<PAGE> 1
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST Two World Trade Center
LETTER TO THE SHAREHOLDERS October 31, 1999 New York, New York 10048
DEAR SHAREHOLDER:
The U.S. economy, led by consumer demand, has continued to experience robust
growth this year. The fixed-income markets anticipated that the Federal Reserve
Board remove the liquidity it provided during last year's international economic
crises. The Fed changed monetary policy and raised the federal-funds rate 50
basis points, to 5.25 percent during the summer. By October long-term interest
rates had risen to levels last seen two years ago. Subsequently, the Fed raised
the federal-funds rate an additional 25 basis points to 5.50 percent in
November.
MUNICIPAL MARKET CONDITIONS
Long-term insured municipal index yields began 1999 near a record low of 5.05
percent. By the end of October, municipal index yields had increased 100 basis
points, to 6.05 percent. Since bond prices move inversely to changes in interest
rates, these higher yields resulted in significantly lower bond prices. The
increase in yields translated into a 13 percent price decline for a generic
insured municipal bond with a 30-year maturity.
The municipal market outperformed U.S. Treasury bonds early in the year but
gradually gave ground. The ratio of long-term insured municipal index yields to
benchmark 30-year Treasury yields is a measure of relative performance. The
ratio declined from 99 percent at the end of 1998 to 91 percent in May before
rising to 98 percent by the end of October. A declining ratio means that
municipals have outperformed Treasuries. Over the past five years the ratio has
ranged from a high of 99 percent, to a low of 82 percent.
Higher interest rates led to a reduction in municipal market underwriting this
year. New issue volume declined 20 percent in the first ten months of 1999.
Refunding activity, the most interest rate sensitive component of supply, was
down 50 percent.
<PAGE> 2
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
BOND YIELDS 1994-1999
<TABLE>
<CAPTION>
30-YEAR INSURED 30-YEAR U.S. INSURED MUNICIPAL YIELDS AS A
MUNICIPAL YIELDS TREASURY YIELDS PERCENTAGE OF U.S. TREASURY YIELDS
---------------- --------------- ----------------------------------
<S> <C> <C> <C>
1994 5.40 6.34 85.17
5.40 6.24 86.54
5.80 6.66 87.09
6.40 7.09 90.27
6.35 7.32 86.75
6.25 7.43 84.12
6.50 7.61 85.41
6.25 7.39 84.57
6.30 7.45 84.56
6.55 7.81 83.87
6.75 7.96 84.80
7.00 8.00 87.50
6.75 7.88 85.66
1995 6.40 7.70 83.12
6.15 7.44 82.66
6.15 7.43 82.77
6.20 7.34 84.47
5.80 6.66 87.09
6.10 6.62 92.15
6.10 6.86 88.92
6.00 6.66 90.09
5.95 6.48 91.82
5.75 6.33 90.84
5.50 6.14 89.58
5.35 5.94 90.07
1996 5.40 6.03 89.55
5.60 6.46 86.69
5.85 6.66 87.84
5.95 6.89 86.36
6.05 6.99 86.55
5.90 6.89 85.63
5.85 6.97 83.93
5.90 7.11 82.98
5.70 6.93 82.25
5.65 6.64 85.09
5.50 6.35 86.61
5.60 6.63 84.46
1997 5.70 6.79 83.95
5.65 6.80 83.09
5.90 7.10 83.10
5.75 6.94 82.85
5.65 6.91 81.77
5.60 6.78 82.60
5.30 6.30 84.13
5.50 6.61 83.21
5.40 6.40 84.38
5.35 6.15 86.99
5.30 6.05 87.60
5.15 5.92 86.99
1998 5.15 5.80 88.79
5.20 5.92 87.84
5.25 5.93 88.53
5.35 5.95 89.92
5.20 5.80 89.66
5.20 5.65 92.04
5.18 5.71 90.72
5.03 5.27 95.45
4.95 5.00 99.00
5.05 5.16 97.87
5.00 5.06 98.81
5.05 5.10 99.02
1999 5.00 5.09 98.23
5.10 5.58 91.40
5.15 5.63 91.47
5.20 5.66 91.87
5.30 5.83 90.91
5.47 5.96 91.78
5.55 6.10 90.98
5.75 6.06 94.88
5.85 6.05 96.69
6.03 6.16 97.90
</TABLE>
PERFORMANCE
In this interest rate environment, the net asset value (NAV) of Morgan Stanley
Dean Witter Insured Municipal Trust (IMT) declined from $16.13 to $14.91 per
share for the fiscal year ended October 31, 1999. Based on this change plus
reinvestment of tax-free dividends totaling $0.9025 per share and a long-term
capital gain distribution of $0.10 per share paid on December 18, 1998, the
Trust's total NAV return was -1.20 percent. IMT's value on the New York Stock
Exchange (NYSE) fell from $15.625 to $13.6875 per share during the same period.
