INTERCAPITAL INSURED MUNICIPAL TRUST, N-30D, 1997-12-23

INTERCAPITAL INSURED MUNICIPAL TRUST
N-30D, 1997-12-23

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<PAGE> 1

INTERCAPITAL INSURED MUNICIPAL TRUST Two World Trade Center, New York,
New York 10048
LETTER TO THE SHAREHOLDERS October 31, 1997

DEAR SHAREHOLDER:

We are pleased to present the annual report on the operations of InterCapital
Insured Municipal Trust (IMT) for the fiscal year ended October 31, 1997.

Stimulated by a resurgence of consumer spending in late 1996, the economy grew
at a rapid pace in the first quarter of 1997. This prompted the Federal Reserve
Board to tighten its monetary policy in March in a preemptive move against a
possible increase in the rate of inflation. Economic growth slowed in the second
quarter and the bond market rallied. In addition to more moderate economic
growth, low inflation and stable monetary policy, the bond rally through July
was supported by a shrinking federal budget deficit and a strong dollar.
However, by August the bond market retreated on fears that stronger employment
conditions might prompt the Federal Reserve Board to tighten further. Yields
declined in October when turmoil in the global stock markets precipitated
"flight-to-quality" demand for U.S. Treasuries.

BOND YIELDS 1994-1997

<TABLE>
<CAPTION>
Insured Municipal Revenue
30-Year U.S. 30-Year Insured Yields as a Percentage
Treasury Yields Municipal Revenue Yields of U.S. Treasury Yields
<S> <C> <C> <C>
Dec '93 6.34 5.4 85.17%
6.24 5.4 86.54%
6.66 5.8 87.09%
7.09 6.4 90.27%
7.32 6.35 86.75%
7.43 6.25 84.12%
Jun '94 7.61 6.5 85.41%
7.39 6.25 84.57%
7.45 6.3 84.56%
7.81 6.55 83.87%
7.96 6.75 84.80%
8 7 87.50%
Dec '94 7.88 6.75 85.66%
7.7 6.4 83.12%
7.44 6.15 82.66%
7.43 6.15 82.77%
7.34 6.2 84.47%
6.66 5.8 87.09%
Jun '95 6.62 6.1 92.15%
6.86 6.1 88.92%
6.66 6 90.08%
6.48 5.95 91.82%
6.33 5.75 90.84%
6.14 5.5 89.56%
Dec '95 5.94 5.35 90.07%
6.03 5.4 89.55%
6.46 5.8 86.69%
6.66 5.85 87.84%
6.89 5.95 86.36%
6.99 6.05 86.55%
Jun '96 6.89 5.9 85.63%
6.97 5.85 83.93%
7.11 5.9 82.98%
6.93 5.7 82.25%
6.64 5.65 85.09%
6.35 5.5 86.61%
Dec '96 6.63 5.6 84.46%
6.79 5.7 83.95%
6.8 5.65 83.08%
7.1 5.9 83.10%
6.94 5.75 82.85%
6.91 5.65 81.77%
Jun '97 6.78 5.6 82.60%
6.3 5.3 84.00%
6.61 5.5 83.00%
6.4 5.4 84.40%
Oct '97 6.15 5.35 86.90%

</TABLE>

Source: Municipal Market Data

<PAGE> 2

INTERCAPITAL INSURED MUNICIPAL TRUST

LETTER TO THE SHAREHOLDERS October 31, 1997, continued

MUNICIPAL MARKET CONDITIONS

Municipal yields followed the trend of Treasury yields but with less volatility.
Long-term insured revenue index yields increased from 5.65 percent to 5.90
percent between October 1996 and March 1997. The bond rally over the past seven
months pushed 30-year yields down to 5.35 percent by the end of October 1997.
Yields on one-year notes were little changed at 3.75 percent over the 12-month
period. Consequently, the yield pickup for extending maturities from 1 to 30
years narrowed from 190 basis points to 160 basis points.

