<PAGE>
INTERCAPITAL INSURED MUNICIPAL TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
Strong economic growth in the fourth quarter of 1993 and a shift in Federal
Reserve Board monetary policy in February of 1994 caused the fixed-income
markets to reverse direction and led to the sharpest increase in interest rates
in more than six years. At the beginning of the year, market concerns about
inflation developed as the economy approached full employment and commodity
prices moved upward. The Federal Reserve Board responded by tightening monetary
policy. Since early February, the central bank has raised the federal-funds rate
- -- the interest rate banks charge each other for overnight loans -- 250 basis
points from 3.00 percent to 5.50 percent in six separate moves through November.
Between May and November, the discount rate -- the interest rate the Federal
Reserve charges member banks for loans -- increased 175 basis points to 4.75
percent.
During InterCapital Insured Municipal Trust's (NYSE symbol: IMT) fiscal year
ended October 31, 1994, long-term municipal bond yields, as measured by THE BOND
BUYER Revenue Bond Index*, rose 139 basis points from 5.56 percent to 6.95
percent. In February and March yields jumped 89 basis points from 5.50 percent
to 6.39 percent in response to the Federal Reserve Board's initial tightening
and subsequent municipal bond selling pressure. A semblance of stability
returned to the market between June and August. After Labor Day, however,
continued economic growth, aggressive tax-loss selling, heavy mutual-fund
redemptions and excessive dealer inventory led to further municipal market
deterioration. The total yield increase of 139 basis points during the fiscal
year was equivalent to a 17 percent price decline for a 30-year municipal bond.
One-third of this price decline occurred in September and October.
The municipal market was also influenced by supply and demand conditions.
New-issue underwriting totaled a record $290 billion in 1993. The pace of
new-issue activity over the first 10 months of 1994, however, slowed 44 percent.
The estimated issuance for 1994 is $160 billion. By way of comparison, bond
maturities and calls for redemption are expected to reach $190 billion this year
resulting in a reduction in the amount of municipal debt outstanding. This
scarcity would normally be expected to improve the relative performance of
municipal bonds under stable-to-improving interest rate conditions.
PERFORMANCE
The Trust's net asset value (NAV) declined from $16.95 to $14.27 per share
during the fiscal year ended October 31, 1994. Based on this change and
reinvestment of tax-free dividends totaling $1.12 per share, the Trust's total
return for the fiscal year was -9.40 percent. Concurrently, the Trust's share
value on the New York Stock Exchange declined from $16.75 to $12.625 per share.
Based on this market change and reinvestment of dividends, the Trust's total
return for the fiscal year was -18.84 percent. The Trust began the fiscal year
trading at a 1.18 percent discount to NAV and closed at a 11.53 percent discount
to NAV.
PORTFOLIO STRUCTURE
As of October 31, 1994, the portfolio's long-term investments were
diversified among 11 municipal sectors and 51 credits. The three largest sectors
were hospital, water and sewer and industrial development/pollution control
revenue bonds, representing 50 percent of net assets. The average maturity and
call protection of the Trust's long-term holdings was 21 years and 8 years,
respectively. Bonds subject to
- ------------------------
* THE BOND BUYER Revenue Bond Index is an arithmetic average of the yields of 25
selected municipal revenue bonds with 30-year maturities. Credit ratings of
these bonds range from Aa1 to Baa1 by Moody's and AA+ to A- by Standard &
Poor's.
<PAGE>
the alternative minimum tax (AMT) represented approximately 11 percent of net
assets. At the end of the period, the Trust had net assets in excess of $491
million.