Based on this change plus reinvestment of distributions, IMT's total market
return was - 6.36 percent. On October 31, 1999, IMT's NYSE market price
represented was at an 8.20 percent discount to its NAV.
Monthly dividends for the fourth quarter of 1999 were declared in September.
Beginning with the October payment, the dividend was increased from $0.075 to
$0.0775 per share. The new dividend rate reflects the Trust's estimated earnings
over the next 6 - 12 months and its $0.124 per share cushion of undistributed
net investment income on October 31, 1999.
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
PORTFOLIO STRUCTURE
The Trust's investments were diversified among 12 long-term sectors and 56
credits. At the end of October, the portfolio's average maturity was 13 years.
Average duration, a measure of sensitivity to interest rate changes, was 4.0
years. Issues in the refunded bond category comprised 41 percent of net assets.
These bonds have been refinanced and will be redeemed on the dates shown in the
portfolio. The accompanying charts provide current information on the
portfolio's credit enhancements, sector distribution and geographic
diversification. Optional call provisions by year with their respective cost
(book) yields are also charted.
THE IMPACT OF LEVERAGING
As discussed in previous shareholder 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 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. ARPS
leverage also increases the price volatility of common shares and has the effect
of extending portfolio duration.
During the 12-month period, ARPS leverage contributed approximately $0.13 per
share to common share earnings. Weekly ARPS yields ranged between 2.75 and 5.125
percent. In comparison, the yield on 1-year municipal notes increased from 3.04
percent at the end of 1998, to 3.77 percent at the end of October 1999. The
Trust's two ARPS series totaling $130 million represented 28.2 percent of net
assets.
LOOKING AHEAD
The Federal Reserve Board raised interest rates twice in the summer and again in
November. This confirmed its previously disclosed bias of becoming less
accommodative in the face of continued strong domestic economic growth.
Depending on the impact of tight labor markets and higher commodity prices on
inflation, the central bank may raise short-term interest rates further.
However, we believe municipal bonds continue to offer long-term investors good
value especially in relationship to Treasuries.
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
The Trust's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps 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, which ever 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. During the fiscal year ended October 31,
1999 the Trust purchased and retired 239,200 shares of common stock at a
weighted average market discount of 7.47 percent.
We appreciate your ongoing support of Morgan Stanley Dean Witter Insured
Municipal Trust and look forward to continuing to serve your investment needs.