The ratio of 30-year insured revenue bond yields to 30-year U.S. Treasury yields
rose from 83 percent at the end of March 1997 to 87 percent in October. A rising
ratio means that municipals have underperformed Treasuries and have become
relatively more attractive. Over the past four years, this ratio has annually
ranged from an average low of 83 percent to an average high of 90 percent.

New-issue underwriting volume was slightly ahead in the first half of 1997. The
decline in interest rates subsequently led to a surge in refunding activity. As
a result, new-issue municipal volume was up 17 percent during the first 10
months of 1997. Refundings accounted for more than 25 percent of total volume.

PERFORMANCE

During the fiscal year ended October 31, 1997, the Trust's net asset value (NAV)
improved from $15.80 to $15.96. Based on this NAV change plus reinvestment of
tax-free dividends of $0.99 per share and taxable capital gains distributions of
$0.05 per share, the Trust's total NAV return was 8.11 percent. IMT's market
price on the New York Stock Exchange moved from $15.00 to $15.25 per share.
Based on this change in market price plus reinvestment of dividends and
distributions, the Trust's total market return was 8.80 percent. On October 31,
1997, the IMT traded at a 4 percent discount to NAV.

Monthly dividends for the fourth quarter of 1997 were declared in September.
Over the past 12 months the level of undistributed net investment income
declined from $0.080 to $0.062 per share. Beginning with the October 1997
payment, the monthly dividend was reduced from $0.0825 to $0.080 per share to
more closely reflect the Trust's anticipated income.
<PAGE> 3

INTERCAPITAL INSURED MUNICIPAL TRUST

LETTER TO THE SHAREHOLDERS October 31, 1997, continued

LARGEST SECTORS AS OF OCTOBER 31, 1997
(% of NET ASSETS)

<TABLE>
<S> <C>
REFUNDED 35%
IDR/PCR* 15%
HOSPITAL 14%
WATER & SEWER 7%
MORTGAGE 6%
ALL OTHERS 23%
</TABLE>

* INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE

PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.

CREDIT ENHANCEMENTS AS OF OCTOBER 31, 1997
(% OF TOTAL LONG-TERM PORTFOLIO)

<TABLE>
<S> <C>
MBIA 35%
AMBAC 26%
FGIC 25%
FSA 8%
GNMA 6%
</TABLE>

PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.

CALL STRUCTURE AS OF OCTOBER 31, 1997 WEIGHTED AVERAGE
(% OF TOTAL LONG-TERM PORTFOLIO) CALL PROTECTION: 5 YEARS
PERCENT CALLABLE

YEARS BONDS CALLABLE

<PAGE> 4

INTERCAPITAL INSURED MUNICIPAL TRUST

LETTER TO THE SHAREHOLDERS October 31, 1997, continued

PORTFOLIO STRUCTURE

IMT remained fully invested in long-term municipal bonds during the period.
Investments were diversified among 12 long-term sectors and 52 credits. The
Trust's weighted average maturity was 16 years. The distribution of call dates
in the portfolio produced 5 years of weighted average call protection. To assure
the timely payment of principal and interest, each portion 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 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 shareholders depends on two
factors. The first factor is the amount of ARPS outstanding, while the second is
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 fiscal year, ARPS leverage contributed approximately $0.13 per share
to common share earnings. Weekly ARPS yields ranged between 3.25 and 5.00
percent during the period. Two ARPS series totaling $130 million and
representing 27 percent of net assets were outstanding.