Each position in the portfolio was backed either by bond insurers that are
rated Aaa by Moody's Investors Service, Inc. and/or AAA by Standard & Poor's
Corp. or by U.S. government-guaranteed securities. This is to ensure the timely
payment of principal and interest. Additionally, holdings representing 22
percent of the portfolio had been prerefunded and were further secured by
escrows of U.S. government securities. As of October 31, 1994, the distribution
of long-term credit enhancements was:
<TABLE>
<CAPTION>
Credit Enhancements Percent
- ----------------------------------------------------------------------------------- -------------
<S> <C>
AMBAC Indemnity Corporation (AMBAC)................................................ 28%
Financial Guaranty Insurance Company (FGIC)........................................ 23
Financial Security Assurance Inc. (FSA)............................................ 6
Municipal Bond Investors Assurance Corporation (MBIA).............................. 37
GNMA-Backed Obligations............................................................ 6
</TABLE>
THE IMPACT OF LEVERAGING
As reported previously, the Trust's common shares are leveraged. Leverage
was created through the issuance of Auction Rate Preferred Shares (ARPS). The
ARPS's auction periods normally range between one week and one year. Proceeds
from ARPS underwritings were used to purchase additional long-term municipal
bonds. Following the payment of ARPS dividends, the common shares earn
incremental income when the portfolio yield is higher than the costs of the ARPS
(yield plus operating and remarketing expenses). Although rising short-term
interest rates have narrowed the yield spread this year, ARPS continue to
provide positive incremental income to common shareholders.
The leveraged capital structure of closed-end municipal bond funds
additionally impacts NAV. ARPS normally account for one-third of a fund's
underwritten capital structure. This produces a volatility factor for common
shares of 1.5 times the price change of bonds held in the portfolio. The common
stock's NAV per share reflects the full price change of the portfolio's
investments since the value of the preferred shares does not fluctuate.
As the bond market has eroded, the degree of leverage and volatility has
increased. The purchase and retirement of ARPS counteracts this trend. During
the fiscal year, IMT purchased and retired $20 million in par amount of ARPS, so
that $160 million in ARPS remain outstanding. Additional ARPS purchases may
occur if the degree of leverage increases or ARPS profitability (spread)
declines significantly.
DIVIDEND RESERVES
At the end of the fiscal year, IMT had undistributed net investment income
of $0.179 per share available for future distributions. This dividend reserve or
"cushion" helped sustain the Trust's current monthly dividend. Higher yields in
future ARPS auctions and ARPS retirements may erode the cushion. Declines in the
dividend reserve may cause the Trust to adjust the common share dividend.
LOOKING AHEAD
The overall direction of interest rates will primarily be determined by the
strength of the economy, the trend of inflation and the Federal Reserve Board's
responses. These conditions may continue to move interest rates higher through
mid-1995. Investor demand for municipal securities should be sustained by
significant bond maturities, calls for redemption and diminished new-issue
supply. Changing market conditions and the profitability of ARPS are among the
factors that will determine the Trust's future level of income and influence the
direction of the common stock market price.
The Trust's procedure for reinvestment of all dividends and distributions on
common shares is to purchase in the open market. This method helps to support
the market value of the Trust's shares. In addition, the Trustees have approved
a procedure whereby the Trust, when appropriate, may purchase shares in the open
market or in privately negotiated transactions at a price not above market value
or net
<PAGE>
asset value, whichever is lower at the time of purchase. The Trust may also
utilize procedures to reduce or eliminate the amount of outstanding ARPS,
including their purchase in the open market or in privately negotiated
transactions. Over the fiscal year, the Trust purchased 285,000 shares of common
stock at a weighted average discount of 8.8 percent.
We appreciate your ongoing support of InterCapital Insured Municipal Trust
and look forward to continuing to serve your investment needs.
