
4,720 Massachusetts Housing Finance Agency, Ser 14 (Bifurcated FSA) .. 7.60 12/01/14 4,933,863
1,805 Minnesota Housing Finance Agency, Ser 1990 A (AMT)(Bifurcated
FSA) ........................................................... 7.85 07/01/22 1,895,629
1,825 Missouri Housing Development Commission, GNMA-Backed 1991 Ser A
(AMT) .......................................................... 7.375 08/01/23 1,926,196
4,800 Nebraska Investment Finance Authority, GNMA-Backed 1990 Ser 1 &
2 (AMT) ........................................................ 7.631 09/10/30 5,090,016
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS April 30, 1998 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
$ 620 New Jersey Housing & Mortgage Finance Agency, Home Buyer Ser E
(MBIA) ......................................................... 7.65 % 10/01/16 $ 645,959
1,910 Tennessee Housing Development Agency, Homeownership Issue S
(AMT)(Secondary MBIA) .......................................... 7.625 07/01/22 2,029,089
3,935 Wisconsin Housing & Economic Development Authority,
Homeownership 1991 Ser A (Bifurcated FSA) ...................... 7.50 09/01/17 4,143,870
- ----------- --------------
27,320 28,799,517
- ----------- --------------
Transportation Facilities Revenue (10.2%)
3,000 Hawaii, Airports Second Ser 1990 (AMT)(FGIC) .................... 7.50 07/01/20 3,227,250
2,000 Wayne County, Michigan, Detroit Metropolitan Wayne County
Airport Sub Lien Ser 1991 B (AMT)(MBIA) ........................ 6.75 12/01/21 2,160,720
5,000 New Hampshire, Turnpike 1991 Refg Ser B & C (FGIC) .............. 6.805 11/01/17 5,744,250
- ----------- --------------
10,000 11,132,220
- ----------- --------------
Water & Sewer Revenue (6.0%)
2,250 Broward County, Florida, Utility Ser 1991 (FGIC) ................ 6.00 10/01/20 2,341,305
4,000 Norfolk, Virginia, Water Ser 1995 (MBIA) ........................ 5.875 11/01/20 4,200,440
- ----------- --------------
6,250 6,541,745
- ----------- --------------
Other Revenue (1.9%)
2,000 Las Cruces, New Mexico, Ser 1995 (AMT)(MBIA) .................... 5.50 12/01/15 2,020,340
- ----------- --------------
Refunded (25.5%)
2,000 Castaic Lake Water Agency, California, Ser 1990 COPs (MBIA) ..... 7.125 08/01/00+ 2,168,640
5,000 Eastern Municipal Water District, California, Water & Sewer Ser
1991 COPs (FGIC) ............................................... 6.50 07/01/01+ 5,431,450
2,000 Connecticut Health & Educational Facilities Authority, Yale-New
Haven Hospital Ser F (MBIA) .................................... 7.10 07/01/00+ 2,158,940
3,000 Jacksonville Health Facilities Authority, Florida, New
Children's Hospital at Baptist Medical Center Ser 1991 (MBIA) .. 7.00 06/01/01+ 3,287,610
5,000 Cook County, Illinois, Ser 1992 A (MBIA) ........................ 6.60 11/15/02+ 5,544,100
3,000 Illinois Health Facilities Authority, Memorial Medical Center
Ser 1989 (MBIA) ................................................ 6.75 10/01/00+ 3,233,790
1,000 Nebraska Investment Finance Authority, Methodist Health System
Inc 1991 (MBIA) ................................................ 7.00 03/01/01+ 1,090,980
1,425 Port of Portland, Oregon, Portland International Airport Ser
Seven B (AMT)(MBIA) ............................................ 7.10 01/01/12+ 1,711,710
3,000 Bucks County Industrial Development Authority, Pennsylvania,
Grand View Hospital Ser of 1991 (AMBAC) ........................ 7.00 07/01/01+ 3,290,730
- ----------- --------------
25,425 27,917,950
- ----------- --------------
98,950 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $98,008,891) .. 106,097,641
- ----------- --------------
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
PORTFOLIO OF INVESTMENTS April 30, 1998 (unaudited) continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (1.2%)
$ 300 South Carolina Jobs Economic Development Authority, St Francis
Hospital Ser 1990 (Demand 05/01/98) ............................ 4.25*% 07/01/22 $ 300,000
1,000 Harris County Health Facilities Development Corporation, Texas,
St Luke's Episcopal Hospital Ser 1997 A (Demand 05/01/98) ...... 4.25* 02/15/27 1,000,000
- ----------- --------------
1,300 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS
(Identified Cost $1,300,000) ............................................. 1,300,000
- ----------- --------------
$100,250 TOTAL INVESTMENTS (Identified Cost $99,308,891) (a) ...................... 98.2% 107,397,641
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ........................... 1.8 2,012,005
----------- --------------
NET ASSETS ............................................................... 100.0% $109,409,646
=========== ==============
</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
$8,097,495 and the aggregate gross unrealized depreciation is
$8,745, resulting in net unrealized appreciation of $8,088,750.