LOOKING AHEAD

So far this year, long-term municipal bonds have followed the trend of
Treasuries toward lower yields. The recent enactment of the Taxpayer Relief Act
of 1997 did not impact municipals directly and the long-term benefits of
tax-exempt income have remained 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. The Trust may also utilize procedures to reduce
or eliminate the amount of outstanding ARPS, including their purchase in the
open market or in privately negotiated transactions.
<PAGE> 5

INTERCAPITAL INSURED MUNICIPAL TRUST

LETTER TO THE SHAREHOLDERS October 31, 1997, continued

We appreciate your ongoing support of InterCapital Insured Municipal 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> 6

INTERCAPITAL INSURED MUNICIPAL TRUST

RESULTS OF MEETINGS (unaudited)

* * *

On May 20, 1997, a special meeting of the Trust's shareholders was held for the
purpose of voting on two separate matters, the results of which were as follows:

(1) ELECTION OF TRUSTEE:

<TABLE>
<S> <C>
Wayne E. Hedien
For................................................................ 17,426,057
Withheld........................................................... 478,186
</TABLE>

The following Trustees were not standing for reelection at this meeting:
Michael Bozic, Charles A. Fiumefreddo, Edwin J. Garn, John R. Haire, Dr.
Manuel H. Johnson, Michael E. Nugent, Philip J. Purcell and John L. Schroeder.

(2) APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE TRUST AND DEAN
WITTER INTERCAPITAL INC. IN CONNECTION WITH THE MERGER OF MORGAN STANLEY
GROUP INC. WITH DEAN WITTER, DISCOVER & CO.:

<TABLE>
<S> <C>
For................................................................ 16,789,020
Against............................................................ 254,930
Abstain............................................................ 860,293
</TABLE>

On October 24, 1997, an annual meeting of the Trust's shareholders was held for
the purpose of voting on two separate matters, the results of which were as
follows:

(1) ELECTION OF TRUSTEES BY ALL SHAREHOLDERS:

<TABLE>
<S> <C>
Wayne E. Hedien
For............................................................... 17,345,320
Withheld.......................................................... 462,141

Dr. Manuel H. Johnson
For............................................................... 17,348,020
Withheld.......................................................... 459,441

John L. Schroeder
For............................................................... 17,353,216
Withheld.......................................................... 454,245
</TABLE>

The following Trustees were not standing for reelection at this meeting:
Michael Bozic, Charles A. Fiumefreddo, Edwin J. Garn, John R. Haire, Michael
E. Nugent and Philip J. Purcell.

(2) RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT
ACCOUNTANTS:

<TABLE>
<S> <C>
For................................................................ 17,203,950
Against............................................................ 137,525
Abstain............................................................ 465,986
</TABLE>
<PAGE> 7

INTERCAPITAL INSURED MUNICIPAL TRUST

PORTFOLIO OF INVESTMENTS October 31, 1997

Educational Facilities Revenue (4.1%)
Massachusetts Health & Educational Facilities Authority,
15,000 Northeastern University Ser E (MBIA).................................... 6.55 10/01/22 16,534,200
3,000 Stonehill College Ser E (MBIA).......................................... 6.60 07/01/20 3,301,710
- -------- ------------
18,000 19,835,910
- -------- ------------

Electric Revenue (3.0%)
10,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg Ser (FGIC)... 6.25 01/01/18 10,674,900
3,770 Lower Colorado River Authority, Texas, Jr Lien Refg Ser 1992 (AMBAC).... 6.00 01/01/17 3,905,607
- -------- ------------
13,770 14,580,507
- -------- ------------

Hospital Revenue (13.9%)
5,000 Brevard County Health Facilities Authority, Florida, Wuesthoff Memorial
Hospital Ser 1992 A (MBIA)............................................. 6.625 04/01/13 5,477,900
8,955 Illinois Health Facilities Authority, Southern Illinois Hospital
Services Ser 1991 (MBIA)............................................... 6.625 03/01/20 9,743,667
3,700 Massachusetts Health & Educational Facilities Authority, McLean Hospital
Ser C (FGIC)........................................................... 6.625 07/01/15 4,051,352
5,000 Farmington Hills Hospital Finance Authority, Michigan, Botsford General
Hospital Ser 1992 A (MBIA)............................................. 6.50 02/15/22 5,423,350
15,000 Amarillo Health Facilities Corporation, Texas, High Plains Baptist
Hospital Ser 1992 A & B (FSA).......................................... 6.562 01/01/22 16,247,400
Wisconsin Health & Educational Facilities Authority,
15,000 Children's Hospital Inc Ser 1992 B (FGIC)............................... 6.50 08/15/21 16,337,400
10,000 Wausau Hospital Inc Ser 1991 B (AMBAC).................................. 6.70 08/15/20 10,776,800
- -------- ------------
62,655 68,057,869
- -------- ------------