Very truly yours,
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
INTERCAPITAL INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- --------- ---------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (95.5%)
GENERAL OBLIGATION (12.2%)
$ 8,000 Chicago, Illinois, Refg Ser 1992 (AMBAC Insured).................... 6.25% 1/ 1/11 $ 7,684,720
15,000 Cook County, Illinios, Ser 1992 A (MBIA Insured).................... 6.60 11/15/22 14,489,250
6,000 Louisiana, Ser 1992 A (AMBAC Insured)............................... 6.50 5/ 1/08 6,102,480
9,300 New Orleans, Louisiana, Issue of 1992 (FGIC Insured)................ 7.50 9/ 1/21 9,892,503
7,250 Chippewa Valley Schools, Michigan, 1992 (FGIC Insured)
(Prerefunded)..................................................... 6.375 5/ 1/21 7,636,643
9,500 Detroit City School District, Michigan, Ser 1991 (Secondary AMBAC
Insured) (Prerefunded)............................................ 7.10 5/ 1/07 10,367,540
4,000 Clark County, Nevada, Transportation Impr Ltd Tax Ser 6/1/92 B
(AMBAC Insured)................................................... 6.50 6/ 1/17 3,866,560
---------------
- -----------
60,039,696
59,050
---------------
- -----------
EDUCATIONAL FACILITIES REVENUE (4.0%)
Massachusetts Health & Educational Facilities Authority,
15,000 Northeastern University Ser E (MBIA Insured)...................... 6.55 10/ 1/22 14,679,150
3,000 Stonehill College Ser E (MBIA Insured)............................ 6.60 7/ 1/20 2,937,870
2,000 University of Pittsburgh, Pennsylvania, 1992 Ser A (MBIA Insured)... 6.125 6/ 1/21 1,864,960
---------------
- -----------
19,481,980
20,000
---------------
- -----------
ELECTRIC REVENUE (9.4%)
5,500 Vero Beach, Florida, Ser 1991 (MBIA Insured) (Prerefunded).......... 6.55 12/ 1/21 5,851,945
10,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg Ser (FGIC
Insured).......................................................... 6.25 1/ 1/18 9,394,700
South Carolina Public Service Authority,
15,000 1991 Ser D (AMBAC Insured) (Prerefunded)............................ 6.50 7/ 1/24 15,930,150
10,000 1991 Ser D (Secondary MBIA Insured) (Prerefunded)................... 6.625 7/ 1/31 10,671,200
5,000 Lower Colorado River Authority, Texas, Jr Lien Refg Ser 1992 (AMBAC
Insured).......................................................... 6.00 1/ 1/17 4,576,750
---------------
- -----------
46,424,745
45,500
---------------
- -----------
HOSPITAL REVENUE (19.2%)
15,000 Delaware Health Facilities Authority, Medical Center of Delaware Ser
1992 (MBIA Insured)............................................... 6.25 10/ 1/06 15,099,298
5,000 Brevard County Health Facilities Authority, Florida, Wuesthoff
Memorial Hospital Ser 1992 A (MBIA Insured)....................... 6.625 4/ 1/13 5,050,150
5,455 Jacksonville Health Facilities Authority, Florida, Memorial Regional
Rehabilitation Center Ser 1992 (MBIA Insured)..................... 6.625 5/ 1/22 5,437,817
10,155 Fulton - Dekalb Hospital Authority, Georgia, Grady Memorial Hospital
Ser 1991 (AMBAC Insured) (Prerefunded)............................ 6.90 1/ 1/20 10,978,672
8,955 Illinois Health Facilities Authority, Southern Illinois Hospital
Services Ser 1991 (MBIA Insured).................................. 6.625 3/ 1/20 8,660,918
3,700 Massachusetts Health & Educational Facilities Authority, McLean
Hospital Ser C (FGIC Insured)..................................... 6.625 7/ 1/15 3,664,628
5,000 Farmington Hills Hospital Finance Authority, Michigan, Botsford
General Hospital Ser 1992 A (MBIA Insured)........................ 6.50 2/15/22 4,826,300
2,500 Chattanooga - Hamilton County Hospital Authority, Tennessee,
Erlanger Medical Center 1991 Ser B RIBs (FSA Insured)
(Prerefunded)..................................................... 10.028+ 5/18/21 2,846,875
15,000 Amarillo Health Facilities Corporation, Texas, High Plains Baptist
Hospital Ser 1992 A & B (FSA Insured)............................. 6.562 1/ 1/22 14,554,950
</TABLE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- --------- ---------------
<C> <S> <C> <C> <C>
Wisconsin Health & Educational Facilities Authority,
$ 15,000 Children's Hospital Inc Ser 1992 B (FGIC Insured)................. 6.50% 8/15/21 $ 14,182,200
10,000 Wausau Hospital Inc Ser 1991 B (AMBAC Insured).................... 6.70 8/15/20 9,700,500
---------------
- -----------
95,002,308
95,765
---------------