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, 1998
<TABLE>
<CAPTION>
<S> <C>
California ........... 7.0%
Connecticut .......... 2.0
District of Columbia.. 1.6
Florida .............. 5.2
Hawaii ............... 3.1
Illinois ............. 8.0
Indiana .............. 3.5
Kansas ............... 1.9
Maine ................ 4.8
Massachusetts ........ 10.4
Michigan ............. 2.0%
Minnesota ............ 1.7
Missouri ............. 3.6
Nebraska ............. 5.6
New Hampshire ........ 8.2
New Jersey ........... 0.6
New Mexico ........... 1.8
New York ............. 4.8
Oregon ............... 1.6
Pennsylvania ......... 4.0
South Carolina ....... 4.5%
Tennessee ............ 1.9
Texas ................ 0.9
Virginia ............. 3.8
Washington ........... 1.9
Wisconsin ............ 3.8
----
Total .............. 98.2%
====
</TABLE>
- -----------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $99,308,891)......................................... $107,397,641
Cash................................................................... 141,124
Receivable for:
Interest............................................................. 2,012,188
Investments sold..................................................... 45,000
Prepaid expenses....................................................... 34,017
--------------
TOTAL ASSETS ........................................................ 109,629,970
--------------
LIABILITIES:
Payable for:
Dividends to preferred shareholders.................................. 91,974
Investment management fee............................................ 35,929
Accrued expenses....................................................... 92,421
--------------
TOTAL LIABILITIES ................................................... 220,324
--------------
NET ASSETS .......................................................... $109,409,646
==============
COMPOSITION OF 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)......................... 70,937,933
Net unrealized appreciation............................................ 8,088,750
Accumulated undistributed net investment income........................ 676,135
Accumulated net realized loss.......................................... (293,172)
--------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS ........................ 79,409,646
--------------
TOTAL NET ASSETS .................................................... $109,409,646
==============
NET ASSET VALUE PER COMMON SHARE
($79,409,646 divided by 5,137,563 common shares outstanding) ......... $ 15.46
=======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ...................... $3,409,708
------------
EXPENSES
Investment management fee............. 191,726
Auction commission fees............... 55,788
Professional fees..................... 47,884
Transfer agent fees and expenses ..... 19,618
Trustees' fees and expenses........... 8,869
Registration fees..................... 8,225
Shareholder reports and notices ...... 4,905
Auction agent fees.................... 3,789
Custodian fees........................ 2,496
Other................................. 6,737
------------
TOTAL EXPENSES ..................... 350,037
Less: expense offset ................. (2,488)
------------
NET EXPENSES ....................... 347,549
------------
NET INVESTMENT INCOME .............. 3,062,159
------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss..................... (7,977)
Net change in unrealized
appreciation......................... (358,591)
------------
NET LOSS ........................... (366,568)
------------
NET INCREASE ......................... $2,695,591
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<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, 1998 OCTOBER 31, 1997
- ------------------------------------------------- -------------- ----------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ............................ $ 3,062,159 $ 6,179,031
Net realized loss................................. (7,977) (27,561)
Net change in unrealized appreciation............. (358,591) 847,032
-------------- ----------------
NET INCREASE ................................... 2,695,591 6,998,502
-------------- ----------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Preferred......................................... (548,778) (1,131,150)
Common............................................ (2,543,027) (4,947,971)
-------------- ----------------
TOTAL .......................................... (3,091,805) (6,079,121)
-------------- ----------------
Decrease from transactions in common shares of
beneficial interest.............................. -- (345,471)
-------------- ----------------
NET INCREASE (DECREASE)......................... (396,214) 573,910
NET ASSETS:
Beginning of period............................... 109,805,860 109,231,950
-------------- ----------------
END OF PERIOD
(Including undistributed net investment income
of $676,135 and $705,781, respectively) ........ $109,409,646 $109,805,860
============== ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (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
11
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (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 proceeds from sales of portfolio securities, excluding short-term
investments, for the six months ended April 30, 1998 aggregated $715,000.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager,
is the Trust's transfer agent. At April 30, 1998, the Trust had transfer agent
fees and expenses payable of approximately $3,000.
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, 1998
included in Trustees' fees and expenses in the Statement of Operations amounted
to $1,951. At April 30, 1998, the Trust had an accrued pension liability of
$39,114 which is included in accrued expenses in the Statement of Assets and
Liabilities.
12
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (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 3.73% 07/02/98 3.73%
</TABLE>
- ------------
* As of April 30, 1998.
** For the six months ended April 30, 1998.
Subsequent to April 30, 1998 and up through June 5, 1998, the Trust paid
dividends at a rate of 3.73% in the aggregate amount of $187,014.
The Trust is subject to certain restrictions relating to the preferred shares.
Failure to comply with these restrictions could preclude the Trust from
declaring any distributions to common shareholders or purchasing common shares
and/or could trigger the mandatory redemption of preferred shares at
liquidation value.
