<PAGE> 1
INTERCAPITAL INSURED MUNICIPAL TRUST Two World Trade Center,
New York, New York 10048
LETTER TO THE SHAREHOLDERS October 31, 1996
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, 1996.
Stronger economic growth and the potential threat of inflation shifted the tone
of the fixed-income markets from bullish to bearish in early 1996. This change
in market psychology was confirmed in March by a surprisingly large increase in
payroll employment. The rise in interest rates between February and July may be
attributed to market weakness on the days that strong monthly employment figures
were reported. The bond market sporadically pushed long-term yields higher,
anticipating that the Federal Reserve Board might raise the federal-funds rate.
However, with slower growth in employment and overall economic activity between
August and October, the central bank left monetary policy unchanged. As a
result, by the end of October the fixed-income markets had regained an
optimistic outlook and rallied to levels not seen since February.
MUNICIPAL MARKET CONDITIONS
Between February and July, 30-year insured revenue bond yields rose 75 basis
points from 5.40 percent to reach 6.15 percent in April and again in mid-June.
Subsequently, demand for municipal bonds improved and followed the trend of U.S.
Treasury securities toward lower yields. Insured bond yields reached 5.60
percent by the end of October. One-year municipal note yields declined
marginally from 3.80 percent to 3.70 percent over the past 12 months. In
October, the yield curve pickup for extending maturities from 1 to 30 years was
190 basis points.
The ratio of insured revenue bond yields to 30-year U.S. Treasury yields, moved
from 91 percent to 84 percent over the course of the fiscal year. A declining
ratio means that municipal bond prices outperformed U.S. Treasury prices. The
relative improvement in municipals occurred as flat-tax proposals failed to gain
public support.
<PAGE> 2
INTERCAPITAL INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS October 31, 1996, continued
The municipal market also benefited from steady demand. In addition to regular
maturities and calls for redemption this year, it has been estimated that
investors also faced the retirement of over $60 billion of debt that has been
previously refinanced. On the supply side, new issues increased 20 percent to
$147 billion over the calendar year to date.
PERFORMANCE
The Trust's net asset value (NAV) moved from $15.86 to $15.80 per share during
the fiscal year ended October 31, 1996. Based on this NAV change plus
reinvestment of tax-free dividends totaling $1.02 per share and a long-term
capital gain distribution totaling approximately $0.08 per share, the Trust's
total return was 7.15 percent. Over the same period, IMT's market price on the
New York Stock Exchange increased from $14.625 to $15.00 per share. Based on
this market price change and reinvestment of tax-free dividends and
distributions, the Trust's total return was 10.31 percent.
IMT began the fiscal year trading at an 8 percent discount to NAV and ended the
year at a 5 percent discount. During the year undistributed net investment
income available for dividends declined from $0.127 per share to $0.080 per
share. This reduction prompted a cut in the Trust's monthly dividend from $0.085
to $0.0825, beginning with the November 1996 payment.
PORTFOLIO STRUCTURE
On October 31, 1996, the Trust's net assets of $486 million were diversified
among
CREDIT ENHANCEMENTS AS OF OCTOBER 31, 1996
(% OF TOTAL LONG-TERM PORTFOLIO)
AMBAC
26%
MBIA
35%
GNMA
6%
FSA
8%
FGIC
25%
FIVE LARGEST SECTORS AS OF OCTOBER 31, 1996
(% OF NET ASSETS)
IDR/PCR*
15%
REFUNDED
25%
ALL OTHERS
27%
GENERAL
OBLIGATION
8%
WATER & SEWER
11%
HOSPITAL
14%
*INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE
<PAGE> 3
INTERCAPITAL INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS October 31, 1996, continued
12 long-term municipal sectors and 52 credits. The average maturity and call
protection of the IMT's long-term portfolio were 20 and 5 years, respectively.