- -----------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (12.8%)
6,000 Delaware Economic Development Authority, Delmarva Power & Light Co
Ser 1992 A (AMT) (AMBAC Insured).................................. 6.85 5/ 1/22 5,926,740
5,000 Lawrenceburg, Indiana, Indiana & Michigan Power Co Refg Ser D
(Secondary FGIC Insured).......................................... 7.00 4/ 1/15 5,103,150
20,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA
Insured).......................................................... 7.00 6/ 1/31 20,251,400
7,500 Humboldt County, Nevada, Sierra Pacific Power Co Refg Ser 1987
(AMBAC Insured)................................................... 6.55 10/ 1/13 7,379,775
7,000 Montgomery County Industrial Development Authority, Pennsylvania,
Philadelphia Electric Co Refg 1991 Ser B
(MBIA Insured).................................................... 6.70 12/ 1/21 6,981,940
Brazos River Authority, Texas,
7,500 Houston Lighting & Power Co 1992 A (AMBAC Insured).................. 6.70 3/ 1/17 7,447,500
10,000 Texas Utilities Electric Co Collateralized Ser 1992 A (AMT) (AMBAC
Insured).......................................................... 6.75 4/ 1/22 9,743,600
---------------
- -----------
62,834,105
63,000
---------------
- -----------
MORTGAGE REVENUE - SINGLE FAMILY (5.9%)
20,600 Nebraska Investment Finance Authority, GNMA-Backed 1992 Ser A & B
(AMT)............................................................... 6.558 9/15/24 19,704,724
9,300 Ohio Housing Finance Agency, GNMA-Backed Ser A 1 & 2 (AMT).......... 6.903 3/ 1/31 9,120,789
---------------
- -----------
28,825,513
29,900
---------------
- -----------
NURSING & HEALTH RELATED FACILITIES REVENUE (0.7%)
3,500 New York State Medical Care Facilities Finance Agency, Mental Health
1992 Ser A (FGIC Insured)......................................... 6.375 8/15/17 3,375,470
---------------
- -----------
PUBLIC FACILITIES REVENUE (7.6%)
13,550 Orange County, Florida, Tourist Development Tax Ser 1992 B (AMBAC
Insured).......................................................... 6.00 10/ 1/21 12,579,685
25,000 Hudson County, New Jersey, Correctional Refg Ser 1992 COPs (MBIA
Insured).......................................................... 6.60 12/ 1/21 24,656,500
---------------
- -----------
37,236,185
38,550
---------------
- -----------
RESOURCE RECOVERY REVENUE (1.9%)
9,000 Detroit Economic Development Corporation, Michigan, Ser 1991 A
(AMT) (FSA Insured)............................................... 6.875 5/ 1/09 9,144,360
---------------
- -----------
<PAGE>
</TABLE>
INTERCAPITAL INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1994 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- --------- ---------------
<C> <S> <C> <C> <C>
TRANSPORTATION FACILITIES REVENUE (4.1%)
$ 5,000 Greater Orlando Aviation Authority, Florida, Ser 1992 A (AMT) (FGIC
Insured).......................................................... 6.50% 10/ 1/12 $ 4,952,700
2,500 Hawaii, Airport Second Lien Ser 1991 (AMT) (MBIA Insured)........... 6.75 7/ 1/21 2,466,175
Harris County, Texas, Sr Lien Toll Road Refg
10,000 Ser 1992 A (AMBAC Insured) (Prerefunded)............................ 6.50 8/15/17 10,625,500
2,050 Ser 1993 A (AMBAC Insured).......................................... 6.50 8/15/17 1,990,509
---------------
- -----------
20,034,884
19,550
---------------
- -----------
WATER & SEWER REVENUE (17.7%)
2,500 Jupiter, Florida, Water Refg Ser 1992 A (AMBAC Insured)............. 6.25 10/ 1/18 2,409,825
12,500 Reedy Creek Improvement District, Florida, Utilities Ser 1991-1
(MBIA Insured) (Prerefunded)...................................... 6.50 10/ 1/16 13,223,000
7,790 Kenton County Water District #1, Kentucky, Refg Ser 1992 (FGIC
Insured).......................................................... 6.375 2/ 1/17 7,594,783
Detroit, Michigan, Water Supply Refg
3,000 Ser 1992 (FGIC Insured)........................................... 6.375 7/ 1/22 2,859,600
3,500 Ser 1992 INFLOS (FGIC Insured) (Prerefunded)...................... 8.999+ 7/ 1/22 3,845,625
6,400 Bergen County Utilities Authority, New Jersey, 1992 Water Pollution
Ser A (FGIC Insured).............................................. 6.50 12/15/12 6,400,000
5,000 Cleveland, Ohio, Waterworks Ser F 1992 B (AMBAC Insured)............ 6.50 1/ 1/11 5,002,750
15,000 Harrisburg Authority, Pennsylvania, Water Ser of 1992 (FGIC Insured)