<TABLE>
<S> <C>
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
</TABLE>
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
LARGEST SECTORS AS OF OCTOBER 31, 1999 (% OF NET ASSETS)
<TABLE>
<CAPTION>
WATER & PUBLIC
REFUNDED IDR/PCR* SEWER HOSPITAL ELECTRIC MORTGAGE FACILITIES
-------- -------- ------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
41% 14% 9% 5% 5% 5% 5%
<CAPTION>
TRANSPORTATION
--------------
<S> <C>
5%
</TABLE>
* INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
LONG TERM INSURERS AS OF OCTOBER 31, 1999
(% OF TOTAL LONG-TERM PORTFOLIO)
<TABLE>
<CAPTION>
AMBAC FGIC FSA GNMA MBIA
----- ---- --- ---- ----
<S> <C> <C> <C> <C> <C>
23% 26% 14% 4% 33%
</TABLE>
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
GEOGRAPHIC SUMMARY OF INVESTMENTS
BASED ON MARKET VALUE AS A PERCENT OF NET ASSETS
OCTOBER 31, 1999
<TABLE>
<S> <C>
ALASKA................. 0.6%
ALABAMA................ 0.9
COLORADO............... 0.2
DELAWARE............... 4.9
FLORIDA................ 8.5
GEORGIA................ 2.2
HAWAII................. 2.5
ILLINOIS............... 7.1
INDIANA................ 1.2
KANSAS................. 4.6
KENTUCKY............... 1.8%
LOUISIANA.............. 3.6
MASSACHUSETTS.......... 4.6
MICHIGAN............... 4.2
MINNESOTA.............. 0.4
MISSOURI............... 0.6
NEBRASKA............... 3.0
NEVADA................. 2.6
NEW JERSEY............. 6.0
NEW YORK............... 1.0
OHIO................... 2.3%
PENNSYLVANIA........... 5.0
SOUTH CAROLINA......... 8.9
TENNESSEE.............. 1.1
TEXAS.................. 15.9
WASHINGTON............. 3.4
WISCONSIN.............. 3.5
-------
TOTAL.................. 100.6%
=======
</TABLE>
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS October 31, 1999, continued
CALL AND COST (BOOK) YIELD STRUCTURE*
OCTOBER 31, 1999
WEIGHTED AVERAGE
CALL PROTECTION: 4 YEARS
[C]
<TABLE>
<CAPTION>
PERCENT CALLABLE*
-----------------
<S> <C>
1999 0%
2000 0%
2001 18%
2002 60%
2003 0%
2004 0%
2005 2%
2006 5%
2007 0%
2008 3%
2009 6%
2010+ 6%
<CAPTION>
WEIGHTED AVERAGE
BOOK YIELD: 6.5%
COST (BOOK) YIELD **
--------------------
<S> <C>
1999 '-'%
2000 '-'%
2001 6.70%
2002 6.70%
2003 '-'%
2004 '-'%
2005 6.00%
2006 6.30%
2007 '-'%
2008 5.90%
2009 5.80%
2010+ 5.70%
</TABLE>
* % BASED ON LONG-TERM PORTFOLIO.
** COST OR "BOOK" YIELD IS THE ANNUAL INCOME EARNED ON A PORTFOLIO INVESTMENT
BASED ON ITS ORIGINAL PURCHASE PRICE BEFORE TRUST OPERATING EXPENSES. FOR
EXAMPLE, THE TRUST EARNED A BOOK YIELD OF 6.7% ON 18% OF THE LONG-TERM
PORTFOLIO THAT IS CALLABLE IN 2001.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On October 28, 1999, 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 TRUSTEES BY ALL SHAREHOLDERS:
<TABLE>
<S> <C>
Michael Bozic
For......................................................... 17,308,741
Withheld.................................................... 300,348
</TABLE>
<TABLE>
<S> <C>
(2) ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS:
For......................................................... 2,352
Withheld.................................................... 2
</TABLE>
The following Trustees were not standing for reelection at this meeting:
Edwin J. Garn, Wayne E. Hedien, Dr. Manuel H. Johnson, Michael E. Nugent,
Philip J. Purcell and John L. Schroeder.