To assure the timely payment of principal and interest, each position in the
portfolio was backed by triple "A" rated bond insurance or by 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 form one
week to one year. Incremental income to common shares depends on two factors:
first, the spread between interest earned on the long-term bonds in the
established portfolio of investments and the ARPS auction rate plus ARPS
expenses; second, the amount of ARPS outstanding. The greater the amount of ARPS
outstanding, the greater the amount of incremental income available for
distribution to common shareholders.
Weekly ARPS yields ranged between 3.19 and 4.20 percent during the fiscal year.
Leverage contributed approximately $0.13 per share to common share earnings
during the fiscal year. Two ARPS series totaling $130 million and representing
27 percent of net assets were outstanding.
LOOKING AHEAD
The balance between the supply of new issues and demand created by maturities is
expected to remain positive for the municipal market. Long-term insured
municipal securities currently yield 84 percent of U.S. Treasury securities and
may be expected to move in tandem with the Treasury market. Although municipal
performance relative to U.S. Treasury securities has improved, tax-exempts could
again be affected by market uncertainty if new tax reduction proposals were to
resurface.
The Trust's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps to
support the market value of the Trust's shares. In addition, we would like to
remind you that the Trustees have approved a procedure whereby the Trust, when
appropriate, may purchase shares in the open market or in privately negotiated
transactions at a price not above market value or net asset value, whichever is
lower at the time of purchase. During the fiscal year, IMT purchased and retired
176,400 shares of common stock at a weighted average market discount of 5.45
percent. The Trust may also utilize procedures to reduce or eliminate the amount
of outstanding ARPS, including their purchase in the open market or in privately
negotiated transactions.
<PAGE> 4
INTERCAPITAL INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS October 31, 1996, 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> 5
INTERCAPITAL INSURED MUNICIPAL TRUST
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On October 29, 1996, an annual meeting of the Trust's shareholders was held for
the purpose of voting on three separate matters, the results of which were as
follows:
(1) ELECTION OF TRUSTEE BY ALL SHAREHOLDERS:
<TABLE>
<S> <C>
Michael Bozic
For................................................................ 16,950,402
Withheld........................................................... 311,658
</TABLE>
ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS:
<TABLE>
<S> <C>
Charles A. Fiumefreddo
For................................................................ 1,959
Withheld........................................................... 6
</TABLE>
The following Trustees were not standing for reelection at this meeting:
Edwin J. Garn, John R. Haire, Dr. Manuel H. Johnson, Michael E. Nugent,
Philip J. Purcell and John L. Schroeder
(2) CONTINUANCE OF THE CURRENTLY EFFECTIVE INVESTMENT MANAGEMENT AGREEMENT WITH
DEAN WITTER INTERCAPITAL INC.:
<TABLE>
<S> <C>
For................................................................ 16,506,332
Against............................................................ 206,188
Abstain............................................................ 549,540
</TABLE>
(3) RATIFICATION OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS:
<TABLE>
<S> <C>
For................................................................ 16,717,871
Against............................................................ 110,123
Abstain............................................................ 434,066
</TABLE>
<PAGE> 6
INTERCAPITAL INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS October 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (97.7%)
General Obligation (7.5%)
$ 8,000 Chicago, Illinois, Refg Ser 1992 (AMBAC)................................ 6.25% 01/01/11 $ 8,658,320
15,000 Cook County, Illinois, Ser 1992 A (MBIA)................................ 6.60 11/15/22 16,410,600
6,000 Louisiana, Ser 1992 A (AMBAC)........................................... 6.50 05/01/08 6,559,020
4,000 Clark County, Nevada, Transportation Impr Ltd Tax Ser 06/01/92 B