(Prerefunded)..................................................... 6.50 8/15/16 15,744,600
10,000 Grand Strand Water & Sewer Authority, South Carolina, Refg Ser 1992
(MBIA Insured).................................................... 6.00 6/ 1/19 9,150,000
7,000 North Charleston Sewer District, South Carolina, Refg Ser 1992 A
(MBIA Insured).................................................... 6.00 7/ 1/18 6,444,690
15,000 Metropolitan Seattle, Washington, Sewer Ser U (FGIC Insured)........ 6.60 1/ 1/32 14,398,200
---------------
- -----------
87,073,073
87,690
---------------
- -----------
471,505 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $465,376,588)....................................... 469,472,319
---------------
- -----------
SHORT-TERM MUNICIPAL OBLIGATION (1.9%)
9,100 Harris County Health Facilities Development Corporation, Texas,
Methodist Hospital 1994 (Tender 11/1/94) (Identified Cost
$9,100,000)....................................................... 3.40* 12/ 1/25 9,100,000
---------------
- -----------
$ 480,605 TOTAL INVESTMENTS (IDENTIFIED COST $474,476,588)(A).................. 97.4% 478,572,319
- -----------
- -----------
OTHER ASSETS IN EXCESS OF LIABILITIES................................ 2.6 12,787,783
---------- -------------
NET ASSETS........................................................... 100.0% $ 491,360,102
---------- -------------
---------- -------------
<FN>
- ----------------
AMT ALTERNATIVE MINIMUM TAX.
COPS CERTIFICATES OF PARTICIPATION.
INFLOS INVERSE FLOATING RATE SECURITIES.
RIBS RESIDUAL INTEREST BONDS.
* VARIABLE OR FLOATING RATE SECURITY. COUPON RATE SHOWN REFLECTS CURRENT
RATE.
+ CURRENT COUPON RATE FOR RESIDUAL INTEREST BONDS. THIS RATE RESETS
PERIODICALLY AS THE AUCTION RATE ON THE RELATED SHORT-TERM SECURITIES
FLUCTUATES.
(A) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $474,476,588; THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $8,948,744 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $4,853,013; RESULTING IN NET
UNREALIZED APPRECIATION OF $4,095,731.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Delaware....... 4.3%
Florida........ 10.1
Georgia........ 2.2
Hawaii......... 0.5
Illinois....... 6.3
Indiana........ 1.0
Kansas......... 4.1%
Kentucky....... 1.5
Louisiana...... 3.3
Massachusetts.. 4.3
Michigan....... 7.9
Nebraska....... 4.0
Nevada......... 2.3%
New Jersey..... 6.3
New York....... 0.7
Ohio........... 2.9
Pennsylvania... 5.0
South
Carolina...... 10.5
Tennessee...... 0.6%
Texas.......... 11.8
Washington..... 2.9
Wisconsin...... 4.9
---
Total.......... 97.4%
---
---
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
INTERCAPITAL INSURED MUNICIPAL TRUST
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $474,476,588) (Note
1)...................................... $ 478,572,319
Receivable for:
Interest................................ 8,358,991
Investments sold........................ 4,981,767
Deferred organizational expenses (Note
1)...................................... 35,462
Prepaid expenses and other assets......... 81,462
-------------
TOTAL ASSETS...................... 492,030,001
-------------
LIABILITIES:
Payable for:
Common shares of beneficial interest
purchased............................. 307,524
Investment management fee (Note 2)...... 154,444
Payable to bank........................... 125,255
Accrued expenses and other payables (Note
3)...................................... 82,676
-------------
TOTAL LIABILITIES................. 669,899
-------------
NET ASSETS:
Preferred shares of beneficial interest,
(1,000,000 shares authorized of
nonparticipating $.01 par value, 3,200
shares outstanding) (Note 4)............ 160,000,000
-------------
Common shares of beneficial interest
(unlimited shares authorized of $.01 par
value, 23,222,113 shares outstanding)
(Note 5)................................ 322,671,198
Net unrealized appreciation on
investments............................. 4,095,731
Accumulated undistributed net investment
income.................................. 4,166,775
Accumulated undistributed net realized
gains on investments.................... 426,398
-------------
NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS.............. 331,360,102
-------------
TOTAL NET ASSETS.................. $ 491,360,102
-------------
-------------
NET ASSET VALUE PER COMMON SHARE,
($331,360,102 divided by 23,222,113
common shares outstanding)..............