Industrial Development/Pollution Control Revenue (15.1%)
6,000 Delaware Economic Development Authority, Delmarva Power & Light Co Ser
1992 A (AMT) (AMBAC)................................................... 6.85 05/01/22 6,558,840
5,000 Lawrenceburg, Indiana, Indiana & Michigan Power Co Refg Ser D (Secondary
FGIC).................................................................. 7.00 04/01/15 5,520,250
20,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA)............ 7.00 06/01/31 21,845,400
7,500 Humboldt County, Nevada, Sierra Pacific Power Co Refg Ser 1987
(AMBAC)................................................................ 6.55 10/01/13 8,195,925
5,000 New York State Energy Research & Development Authority, Brooklyn Union
Gas Co 1996 Ser (MBIA)................................................. 5.50 01/01/21 5,034,450
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8

INTERCAPITAL INSURED MUNICIPAL TRUST

PORTFOLIO OF INVESTMENTS October 31, 1997, continued

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
<C> <S> <C> <C> <C>
$ 7,000 Montgomery County Industrial Development Authority, Pennsylvania,
Philadelphia Electric Co Refg 1991 Ser B (MBIA)........................ 6.70% 12/01/21 $ 7,646,520
Brazos River Authority, Texas,
7,500 Houston Lighting & Power Co 1992 A (AMBAC).............................. 6.70 03/01/17 8,197,725
10,000 Texas Utilities Electric Co Collateralized Ser 1992 A (AMT) (AMBAC)..... 6.75 04/01/22 10,879,400
- -------- ------------
68,000 73,878,510
- -------- ------------

Mortgage Revenue - Single Family (6.1%)
3,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A (MBIA)...... 5.875 12/01/24 3,062,730
17,000 Nebraska Investment Finance Authority, GNMA-Backed 1992 Ser A & B
(AMT).................................................................. 6.70 09/15/24 17,884,170
8,100 Ohio Housing Finance Agency, GNMA-Backed Ser A 1 & 2 (AMT).............. 6.903 03/01/31 8,580,573
- -------- ------------
28,100 29,527,473
- -------- ------------

Nursing & Health Related Facilities Revenue (0.8%)
3,495 New York State Medical Care Facilities Finance Agency, Mental Health
- -------- 1992 Ser A (FGIC)...................................................... 6.375 08/15/17 3,778,374
------------

Public Facilities Revenue (4.5%)
20,000 Hudson County, New Jersey, Correctional Refg Ser 1992 COPs (MBIA)....... 6.60 12/01/21 21,818,000
- -------- ------------

Resource Recovery Revenue (2.0%)
9,000 Detroit Economic Development Corporation, Michigan, Ser 1991 A (AMT)
- -------- (FSA).................................................................. 6.875 05/01/09 9,765,810
------------

Transportation Facilities Revenue (2.7%)
5,000 Greater Orlando Aviation Authority, Florida, Ser 1992 A (AMT) (FGIC).... 6.50 10/01/12 5,438,100
5,000 Hillsborough County Port District, Florida, Tampa Port Authority Refg
Ser 1995 (AMT) (FSA)................................................... 5.75 06/01/13 5,197,600
2,500 Hawaii, Airports Second Lien Ser 1991 (AMT) (MBIA)...................... 6.75 07/01/21 2,700,425
- -------- ------------
12,500 13,336,125
- -------- ------------