(AMBAC)................................................................ 6.50 06/01/17 4,542,480
- -------- ----------
33,000 36,170,420
- -------- ----------
Educational Facilities Revenue (4.1%)
Massachusetts Health & Educational Facilities Authority,
15,000 Northeastern University Ser E (MBIA)................................... 6.55 10/01/22 16,377,150
3,000 Stonehill College Ser E (MBIA)......................................... 6.60 07/01/20 3,277,860
- -------- ----------
18,000 19,655,010
- -------- ----------
Electric Revenue (2.9%)
10,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg Ser (FGIC)... 6.25 01/01/18 10,365,700
3,770 Lower Colorado River Authority, Texas, Jr Lien Refg Ser 1992 (AMBAC).... 6.00 01/01/17 3,834,807
- -------- ----------
13,770 14,200,507
- -------- ----------
Hospital Revenue (13.8%)
5,000 Brevard County Health Facilities Authority, Florida, Wuesthoff Memorial
Hospital Ser 1992 A (MBIA)............................................. 6.625 04/01/13 5,432,800
8,955 Illinois Health Facilities Authority, Southern Illinois Hospital
Services Ser 1991 (MBIA)............................................... 6.625 03/01/20 9,665,042
3,700 Massachusetts Health & Educational Facilities Authority, McLean Hospital
Ser C (FGIC)........................................................... 6.625 07/01/15 4,008,987
5,000 Farmington Hills Hospital Finance Authority, Michigan, Botsford General
Hospital Ser 1992 A (MBIA)............................................. 6.50 02/15/22 5,370,500
15,000 Amarillo Health Facilities Corporation, Texas, High Plains Baptist
Hospital Ser 1992 A & B (FSA).......................................... 6.562 01/01/22 15,831,900
Wisconsin Health & Educational Facilities Authority,
15,000 Children's Hospital Inc Ser 1992 B (FGIC).............................. 6.50 08/15/21 16,122,900
10,000 Wausau Hospital Inc Ser 1991 B (AMBAC)................................. 6.70 08/15/20 10,757,500
- -------- ----------
62,655 67,189,629
- -------- ----------
Industrial Development/Pollution Control Revenue (15.2%)
6,000 Delaware Economic Development Authority, Delmarva Power & Light Co Ser
1992 A (AMT) (AMBAC)................................................... 6.85 05/01/22 6,534,720
5,000 Lawrenceburg, Indiana, Indiana & Michigan Power Co Refg Ser D (Secondary
FGIC).................................................................. 7.00 04/01/15 5,611,600
20,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991 (MBIA)............ 7.00 06/01/31 22,042,200
7,500 Humboldt County, Nevada, Sierra Pacific Power Co Refg Ser 1987
(AMBAC)................................................................ 6.55 10/01/13 8,134,875
5,000 New York State Energy Research & Development Authority, Brooklyn Union
Gas Co 1996 Ser (MBIA)................................................. 5.50 01/01/21 4,869,250
7,000 Montgomery County Industrial Development Authority, Pennsylvania,
Philadelphia Electric Co Refg 1991 Ser B (MBIA)........................ 6.70 12/01/21 7,650,090
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
INTERCAPITAL INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS October 31, 1996, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Brazos River Authority, Texas,
$ 7,500 Houston Lighting & Power Co 1992 A (AMBAC)............................. 6.70% 03/01/17 $ 8,179,200
10,000 Texas Utilities Electric Co Collateralized Ser 1992 A (AMT) (AMBAC).... 6.75 04/01/22 10,741,800
- -------- ----------
68,000 73,763,735
- -------- ----------
Mortgage Revenue - Single Family (6.4%)
3,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A (MBIA)...... 5.875 12/01/24 3,005,880
18,550 Nebraska Investment Finance Authority, GNMA-Backed
1992 Ser A & B (AMT)................................................... 6.70 09/15/24 19,062,722
8,800 Ohio Housing Finance Agency, GNMA-Backed Ser A 1 & 2 (AMT).............. 6.903 03/01/31 9,141,616
- -------- ----------
30,350 31,210,218
- -------- ----------
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 3,693,411
----------
Public Facilities Revenue (6.5%)
10,000 Orange County, Florida, Tourist Development Tax Ser 1992 B (AMBAC)...... 6.00 10/01/21 10,178,400
20,000 Hudson County, New Jersey, Correctional Refg Ser 1992 COPs (MBIA)....... 6.60 12/01/21 21,616,400
- -------- ----------
30,000 31,794,800
- -------- ----------
Resource Recovery Revenue (2.0%)
9,000 Detroit Economic Development Corporation, Michigan, Ser 1991 A (AMT)