(3) RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS:
<TABLE>
<S> <C>
For......................................................... 17,195,840
Against..................................................... 94,938
Abstain..................................................... 318,311
</TABLE>
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS October 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TAX- EXEMPT MUNICIPAL BONDS (97.5%)
General Obligation (4.1%)
$ 1,000 Denver City & County School District No 1, Colorado, Ser
1999 (FGIC)................................................ 5.25 % 12/01/17 $ 925,120
5,000 Hawaii, 1999 Ser CT (FSA)................................... 5.875 09/01/17 4,985,850
8,000 Chicago, Illinois, Refg Ser 1992 (AMBAC).................... 6.25 01/01/11 8,502,000
4,000 Clark County, Nevada, Transportation Impr Ltd Tax Ser
06/01/92 B (AMBAC)......................................... 6.50 06/01/17 4,305,880
- -------- -----------
18,000 18,718,850
- -------- -----------
Educational Facilities Revenue (3.8%)
Massachusetts Health & Educational Facilities Authority,
15,000 Northeastern University Ser E (MBIA)**..................... 6.55 10/01/22 15,631,050
1,745 Stonehill College Ser E (MBIA)............................. 6.60 07/01/20 1,818,604
- -------- -----------
16,745 17,449,654
- -------- -----------
Electric Revenue (4.4%)
10,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg
Ser (FGIC)................................................. 6.25 01/01/18 10,139,200
10,000 Lower Colorado River Authority, Texas, Refg Ser 1999 A (FSA)
(WI)....................................................... 5.875 05/15/16 9,973,500
- -------- -----------
20,000 20,112,700
- -------- -----------
Hospital Revenue (4.7%)
5,000 Montgomery Special Care Facilities Financing Authority,
Alabama, Baptist Health Ser 1998 B (MBIA).................. 5.00 11/15/29 4,168,950
5,000 Brevard County Health Facilities Authority, Florida,
Wuesthoff Memorial Hospital Ser 1992 A (MBIA).............. 6.625 04/01/13 5,294,050
3,000 South Miami Health Authority, Florida, Baptist Health Ser
1998 (MBIA)................................................ 5.00 11/15/28 2,556,990
5,000 Fulco Hospital Authority, Georgia, Catholic Health East Ser
1998 A (MBIA).............................................. 5.00 11/15/28 4,226,450
3,000 Missouri Health & Educational Facilities Authority, SSM
Healthcare Ser 1998 A (MBIA)............................... 5.00 06/01/22 2,594,790
3,020 Amarillo Health Facilities Corporation, Texas, Baptist St
Anthony's Hospital Ser 1998 (FSA).......................... 5.50 01/01/16 2,901,012
- -------- -----------
24,020 21,742,242
- -------- -----------
Industrial Development/Pollution Control Revenue (13.8%)
6,000 Delaware Economic Development Authority, Delmarva Power &
Light Co Ser 1992 A (AMT) (AMBAC).......................... 6.85 05/01/22 6,370,260
5,000 Lawrenceburg, Indiana, Indiana & Michigan Power Co
Refg Ser D (Secondary FGIC)................................ 7.00 04/01/15 5,324,550
20,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991
(MBIA)..................................................... 7.00 06/01/31 21,009,600
7,500 Humboldt County, Nevada, Sierra Pacific Power Co Refg Ser
1987 (AMBAC)............................................... 6.55 10/01/13 7,898,625
5,000 New York State Energy Research & Development Authority,
Brooklyn Union Gas Co 1996 Ser (MBIA)...................... 5.50 01/01/21 4,707,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS October 31, 1999, 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 $ 7,905,975
10,000 Texas Utilities Electric Co Collateralized Ser 1992 A (AMT)
(AMBAC).................................................. 6.75 04/01/22 10,580,900