Water & Sewer Revenue (6.7%)
7,790 Kenton County Water District #1, Kentucky, Refg Ser 1992 (FGIC)......... 6.375 02/01/17 8,526,155
3,000 Detroit, Michigan, Water Supply Refg Ser 1992 (FGIC).................... 6.375 07/01/22 3,246,930
4,950 Cleveland, Ohio, Waterworks Ser F 1992 B (AMBAC)........................ 6.50 01/01/11 5,400,252
10,000 Grand Strand Water & Sewer Authority, South Carolina, Refg Ser 1992
(MBIA)................................................................. 6.00 06/01/19 10,388,000
5,000 North Charleston Sewer District, South Carolina, Refg Ser 1992 A
(MBIA)................................................................. 6.00 07/01/18 5,199,100
- -------- ------------
30,740 32,760,437
- -------- ------------

Refunded (34.9%)
15,000 Delaware Health Facilities Authority, Medical Center of Delaware Ser
1992 (MBIA) (ETM)...................................................... 6.25 10/01/06 16,909,950
5,000 Jacksonville Health Facilities Authority, Florida, Memorial Regional
Rehabilitation Center Ser 1992 (MBIA).................................. 6.625 05/01/02++ 5,562,350
10,000 Orange County, Florida, Tourist Development Tax Ser 1992 B (AMBAC)...... 6.00 10/01/02++ 10,787,100
10,000 Reedy Creek Improvement District, Florida, Utilities Ser 1991-1
(MBIA)................................................................. 6.50 10/01/01++ 10,933,800
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9

INTERCAPITAL INSURED MUNICIPAL TRUST

PORTFOLIO OF INVESTMENTS October 31, 1997, continued

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 5,000 Fulton-De Kalb Hospital Authority, Georgia, Grady Memorial Hospital Ser
1991 (AMBAC)........................................................... 6.90% 01/01/01++ $ 5,482,100
15,000 Cook County, Illinois, Ser 1992 A (MBIA)................................ 6.60 11/15/02++ 16,818,900
9,300 New Orleans, Louisiana, Issue of 1992 (FGIC)............................ 7.50 09/01/02++ 10,602,930
5,000 Chippewa Valley Schools, Michigan, 1992 (FGIC).......................... 6.375 05/01/01++ 5,418,800
7,000 Detroit, Michigan, Water Supply Refg Ser 1992 (FGIC).................... 6.375 07/01/02++ 7,743,540
6,000 Detroit City School District, Michigan, Ser 1991 (Secondary AMBAC)...... 7.10 05/01/01++ 6,668,820
6,400 Bergen County Utilities Authority, New Jersey, 1992 Water Pollution Ser
A (FGIC)............................................................... 6.50 06/15/02++ 7,103,552
15,000 Harrisburg Authority, Pennsylvania, Water Ser of 1992 (FGIC)............ 6.50 08/15/02++ 16,440,450
15,000 South Carolina Public Service Authority, 1991 Ser D (AMBAC)............. 6.50 07/01/02++ 16,653,750
5,000 Chattanooga-Hamilton County Hospital Authority, Tennessee, Erlanger
Medical Center 1991 Ser A (FSA)........................................ 6.854 05/15/01++ 5,526,400
10,000 Harris County, Texas, Sr Lien Toll Road Refg Ser 1992 A (AMBAC)......... 6.50 08/15/02++ 11,123,800
15,000 Metropolitan Seattle, Washington, Sewer Ser U (FGIC).................... 6.60 01/01/01++ 16,337,700
- -------- ------------
153,700 170,113,942
- -------- ------------
437,960 TOTAL MUNICIPAL BONDS (Identified Cost $432,573,629)........................................... 477,641,317
- -------- ------------
SHORT-TERM MUNICIPAL OBLIGATIONS (0.5%)
500 St Charles Parish, Louisiana, Shell Oil Co Ser 1995 (Demand 11/03/97)... 4.00* 10/01/25 500,000
1,900 Wisconsin Health & Educational Facilities Authority, Wheaton Franciscan
- -------- Services Ser 1997 (Demand 11/03/97).................................... 3.60* 08/15/16 1,900,000
------------
2,400 TOTAL SHORT-TERM MUNICIPAL OBLIGATIONS (Identified Cost $2,400,000)............................ 2,400,000
- -------- ------------