- -------- (FSA).................................................................. 6.875 05/01/09 9,688,230
----------
Transportation Facilities Revenue (2.7%)
5,000 Greater Orlando Aviation Authority, Florida, Ser 1992 A (AMT) (FGIC).... 6.50 10/01/12 5,361,250
5,000 Hillsborough County Port District, Florida, Tampa Port Authority Refg
Ser 1995 (AMT) (FSA)................................................... 5.75 06/01/13 5,070,950
2,500 Hawaii, Airports Second Lien Ser 1991 (AMT) (MBIA)...................... 6.75 07/01/21 2,694,625
- -------- ----------
12,500 13,126,825
- -------- ----------
Water & Sewer Revenue (11.3%)
7,790 Kenton County Water District #1, Kentucky, Refg Ser 1992 (FGIC)......... 6.375 02/01/17 8,301,647
3,000 Detroit, Michigan, Water Supply Refg Ser 1992 (FGIC).................... 6.375 07/01/22 3,107,400
6,400 Bergen County Utilities Authority, New Jersey, 1992 Water Pollution Ser
A (FGIC)............................................................... 6.50 12/15/12 6,948,864
4,950 Cleveland, Ohio, Waterworks Ser F 1992 B (AMBAC)........................ 6.50 01/01/11 5,370,156
10,000 Grand Strand Water & Sewer Authority, South Carolina, Refg Ser 1992
(MBIA)................................................................. 6.00 06/01/19 10,160,300
5,000 North Charleston Sewer District, South Carolina, Refg Ser 1992 A
(MBIA)................................................................. 6.00 07/01/18 5,080,950
15,000 Metropolitan Seattle, Washington, Sewer Ser U (FGIC).................... 6.60 01/01/32 16,159,050
- -------- ----------
52,140 55,128,367
- -------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
INTERCAPITAL INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS October 31, 1996, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
Refunded (24.5%)
$ 15,000 Delaware Health Facilities Authority, Medical Center of Delaware Ser
1992 (MBIA)............................................................ 6.25% 10/01/06++ $ 16,512,900
5,000 Jacksonville Health Facilities Authority, Florida, Memorial Regional
Rehabilitation Center Ser 1992 (MBIA).................................. 6.625 05/01/02++ 5,584,400
10,000 Reedy Creek Improvement District, Florida, Utilities Ser 1991-1
(MBIA)................................................................. 6.50 10/01/01++ 10,990,400
5,000 Fulton-De Kalb Hospital Authority, Georgia, Grady Memorial Hospital Ser
1991 (AMBAC)........................................................... 6.90 01/01/01++ 5,536,000
9,300 New Orleans, Louisiana, Issue of 1992 (FGIC)............................ 7.50 09/01/02++ 10,680,678
5,000 Chippewa Valley Schools, Michigan, 1992 (FGIC).......................... 6.375 05/01/01++ 5,448,000
7,000 Detroit, Michigan, Water Supply Refg Ser 1992 (FGIC).................... 6.375 07/01/02++ 7,664,580
6,000 Detroit City School District, Michigan, Ser 1991 (Secondary AMBAC)...... 7.10 05/01/01++ 6,735,180
15,000 Harrisburg Authority, Pennsylvania, Water Ser of 1992 (FGIC)............ 6.50 08/15/02++ 16,448,700
15,000 South Carolina Public Service Authority, 1991 Ser D (AMBAC)............. 6.50 07/01/02++ 16,693,950
5,000 Chattanooga-Hamilton County Hospital Authority, Tennessee, Erlanger
Medical Center 1991 Ser A (FSA)........................................ 6.854 05/15/01++ 5,534,500
10,000 Harris County, Texas, Sr Lien Toll Road Refg Ser 1992 A (AMBAC)......... 6.50 08/15/02++ 11,130,500
- -------- ------------
107,300 118,959,788
- -------- ------------
440,210 TOTAL MUNICIPAL BONDS (Identified Cost $434,788,221)............................................. 474,580,940
- -------- ------------
SHORT-TERM MUNICIPAL OBLIGATION (0.5%)
2,500 Massachusetts, Dedicated Income Tax Ser 1990 B
- -------- (Demand 11/01/96) (Identified Cost $2,500,000)......................... 3.60* 12/01/97 2,500,000
------------
$442,710 TOTAL INVESTMENTS (Identified Cost $437,288,221) (a).................................... 98.2% 477,080,940
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................ 1.8 8,768,537
------ ------------
NET ASSETS............................................................................... 100.0% $485,849,477
====== ============
</TABLE>
- ---------------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
++ Prerefunded to call date shown.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation was
$39,874,202 and the aggregate gross unrealized depreciation was
$81,483, resulting in net unrealized appreciation of $39,792,719.