- -------- -----------
61,000 63,797,660
- -------- -----------
Mortgage Revenue - Single Family (4.8%)
3,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A
(MBIA)..................................................... 5.875 12/01/24 2,889,450
13,400 Nebraska Investment Finance Authority, GNMA-Backed 1991 Ser
A & B (AMT)................................................ 6.70 09/15/24 13,789,538
5,100 Ohio Housing Finance Agency, GNMA-Backed Ser A 1 & 2
(AMT)...................................................... 6.903 03/01/31 5,274,165
- -------- -----------
21,500 21,953,153
- -------- -----------
Public Facilities Revenue (4.5%)
20,000 Hudson County, New Jersey, Correctional Refg Ser 1992 COPs
(MBIA)..................................................... 6.60 12/01/21 20,946,400
- -------- -----------
Resource Recovery Revenue (1.9%)
8,325 Detroit Economic Development Corporation, Michigan, Ser 1991
A (AMT) (FSA).............................................. 6.875 05/01/09 8,729,262
- -------- -----------
Transportation Facilities Revenue (4.9%)
5,000 Greater Orlando Aviation Authority, Florida, Ser 1992 A
(AMT) (FGIC)............................................... 6.50 10/01/12 5,293,500
5,000 Hillsborough County Port District, Florida, Tampa Port
Authority Refg Ser 1995 (AMT) (FSA)........................ 5.75 06/01/13 5,014,950
2,500 Hawaii, Airports Second Lien Ser 1991 (AMT) (MBIA).......... 6.75 07/01/21 2,611,675
4,000 Illinois Toll Highway Authority, Priority Refg 1998 Ser A
(FSA)...................................................... 5.50 01/01/15 3,899,320
4,000 Regional Transportation Authority, Illinois, Refg Ser 1999
(FSA)...................................................... 5.75 06/01/21 3,912,720
2,000 Minneapolis-St Paul Metropolitan Airports Commission,
Minnesota, Ser 1998 A (AMBAC).............................. 5.00 01/01/30 1,700,440
- -------- -----------
22,500 22,432,605
- -------- -----------
Water & Sewer Revenue (8.9%)
7,000 Atlanta, Georgia, Water & Wastewater Ser 1999 A (FGIC)...... 5.00 11/01/29 5,971,210
5,000 Honolulu City and County, Hawaii, Wastewater Junior Ser 1998
(FGIC)..................................................... 4.50 07/01/28 3,877,750
7,790 Kenton County Water District #1, Kentucky, Refg Ser 1992
(FGIC)..................................................... 6.375 02/01/17 8,178,176
3,000 Detroit, Michigan, Water Supply Refg Ser 1992 (FGIC)........ 6.375 07/01/22 3,158,580
5,000 Philadelphia, Pennsylvania, Water & Wastewater Ser 1998
(AMBAC).................................................... 5.25 12/15/14 4,759,000
10,000 Grand Strand Water & Sewer Authority, South Carolina, Refg
Ser 1992 (MBIA)............................................ 6.00 06/01/19 10,015,900
5,000 North Charleston Sewer District, South Carolina, Refg Ser
1992 A (MBIA).............................................. 6.00 07/01/18 5,011,700
- -------- -----------
42,790 40,972,316
- -------- -----------
Other Revenue (0.5%)
3,000... Philadelphia, Pennsylvania, Gas Works Second Ser 1998
(FSA)....................................................... 5.00 07/01/23 2,569,170
- -------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS October 31, 1999, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Refunded (41.2%)
$15,000 Delaware Health Facilities Authority, Medical Center of
Delaware Ser 1992 (MBIA) (ETM).............................. 6.25 % 10/01/06 $16,212,450
10,000 Orange County, Florida, Tourist Development Tax Ser 1992 B
(AMBAC).................................................... 6.00 10/01/02+ 10,442,200
10,000 Reedy Creek Improvement District, Florida, Utilities Ser
1991-1 (MBIA).............................................. 6.50 10/01/01+ 10,518,100