$14.27
-------------
-------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1994
<TABLE>
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME......................... $ 33,937,634
-------------
EXPENSES
Investment management fee (Note 2).... 1,920,142
Auction commission fees............... 468,853
Transfer agent fees and expenses (Note
3).................................. 142,175
Professional fees..................... 107,156
Shareholder reports and notices....... 48,957
Auction agent fees.................... 32,956
Registration fees..................... 32,618
Trustees' fees and expenses (Note
3).................................. 29,772
Organizational expenses (Note 1)...... 15,191
Other................................. 31,196
-------------
TOTAL EXPENSES.................... 2,829,016
-------------
NET INVESTMENT INCOME........... 31,108,618
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 1):
Net realized gain on investments...... 491,436
Net change in unrealized appreciation
on investments...................... (63,498,938)
-------------
NET LOSS ON INVESTMENTS........... (63,007,502)
-------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS..... $ (31,898,884)
-------------
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL TRUST
FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1994 OCTOBER 31, 1993
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................... $ 31,108,618 $ 31,782,230
Net realized gain (loss) on investments................................. 491,436 (65,038)
Net change in unrealized appreciation on investments.................... (63,498,938) 63,211,553
----------------- -----------------
Net increase (decrease) in net assets resulting from operations....... (31,898,884) 94,928,745
----------------- -----------------
Dividends to preferred shareholders from net investment income............ (5,085,324) (5,207,598)
Dividends to common shareholders from net investment income............... (26,301,573) (26,239,525)
----------------- -----------------
Total dividends....................................................... (31,386,897) (31,447,123)
----------------- -----------------
Decrease from transactions in shares of beneficial interest (Notes 4 and
5):
Common.................................................................. (3,860,432) --
Preferred............................................................... (20,000,000) --
----------------- -----------------
Total transactions.................................................... (23,860,432) --
----------------- -----------------
Total increase (decrease)............................................. (87,146,213) 63,481,622
NET ASSETS:
Beginning of period....................................................... 578,506,315 515,024,693
----------------- -----------------
END OF PERIOD (including undistributed net investment income of $4,166,775
and $4,445,054, respectively)............................................ $ 491,360,102 $ 578,506,315
----------------- -----------------
----------------- -----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES--InterCapital Insured Municipal 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 October 3, 1991 and commenced
operations on February 28, 1992.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS--Portfolio securities are valued for the Trust
by an outside independent pricing service approved by the Trustees. The
pricing service has informed the Trust that in valuing the Trust's portfolio
securities, it uses both a computerized matrix of tax-exempt securities and
evaluations by its staff, in each case based on information concerning
market transactions and quotations from dealers which reflect the bid side
of the market each day. The Trust's portfolio securities are thus valued by
reference to a combination of transactions and quotations for the same or
other securities believed to be comparable in quality, coupon, maturity,
type of issue, call provisions, trading characteristics and other features
deemed to be relevant. Short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market
basis until sixty days prior to maturity and thereafter at amortized cost
based on their value on the 61st day. Short-term debt securities having a
maturity date of sixty days or less at the time of purchase are valued at
amortized cost.
B. ACCOUNTING FOR INVESTMENTS--Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined on the identified cost
method. The Trust amortizes premiums and discounts on securities purchased
over the life of the respective securities. Interest income is accrued
daily.
C. FEDERAL INCOME TAX STATUS--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--The Trust records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such
amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent they
exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in-capital.
E. ORGANIZATIONAL EXPENSES--Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Trust's common shares in
the amount of $76,000 which have been reimbursed by the Trust for the full
amount thereof. Such expenses have been deferred and are being amortized by
the straight-line method over a period not to exceed five years from the
commencement of operations.