Bond Insurance:
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
INTERCAPITAL INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS October 31, 1996, continued
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
October 31, 1996
<TABLE>
<S> <C>
Alaska................... 0.6%
Delaware................. 4.8
Florida.................. 8.8
Georgia.................. 1.1
Hawaii................... 0.6
Illinois................. 7.2
Indiana.................. 1.2
Kansas................... 4.5
Kentucky................. 1.7%
Louisiana................ 3.5
Massachusetts............ 5.4
Michigan................. 7.8
Nebraska................. 3.9
Nevada................... 2.6
New Jersey............... 5.9
New York................. 1.8
Ohio..................... 3.0%
Pennsylvania............. 5.0
South Carolina........... 8.7
Tennessee................ 1.1
Texas.................... 10.2
Washington............... 3.3
Wisconsin................ 5.5
----
Total.................... 98.2%
====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
INTERCAPITAL INSURED MUNICIPAL TRUST
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $437,288,221)....................................... $477,080,940
Cash.................................................................. 279,191
Receivable for:
Interest.......................................................... 7,588,523
Investments sold.................................................. 1,315,153
Deferred organizational expenses...................................... 5,065
Prepaid expenses...................................................... 44,018
------------
TOTAL ASSETS...................................................... 486,312,890
------------
LIABILITIES:
Payable for:
Dividends to preferred shareholders............................... 180,806
Investment management fee......................................... 157,945
Accrued expenses...................................................... 124,662
------------
TOTAL LIABILITIES................................................. 463,413
------------
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, 22,525,813 shares outstanding)....................... 313,029,384
Net unrealized appreciation........................................... 39,792,719
Accumulated undistributed net investment income....................... 1,794,252
Accumulated undistributed net realized gain........................... 1,233,122
------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS...................... 355,849,477
------------
TOTAL NET ASSETS.................................................. $485,849,477
============
NET ASSET VALUE PER COMMON SHARE
($355,849,477 divided by 22,525,813 common shares outstanding)....... $15.80
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11
INTERCAPITAL INSURED MUNICIPAL TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the year ended October 31, 1996
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME........................................................ $29,193,376
-----------
EXPENSES
Investment management fee.............................................. 1,705,781
Auction commission fees................................................ 326,150
Transfer agent fees and expenses....................................... 124,117
Professional fees...................................................... 123,479
Shareholder reports and notices........................................ 40,679
Registration fees...................................................... 32,564
Trustees' fees and expenses............................................ 31,420
Custodian fees......................................................... 23,621
Organizational expenses................................................ 15,577
Auction agent fees..................................................... 14,795
Servicing fees......................................................... 13,037
Other.................................................................. 14,762
-----------
TOTAL EXPENSES BEFORE EXPENSE OFFSET............................... 2,465,982
LESS: EXPENSE OFFSET............................................... (23,523)
-----------
TOTAL EXPENSES AFTER EXPENSE OFFSET................................ 2,442,459
-----------
NET INVESTMENT INCOME.............................................. 26,750,917
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain...................................................... 1,233,119
Net change in unrealized appreciation.................................. 35,232
-----------
NET GAIN........................................................... 1,268,351