15,000 Cook County, Illinois, Ser 1992 A (MBIA).................... 6.60 11/15/02+ 16,193,100
6,000 Louisiana, Ser 1992 A (AMBAC)............................... 6.50 05/01/02+ 6,403,440
9,300 New Orleans, Louisiana, Issue of 1992 (FGIC)................ 7.50 09/01/02+ 10,055,532
3,700 Massachusetts Health & Educational Facilities Authority,
McLean Hospital Ser C (FGIC)............................... 6.625 07/01/02+ 3,969,064
7,000 Detroit, Michigan, Water Supply Refg Ser 1992 (FGIC)........ 6.375 07/01/02+ 7,425,950
6,400 Bergen County Utilities Authority, New Jersey, Water
Pollution 1992 Ser A (FGIC)................................ 6.50 06/15/02+ 6,848,832
4,950 Cleveland, Ohio, Waterworks Ser F 1992 B (AMBAC)............ 6.50 01/01/02+ 5,258,088
15,000 Harrisburg Authority, Pennsylvania, Water Ser of 1992
(FGIC)..................................................... 6.50 08/15/02+ 15,822,600
15,000 South Carolina Public Service Authority, 1991 Ser D
(AMBAC).................................................... 6.50 07/01/02+ 16,063,650
5,000 Chattanooga-Hamilton County Hospital Authority, Tennessee,
Erlanger Medical Center 1991 Ser A (FSA)................... 6.854 05/15/01+ 5,266,750
15,000 Amarillo Health Facilities Corporation, Texas, High Plains
Baptist Hospital Ser 1992 A & B (FSA)...................... 6.562 01/01/02+ 15,860,100
10,000 Harris County, Texas, Sr Lien Toll Road Refg Ser 1992 A
(AMBAC)**.................................................. 6.50 08/15/02+ 10,725,500
865 Lower Colorado River Authority, Texas, Jr Lien Refg Ser 1992
(AMBAC).................................................... 6.00 01/01/02+ 894,038
15,000 Metropolitan Seattle, Washington, Sewer Ser U (FGIC)........ 6.60 01/01/01+ 15,693,900
15,000 Wisconsin Health & Educational Facilities Authority,
Children's Hospital Inc Ser 1992 B (FGIC).................. 6.50 08/15/02+ 16,075,950
- -------- -----------
178,215 189,729,244
- -------- -----------
436,095 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $427,927,432)................. 449,153,256
- -------- -----------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (3.1%)
Harris County Health Facilities Development Corporation,
Texas,
11,400 St Luke's Episcopal Hospital Ser 1997 A (Demand
11/01/99)................................................ 3.65* 02/15/27 11,400,000
2,900 St Luke's Episcopal Hospital Ser 1997 B (Demand
11/01/99)................................................ 3.65* 02/15/27 2,900,000
- -------- -----------
14,300 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (Identified Cost 14,300,000
$14,300,000)...................................................................
- -------- -----------
$450,395 TOTAL INVESTMENTS (Identified Cost $442,227,432) (a)................... 100.6% 463,453,256
========
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS........................... (0.6)
(2,689,058)
----- -----------
NET ASSETS............................................................. 100.0%
$460,764,198
----- ===========
-----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS October 31, 1999, continued
- ---------------------
<TABLE>
<C> <S>
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to maturity.
WI Security purchased on a when issued basis.
+ Prerefunded to call date shown.
* Current coupon of variable rate demand obligation.
** This Security is segregated in connection with the purchase
of a "when-issued" security.
(a) The aggregate cost for federal income tax purposes
approximates identified cost. The aggregate gross unrealized
appreciation is $24,210,014 and the aggregate gross
unrealized depreciation is $2,984,190, resulting in net
unrealized appreciation of $21,225,824.