$440,360 TOTAL INVESTMENTS (Identified Cost $434,973,629)(a)................................... 98.4%
======== 480,041,317

CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.......................................... 1.6 7,844,700
---- ------------

NET ASSETS............................................................................. 100.0% $487,886,017
============
====
</TABLE>

- ---------------------

<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed To Maturity.
++ 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 and
net unrealized appreciation is $45,067,688.

Bond Insurance:
- ---------------
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10

INTERCAPITAL INSURED MUNICIPAL TRUST

PORTFOLIO OF INVESTMENTS October 31, 1997, continued

GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
October 31, 1997

<TABLE>
<S> <C>
Alaska................... 0.6%
Delaware................. 4.8
Florida.................. 8.9
Georgia.................. 1.1
Hawaii................... 0.6
Illinois................. 7.3
Indiana.................. 1.1
Kansas................... 4.5
Kentucky................. 1.8
Louisiana................ 3.6%
Massachusetts............ 4.9
Michigan................. 7.8
Nebraska................. 3.7
Nevada................... 2.6
New Jersey............... 5.9
New York................. 1.8
Ohio..................... 2.9
Pennsylvania............. 4.9
South Carolina........... 8.8%
Tennessee................ 1.1
Texas.................... 10.3
Washington............... 3.4
Wisconsin................ 6.0
----

Total.................... 98.4%
====
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11

INTERCAPITAL INSURED MUNICIPAL TRUST

FINANCIAL STATEMENTS

<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
ASSETS:
Investments in securities, at value
(identified cost $434,973,629)....................................... $480,041,317
Cash.................................................................. 546,748
Interest receivable................................................... 7,646,511
Prepaid expenses...................................................... 52,549
------------

TOTAL ASSETS...................................................... 488,287,125
------------

LIABILITIES:
Payable for:
Investment management fee......................................... 163,713
Dividends to preferred shareholders............................... 130,552
Accrued expenses...................................................... 106,843
------------

TOTAL LIABILITIES................................................. 401,108
------------

NET ASSETS........................................................ $487,886,017
============

COMPOSITION OF NET ASSETS:
Preferred shares of beneficial interest (1,000,000 shares authorized
of non-participating $.01 par value, 2,600 shares outstanding)....... $130,000,000
------------
Common shares of beneficial interest (unlimited shares authorized of
$.01 par value, 22,419,213 shares outstanding)....................... 311,434,961
Net unrealized appreciation........................................... 45,067,688
Accumulated undistributed net investment income....................... 1,383,368
------------

NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS...................... 357,886,017
------------

TOTAL NET ASSETS.................................................. $487,886,017
============

NET ASSET VALUE PER COMMON SHARE
($357,886,017 divided by 22,419,213 common shares outstanding)....... $15.96
======
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 12

INTERCAPITAL INSURED MUNICIPAL TRUST

FINANCIAL STATEMENTS, continued

<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the year ended October 31, 1997
NET INVESTMENT INCOME:
INTEREST INCOME........................................................ $28,920,725
-----------

EXPENSES
Investment management fee.............................................. 1,696,882
Auction commission fees................................................ 373,667
Professional fees...................................................... 109,405
Transfer agent fees and expenses....................................... 91,032
Shareholder reports and notices........................................ 42,794
Registration fees...................................................... 32,547
Custodian fees......................................................... 19,723
Trustees' fees and expenses............................................ 18,222
Auction agent fees..................................................... 16,552
Organizational expenses................................................ 5,065
Other.................................................................. 26,364
-----------