-----------
NET INCREASE........................................................... $28,019,268
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 12
INTERCAPITAL INSURED MUNICIPAL TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31,
1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................... $ 26,750,917 $ 27,213,113
Net realized gain................................... 1,233,119 1,805,528
Net change in unrealized appreciation............... 35,232 35,661,756
------------ ------------
NET INCREASE.................................... 28,019,268 64,680,397
------------ ------------
DIVIDENDS TO PREFERRED SHAREHOLDERS FROM NET
INVESTMENT INCOME................................... (4,790,363) (5,175,254)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS
FROM:
Net investment income............................... (23,043,084) (23,327,851)
Net realized gain................................... (1,805,535) (426,388)
------------ ------------
TOTAL........................................... (24,848,619) (23,754,239)
------------ ------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Preferred........................................... -- (30,000,000)
Common.............................................. (2,647,217) (6,994,598)
------------ ------------
TOTAL........................................... (2,647,217) (36,994,598)
------------ ------------
NET DECREASE.................................... (4,266,931) (1,243,694)
NET ASSETS:
Beginning of period................................. 490,116,408 491,360,102
------------ ------------
END OF PERIOD
(Including undistributed net investment income
of $1,794,252 and $2,876,782, respectively)........ $485,849,477 $490,116,408
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 13
INTERCAPITAL INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1996
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> 14
INTERCAPITAL INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1996, 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 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.
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 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, 1996 aggregated
$4,950,000 and $12,928,444, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At October 31, 1996, the Trust had transfer agent fees
and expenses payable of approximately $21,000.
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
<PAGE> 15
INTERCAPITAL INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1996, continued
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, 1996 included in
Trustees' fees and expenses in the Statement of Operations amounted to $12,814.
At October 31, 1996, the Trust had an accrued pension liability of $32,572 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 RESET RANGE OF
SERIES SHARES* IN THOUSANDS* RATE* DATE DIVIDEND RATES**
- ------- ------- ------------- ----- -------- ----------------
<S> <C> <C> <C> <C> <C>
TU 800 $40,000 3.625% 12/31/96 3.44% - 3.625%
TH 1,800 90,000 3.340 11/01/96 3.19 - 4.20
</TABLE>
- ---------------------
* As of October 31, 1996.
** For the year ended October 31, 1996.
Subsequent to October 31, 1996 and up through December 9, 1996, the Trust paid
dividends to Series TU and TH at rates ranging from 3.32% to 3.62%, in the
aggregate amount of $412,790.
The Trust is subject to certain restrictions relating to the preferred shares.
Failure to comply with these restrictions could preclude the Trust from
declaring any distributions to common shareholders or purchasing common shares
and/or could trigger the mandatory redemption of preferred shares at liquidation
value.
The preferred shares, which are entitled to one vote per share, generally vote
with the common shares but vote separately as a class to elect two Trustees and
on any matters affecting the rights of the preferred shares.
<PAGE> 16
INTERCAPITAL INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1996, continued
5. COMMON SHARES OF BENEFICIAL INTEREST
Transactions in common shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL
PAID IN
EXCESS OF
SHARES PAR VALUE PAR VALUE
---------- --------- ------------
<S> <C> <C> <C>
Balance, October 31, 1994..................................................... 23,222,113 $232,221 $322,438,977
Treasury shares purchased and retired (weighted average discount 7.50%)*...... (519,900) (5,199) (6,989,398)
---------- -------- ------------
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
========== ======== ============
</TABLE>
- ---------------------
* The Trustees have voted to retire the shares purchased.