<PAGE>
INTERCAPITAL INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2. INVESTMENT MANAGEMENT AGREEMENT--Pursuant to an Investment Management
Agreement, the Trust pays its Investment Manager a management fee, calculated
weekly and payable monthly, by applying the annual rate of 0.35% to the Trust's
average weekly net assets.
Under the terms of the Agreement, the Investment Manager maintains certain
of the Trust's books and records and furnishes, at its own expense, office
space, facilities, equipment, clerical, bookkeeping and certain legal services
and pays the salaries of all personnel, including officers of the Trust who are
employees of the Investment Manager. The Investment Manager also bears the cost
of telephone services, heat, light, power and other utilities provided to the
Trust.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES--The cost of
purchases and proceeds from sales of portfolio securities, excluding short-term
investments, for the year ended October 31, 1994 aggregated $33,844,100 and
$66,707,024, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At October 31, 1994, the Trust had transfer agent fees
and expenses payable of approximately $16,000.
On January 1, 1994, the Trust adopted an unfunded noncontributory defined
benefit pension plan covering all independent Trustees of the Trust who will
have served as an independent Trustee for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension costs for
the year ended October 31, 1994, included in Trustees' fees and expenses in the
Statement of Operations amounted to $10,000. At October 31, 1994, the Trust had
an accrued pension liability of $9,864 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 9, 1992, the
Trust issued 3,600 shares of Auction Rate Preferred Shares ("Preferred Shares")
consisting of 1,800 shares each of Series TU and TH for gross total proceeds of
$180,000,000. The preferred shares have a liquidation value of $50,000 per share
plus the redemption premium, if any, plus accumulated but unpaid dividends
(whether or not declared) thereon to the date of distribution. The Trust may
redeem such shares, in whole or in part, at the original purchase price of
$50,000 per share plus accumulated but unpaid dividends (whether or not
declared) thereon to the date of redemption. During the year ended October 31,
1994, the Trust purchased and retired 400 shares of Series TU in the amount of
$20,000,000.
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
RESET RANGE OF
SHARES* SERIES RATE* DATE DIVIDEND RATES**
- ---------- ---------- ----- ------ ----------------
<S> <C> <C> <C> <C>
1,400 TU 3.27 % 11/1/94 2.05 % - 3.47%
1,800 TH 3.34 1/5/95 2.581 - 3.34
<FN>
- ------------
* AS OF OCTOBER 31, 1994.
** FOR THE YEAR ENDED OCTOBER 31, 1994.
</TABLE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Subsequent to October 31, 1994 and up through December 5, 1994, the Trust
paid dividends to each of the Series TU and TH at rates ranging from 3.27% to
3.579% and 3.34% respectively, in the aggregate amount of $683,772.
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, 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
PAR VALUE EXCESS OF
SHARES OF SHARES PAR VALUE
---------- --------- -----------
<S> <C> <C> <C>
Balance, October 31, 1992 and October 31,
1993*................................... 23,507,113 $235,071 $326,296,559
Treasury shares purchased and retired
(weighted average discount 8.78%)**..... (285,000) (2,850) (3,857,582)
---------- --------- -----------
Balance, October 31, 1994................ 23,222,113 $232,221 $322,438,977
---------- --------- -----------
---------- --------- -----------
<FN>
- ------------
* NET OF OFFERING COST $460,545.
** THE TRUSTEES HAVE VOTED TO RETIRE THE SHARES PURCHASED.
</TABLE>
6. FEDERAL INCOME TAX STATUS--During the year ended October 31, 1994, the Trust
utilized net capital loss carryovers of approximately $65,000.