TOTAL EXPENSES..................................................... 2,432,253

Less: expense offset................................................... (19,624)
-----------

NET EXPENSES....................................................... 2,412,629
-----------

NET INVESTMENT INCOME.............................................. 26,508,096
-----------

NET CHANGE IN UNREALIZED APPRECIATION.................................. 5,274,961
-----------

NET INCREASE........................................................... $31,783,057
===========
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 13

INTERCAPITAL INSURED MUNICIPAL TRUST

FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
<S> <C> <C>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996

<CAPTION>
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 26,508,096 $ 26,750,917
Net realized gain.................................... -- 1,233,119
Net change in unrealized appreciation................ 5,274,961 35,232
----------- -----------

NET INCREASE..................................... 31,783,057 28,019,268
----------- -----------
Dividends to preferred shareholders from net
investment income................................... (4,757,694) (4,790,363)
----------- -----------

DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS
FROM:
Net investment income................................ (22,161,286) (23,043,084)
Net realized gain.................................... (1,233,114) (1,805,535)
----------- -----------

TOTAL............................................ (23,394,400) (24,848,619)
----------- -----------

Decrease from transactions in common shares of
beneficial interest:................................ (1,594,423) (2,647,217)
----------- -----------

NET INCREASE (DECREASE).......................... 2,036,540 (4,266,931)

NET ASSETS:
Beginning of period.................................. 485,849,477 490,116,408
----------- -----------
END OF PERIOD
(Including undistributed net investment income of
$1,383,368 and $1,794,252, respectively)......... $487,886,017 $485,849,477
=========== ===========
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 14

INTERCAPITAL INSURED MUNICIPAL TRUST

NOTES TO FINANCIAL STATEMENTS October 31, 1997

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'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 October 3, 1991 and commenced operations on
February 28, 1992.

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
<PAGE> 15

INTERCAPITAL INSURED MUNICIPAL TRUST

NOTES TO FINANCIAL STATEMENTS October 31, 1997, continued

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 for the full amount thereof. Such
expenses were deferred and fully amortized as of February 27, 1997.

2. INVESTMENT MANAGEMENT AGREEMENT

Pursuant to an Investment Management Agreement, the Trust pays the Investment
Manager 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, 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

Proceeds from sales of portfolio securities, excluding short-term investments,
for the year ended October 31, 1997 aggregated $2,250,000.

Dean Witter Trust FSB, an affiliate of the Investment Manager, is the Trust's
transfer agent. At October 31, 1997, the Trust had transfer agent fees and
expenses payable of approximately $3,100.
<PAGE> 16

INTERCAPITAL INSURED MUNICIPAL TRUST

NOTES TO FINANCIAL STATEMENTS October 31, 1997, continued

The Trust has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Trust who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended October 31, 1997 included
in Trustees' fees and expenses in the Statement of Operations amounted to
$4,475. At October 31, 1997, the Trust had an accrued pension liability of
$35,181 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. The Trust has issued Series TU and TH 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
SERIES SHARES* THOUSANDS* RATE* DATE DIVIDEND RATES**
- ------ ------- ---------- ----- --------- ------------------
<S> <C> <C> <C> <C> <C>
TU 800 $ 40,000 3.61% 01/07/98 3.61% - 3.625%
TH 1,800 90,000 3.50 11/07/97 3.25 - 5.00
</TABLE>

- ---------------------
* As of October 31, 1997.
** For the year ended October 31, 1997.

Subsequent to October 31, 1997 and up through December 5, 1997 the Trust paid
dividends to Series TU and TH at rates ranging from 3.45% to 3.85% in the
aggregate amount of $418,000.