The preferred shares, which are entitled to one vote per share, generally vote
with the common shares but vote separately as a class to elect two Trustees and
on any matters affecting the rights of the preferred shares.
5. COMMON SHARES OF BENEFICIAL INTEREST
Transactions in common shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL
PAID IN
EXCESS OF
SHARES PAR VALUE PAR VALUE
----------- ----------- -------------
<S> <C> <C> <C>
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) (345,231)
----------- ----------- -------------
Balance, October 31, 1997 and April 30, 1998 ............................ 5,137,563 $51,376 $70,886,557
=========== =========== =============
</TABLE>
- ------------
* The Trustees have voted to retire the shares purchased.
13
<PAGE>
INTERCAPITAL INSURED MUNICIPAL BOND TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1998 (unaudited) continued
6. FEDERAL INCOME TAX STATUS
At October 31, 1997, the Trust had a net capital loss carryover of
approximately $285,000, which may be used 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 2005
- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
$79 $68 $62 $49 $27
====== ====== ====== ====== ======
</TABLE>
7. DIVIDENDS TO COMMON SHAREHOLDERS
On March 24, 1998, the Trust declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
- ------------- ---------------- ----------------
<S> <C> <C>
$0.0825 May 8, 1998 May 22, 1998
$0.0825 June 5, 1998 June 19, 1998
</TABLE>
14
<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
MONTHS ENDED FOR THE YEAR ENDED OCTOBER 31*
APRIL 30, 1998 ---------------------------------------------
1997 1996 1995 1994
-------------- ---------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............... $ 15.53 $15.35 $ 15.41 $ 14.16 $ 16.75
-------------- ---------- ---------- ---------- ----------
Net investment income.............................. 0.60 1.20 1.21 1.22 1.34
Net realized and unrealized gain (loss)............ (0.07) 0.16 (0.17) 1.30 (2.49)
-------------- ---------- ---------- ---------- ----------
Total from investment operations................... 0.53 1.36 1.04 2.52 (1.15)
-------------- ---------- ---------- ---------- ----------
Less dividends and distributions from:
Net investment income............................. (0.49) (0.96) (0.90) (1.04) (1.21)
Common share equivalent of dividends paid to
preferred shareholders........................... (0.11) (0.22) (0.22) (0.23) (0.23)
Net realized gain................................. -- -- -- -- --
-------------- ---------- ---------- ---------- ----------
Total dividends and distributions.................. (0.60) (1.18) (1.12) (1.27) (1.44)
-------------- ---------- ---------- ---------- ----------
Anti-dilutive effect of acquiring treasury shares . -- -- 0.02 -- --
-------------- ---------- ---------- ---------- ----------
Net asset value, end of period..................... $ 15.46 $15.53 $ 15.35 $ 15.41 $ 14.16
============== ========== ========== ========== ==========
Market value, end of period........................ $15.938 $16.00 $14.125 $14.625 $12.875
============== ========== ========== ========== ==========
TOTAL INVESTMENT RETURN+........................... 2.66%(1) 20.62% 3.06% 22.10% (22.37)%
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS:
Total expenses..................................... 0.88%(2)(3) 0.89%(3) 0.92% 0.91%(3) 1.03 %
Net investment income before preferred stock
dividends......................................... 7.68%(2) 7.80% 7.85% 8.16% 8.68 %
Preferred stock dividends ......................... 1.38%(2) 1.43% 1.41% 1.53% 1.49 %
Net investment income available to common
shareholders...................................... 6.30%(2) 6.37% 6.44% 6.63% 7.19 %
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............ $109,410 $109,806 $109,232 $110,718 $109,377
Asset coverage on preferred shares at end of
period............................................ 364% 365% 363% 369% 312 %
Portfolio turnover rate ........................... -- 2% 5% 6% 12 %
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1993
--------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............... $14.84
--------
Net investment income.............................. 1.41
Net realized and unrealized gain (loss)............ 2.04
--------
Total from investment operations................... 3.45
--------
Less dividends and distributions from:
Net investment income............................. (1.26)
Common share equivalent of dividends paid to
preferred shareholders........................... (0.24)
Net realized gain................................. (0.04)
--------
Total dividends and distributions.................. (1.54)
--------
Anti-dilutive effect of acquiring treasury shares . --
--------
Net asset value, end of period..................... $ 16.75
========
Market value, end of period........................ $ 17.875
========
TOTAL INVESTMENT RETURN+........................... 17.74%
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS:
Total expenses..................................... 1.01%
Net investment income before preferred stock
dividends......................................... 8.86%
Preferred stock dividends ......................... 1.49%
Net investment income available to common
shareholders...................................... 7.37%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............ $128,031
Asset coverage on preferred shares at end of
period............................................ 319%
Portfolio turnover rate ........................... 6%
</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
15
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
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
Morgan Stanley Dean Witter Trust FSB
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, 1998