7. DIVIDENDS TO COMMON SHAREHOLDERS--The Trust declared the following dividends
from net investment income--
<TABLE>
<CAPTION>
DECLARATION AMOUNT PER RECORD PAYABLE
DATE SHARE DATE DATE
- --------------- ---------- --------------- ---------------
<S> <C> <C> <C>
November 1, November 11, November 25,
1994 $0.085 1994 1994
November 29, December 9, December 23,
1994 $0.085 1994 1994
</TABLE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
8. SELECTED QUARTERLY FINANCIAL DATA--(UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED*
-----------------------------------------------------------
10/31/94 7/31/94 4/30/94 1/31/94
------------- ------------- -------------- -------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
------ ----- ------ ----- ------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income..................................... $8,340 $0.36 $8,502 $0.36 $ 8,361 $0.36 $8,735 $0.37
Net investment income....................................... 7,679 0.33 7,855 0.33 7,629 0.33 7,946 0.34
Net realized and unrealized gain (loss) on investments...... (25,889) (1.10) 6,002 0.26 (47,595) (2.02) 4,474 0.19
<CAPTION>
QUARTERS ENDED*
-----------------------------------------------------------
10/31/93 7/31/93 4/30/93 1/31/93
------------- ------------- -------------- -------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
------ ----- ------ ----- ------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income..................................... $8,746 $0.37 $8,757 $0.38 $ 8,707 $0.37 $8,557 $0.36
Net investment income....................................... 8,031 0.34 7,898 0.34 7,964 0.33 7,889 0.34
Net realized and unrealized gain on investments............. 18,562 0.79 7,109 0.30 16,142 0.69 21,334 0.91
<FN>
- ----------
* TOTALS EXPRESSED IN THOUSANDS OF DOLLARS.
</TABLE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected ratios and per share data for a common share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED FEBRUARY 28, 1992*
-------------------------------------- THROUGH OCTOBER 31,
OCTOBER 31, 1994** OCTOBER 31, 1993** 1992**
------------------ ------------------ -------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $16.95 $14.25 $14.06
---------- ---------- ----------
Net investment income................... 1.33 1.35 0.79
Net realized and unrealized gain (loss)
on investments......................... (2.67 ) 2.69 0.19
---------- ---------- ----------
Total from investment operations........ (1.34 ) 4.04 0.98
---------- ---------- ----------
Less dividends and other charges:
Net investment income................. (1.12 ) (1.12 ) (0.49)
Common share equivalent of dividends
paid to preferred shareholders....... (0.22 ) (0.22 ) (0.13)
Offering costs charged against
capital.............................. -- -- (0.17)
---------- ---------- ----------
Total dividends and other charges....... (1.34 ) (1.34 ) (0.79)
---------- ---------- ----------
Net asset value, end of period.......... $14.27 $16.95 $14.25
---------- ---------- ----------
---------- ---------- ----------
Market value, end of period............. $12.625 $16.75 $15.25
---------- ---------- ----------
---------- ---------- ----------
TOTAL INVESTMENT RETURN+................ (18.84 )% 17.73% 4.94 %(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)............................. $ 491,360 $ 578,506 $ 515,025
Ratios to average net assets of common
shareholders:
Expenses.............................. 0.77% 0.80% 0.72 %(2)
Net investment income before preferred
stock dividends...................... 8.45% 8.52% 8.10 %(2)
Preferred stock dividends............. 1.38% 1.40% 1.34 %(2)
Net investment income available to
common shareholders.................. 7.07% 7.12% 6.76 %(2)
Asset coverage on preferred shares at
end of period.......................... 307% 321% 286 %
Portfolio turnover rate................. 6% 1% 1 %(1)
<FN>
- ------------
* 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, IF ANY, ARE ASSUMED
TO BE REINVESTED AT THE PRICES OBTAINED UNDER THE TRUST'S DIVIDEND
REINVESTMENT PLAN. TOTAL INVESTMENT RETURN DOES NOT REFLECT SALES CHARGES OR
BROKERAGE COMMISSIONS.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
INTERCAPITAL INSURED MUNICIPAL TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of InterCapital Insured Municipal Trust
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of InterCapital Insured Municipal
Trust (the "Trust") at October 31, 1994, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the two years in the
period then ended and for the period February 28, 1992 (commencement of
operations) through October 31, 1992, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1994 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
December 5, 1994
1994 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended October 31, 1994, the Trust paid the following per share
amounts from tax-exempt income; $1.12 to the common shareholders, $1,349 to
Series TU preferred shareholders and $1,476 to Series TH preferred
shareholders.
<PAGE>
TRUSTEES
- -------------------------------------------------
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo INTERCAPITAL
Edwin J. Garn INSURED
John R. Haire MUNICIPAL
Dr. Manuel H. Johnson TRUST
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
Annual Report
October 31, 1994