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.
<PAGE> 17

INTERCAPITAL INSURED MUNICIPAL TRUST

NOTES TO FINANCIAL STATEMENTS October 31, 1997, continued

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, 1995....................................................... 22,702,213 $227,022 $315,449,579
Treasury shares purchased and retired (weighted average discount 5.45%)*........ (176,400) (1,764) (2,645,453)
---------- -------- ------------
Balance, October 31, 1996....................................................... 22,525,813 225,258 312,804,126
Treasury shares purchased and retired (weighted average discount 5.03%)*........ (106,600) (1,066) (1,593,357)
---------- -------- ------------
Balance, October 31, 1997....................................................... 22,419,213 $224,192 $311,210,769
========== ======== ============
</TABLE>

- ---------------------
* The Trustees have voted to retire the shares purchased.

6. DIVIDENDS TO COMMON SHAREHOLDERS

On September 23, 1997, the Trust declared the following dividends from net
investment income:

<TABLE>
<CAPTION>
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
- ---------- ----------------- ------------------
<S> <C> <C>
$0.08 November 7, 1997 November 21, 1997
$0.08 December 5, 1997 December 19, 1997
</TABLE>
<PAGE> 18

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 YEAR ENDED OCTOBER 31*
-----------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period....................... $ 15.80 $ 15.86 $ 14.27 $ 16.95 $ 14.25
------ ------ ------ ------ ------
Net investment income...................................... 1.18 1.27 1.21 1.33 1.35
Net realized and unrealized gain (loss).................... 0.23 (0.02) 1.65 (2.67) 2.69
------ ------ ------ ------ ------
Total from investment operations........................... 1.41 1.25 2.86 (1.34) 4.04
------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income................................... (0.99) (1.02) (1.02) (1.12) (1.12)
Common share equivalent of dividends paid to preferred
shareholders........................................... (0.21) (0.21) (0.23) (0.22) (0.22)
Net realized gain....................................... (0.05) (0.08) (0.02) -- --
------ ------ ------ ------ ------
Total dividends and distributions.......................... (1.25) (1.31) (1.27) (1.34) (1.34)
------ ------ ------ ------ ------
Net asset value, end of period............................. $ 15.96 $ 15.80 $ 15.86 $ 14.27 $ 16.95
====== ====== ====== ====== ======
Market value, end of period................................ $ 15.25 $ 15.00 $ 14.625 $ 12.625 $ 16.75
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN+................................... 8.80% 10.31% 24.59% (18.84)% 17.73%

RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses............................................. 0.69%(1) 0.70%(1) 0.72%(1) 0.77% 0.80%
Net investment income before preferred stock dividends..... 7.50% 7.54% 7.88% 8.45% 8.52%
Preferred stock dividends.................................. 1.35% 1.35% 1.50% 1.38% 1.40%
Net investment income available to common shareholders..... 6.15% 6.19% 6.38% 7.07% 7.12%

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.................... $487,886 $485,849 $490,116 $491,360 $578,506
Asset coverage on preferred shares at end of period........ 375% 373% 377% 307% 321%
Portfolio turnover rate.................................... -- 1% 3% 6% 1%
</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) Does not reflect the effect of expense offset of 0.01%.

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 19

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, 1997, 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 five years in the
period then ended, 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, 1997 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 8, 1997

1997 FEDERAL TAX NOTICE (unaudited)

During the year ended October 31, 1997, the Trust paid the
following per share amounts from tax-exempt income: $0.99 to
the common shareholders, $1,762 to Series TU preferred
shareholders and $1,771 to Series TH preferred shareholders.
For the year ended October 31, 1997, the Trust paid the
following per share amounts from long-term capital gains:
$0.04 to the common shareholders, $81 to Series TU preferred
shareholders and $81 to Series TH preferred shareholders.
<PAGE> 20

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
- ---------------------------------------------
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

INTERCAPITAL
INSURED
MUNICIPAL
TRUST

Annual Report
October 31, 1997