6. DIVIDENDS TO COMMON SHAREHOLDERS
The Trust declared the following dividends from net investment income:
<TABLE>
<CAPTION>
DECLARATION AMOUNT RECORD PAYABLE
DATE PER SHARE DATE DATE
- ----------------- --------- ---------------- -----------------
<S> <C> <C> <C>
October 30,
1996........ $0.0825 November 8, 1996 November 22, 1996
November 26,
1996........ $0.0825 December 6, 1996 December 20, 1996
</TABLE>
<PAGE> 17
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 OCTOBER 31** FEBRUARY 28, 1992*
------------------------------------------------ THROUGH
1996 1995 1994 1993 OCTOBER 31, 1992**
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.............. $15.86 $ 14.27 $ 16.95 $14.25 $14.06
------ ------- ------- ------ ------
Net investment income............................. 1.27 1.21 1.33 1.35 0.79
Net realized and unrealized gain (loss)........... (0.02) 1.65 (2.67) 2.69 0.19
------ ------- ------- ------ ------
Total from investment operations.................. 1.25 2.86 (1.34) 4.04 0.98
------ ------- ------- ------ ------
Less dividends and distributions from:
Net investment income.......................... (1.02) (1.02) (1.12) (1.12) (0.49)
Common share equivalent of dividends and
distributions paid to preferred
shareholders.................................. (0.21) (0.23) (0.22) (0.22) (0.13)
Net realized gain.............................. (0.08) (0.02) -- -- --
------ ------- ------- ------ ------
Total dividends and distributions................. (1.31) (1.27) (1.34) (1.34) (0.62)
Offering costs charged against capital............ -- -- -- -- (0.17)
------ ------- ------- ------ ------
Net asset value, end of period.................... $15.80 $ 15.86 $ 14.27 $16.95 $14.25
====== ======= ======= ====== ======
Market value, end of period....................... $15.00 $14.625 $12.625 $16.75 $15.25
====== ======= ======= ====== ======
TOTAL INVESTMENT RETURN+.......................... 10.31% 24.59% (18.84)% 17.73% 4.94%(1)
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses before expense offset.............. 0.70%(4) 0.72%(3) 0.77% 0.80% 0.72%(2)
Net investment income before preferred stock
dividends........................................ 7.54% 7.88%(3) 8.45% 8.52% 8.10%(2)
Preferred stock dividends......................... 1.35% 1.50% 1.38% 1.40% 1.34%(2)
Net investment income available to common
shareholders..................................... 6.19% 6.38% 7.07% 7.12% 6.76%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $485,849 $490,116 $491,360 $578,506 $515,025
Asset coverage on preferred shares at end of
period........................................... 373% 377% 307% 321% 286%
Portfolio turnover rate........................... 1% 3% 6% 1% 1%(1)
</TABLE>
- ---------------------
* Commencement of operations.
** The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total investment return is based upon the current market value on the last
day of each period reported. Dividends and distributions are assumed to be
reinvested at the prices obtained under the Trust's dividend reinvestment
plan. Total investment return does not reflect brokerage commissions.
(1) Not annualized.
(2) Annualized.
(3) The above expense and net investment income ratios would have been 0.71%
and 7.89%, respectively, after expense offset, which reflect 0.01% effect
for custody cash credits.
(4) The above expense ratio would have been 0.69% after expense offset, which
reflects 0.01% effect for custody cash credits.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 18
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, 1996, 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 four 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, 1996 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 9, 1996
1996 FEDERAL TAX NOTICE (unaudited)
During the year ended October 31, 1996, the Trust paid the
following per share amounts from tax-exempt income: $1.02
to the common shareholders, $1,693 to Series TU preferred
shareholders and $1,686 to Series TH preferred shareholders.
For the year ended October 31, 1996, the Trust paid the
following per share amounts from long-term capital gains;
$0.07 to the common shareholders $128 to Series TU preferred
shareholders and $131 to Series TH preferred shareholders.
<PAGE> 19
(This Page Intentionally Left Blank)
<PAGE> 20
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
INTER CAPITAL
INSURED
MUNICIPAL
TRUST
ANNUAL REPORT
OCTOBER 31, 1996