Bond Insurance:
- -------------------------------------------------------------------
AMBAC AMBAC Assurance Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
ASSETS:
Investments in securities, at value
(identified cost $442,227,432).......... $463,453,256
Cash..................................... 516,735
Interest receivable...................... 7,459,872
Prepaid expenses......................... 90,744
------------
TOTAL ASSETS......................... 471,520,607
------------
LIABILITIES:
Payable for:
Investments purchased................ 10,214,454
Investment management fee............ 164,886
Shares of beneficial interest
repurchased......................... 140,915
Dividends to preferred
shareholders........................ 111,664
Accrued expenses......................... 124,490
------------
TOTAL LIABILITIES.................... 10,756,409
------------
NET ASSETS........................... $460,764,198
============
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, 22,177,613 shares outstanding)... 308,053,417
Net unrealized appreciation.............. 21,225,824
Accumulated undistributed net investment
income.................................. 2,758,247
Accumulated net realized loss............ (1,273,290)
------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS........................ 330,764,198
------------
TOTAL NET ASSETS..................... $460,764,198
============
NET ASSET VALUE PER COMMON SHARE
($330,764,198 divided by 22,177,613
common shares outstanding).............. $14.91
============
</TABLE>
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
NET INVESTMENT INCOME:
INTEREST INCOME.......................... $ 28,058,992
------------
EXPENSES
Investment management fee................ 1,683,033
Auction commission fees.................. 355,948
Professional fees........................ 104,867
Transfer agent fees and expenses......... 94,213
Shareholder reports and notices.......... 45,413
Registration fees........................ 32,733
Custodian fees........................... 20,074
Trustees' fees and expenses.............. 17,740
Auction agent fees....................... 17,690
Other.................................... 35,770
------------
TOTAL EXPENSES....................... 2,407,481
Less: expense offset..................... (19,990)
------------
NET EXPENSES......................... 2,387,491
------------
NET INVESTMENT INCOME................ 25,671,501
------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss........................ (1,273,290)
Net change in unrealized appreciation.... (24,952,418)
------------
NET LOSS............................. (26,225,708)
------------
NET DECREASE............................. $ (554,207)
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 25,671,501 $ 26,364,849
Net realized gain (loss)............................. (1,273,290) 2,338,083
Net change in unrealized appreciation................ (24,952,418) 1,110,562
------------ ------------
NET INCREASE (DECREASE).......................... (554,207) 29,813,494
------------ ------------
Dividends to preferred shareholders from net
investment income................................... (4,423,314) (4,623,746)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS
FROM:
Net investment income................................ (20,206,147) (21,408,649)
Net realized gain.................................... (2,338,083) --
------------ ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS................ (22,544,230) (21,408,649)
------------ ------------
Decrease from transactions in common shares of
beneficial interest................................. (3,344,045) (37,122)
------------ ------------
NET INCREASE (DECREASE).............................. (30,865,796) 3,743,977
NET ASSETS:
Beginning of period.................................. 491,629,994 487,886,017
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$2,758,247 and $1,715,822, respectively)......... $460,764,198 $491,629,994
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter 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
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1999, 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.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Morgan Stanley Dean Witter
Advisors Inc. ("the Investment Manager"), the Trust pays a management fee,
calculated weekly and payable monthly, by applying the annual rate of 0.35% to
the Trust's weekly net assets.
Under the terms of the Agreement, 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, 1999 aggregated
$76,410,595 and $81,692,713, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is
the Trust's transfer agent.
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, 1999 included
in Trustees' fees and expenses in the Statement of Operations amounted to
$5,357. At October 31, 1999,
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1999, continued
the Trust had an accrued pension liability of $40,972 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**
- ------ ------- ---------- ----- -------- ----------------
<C> <C> <C> <C> <C> <S>
TU 800 $40,000 3.35% 01/11/00 3.35% - 3.69 %
TH 1,800 90,000 3.35 11/05/99 2.75 - 5.125
</TABLE>
- ---------------------
<TABLE>
<C> <S>
* As of October 31, 1999.
** For the year ended October 31, 1999.
</TABLE>
Subsequent to October 31, 1999 and up through December 3, 1999 the Trust paid
dividends to Series TU and TH at rates ranging from 3.35% to 3.85% in the
aggregate amount of $416,818.
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.
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1999, 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, 1997................................... 22,419,213 $224,192 $311,210,769
Treasury shares purchased and retired (weighted average
discount 3.27%)*........................................... (2,400) (24) (37,098)
---------- -------- ------------
Balance, October 31, 1998................................... 22,416,813 224,168 311,173,671
Treasury shares purchased and retired (weighted average
discount 7.47%)*........................................... (239,200) (2,392) (3,342,030)
---------- -------- ------------
Balance, October 31, 1999................................... 22,177,613 $221,776 $307,831,641
========== ======== ============
</TABLE>
- ---------------------
* The Trustees have voted to retire the shares purchased.
6. DIVIDENDS TO COMMON SHAREHOLDERS
On September 28, 1999, the Trust declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
- --------- ---------------- -----------------
<S> <C> <C>
$0.0775 November 5, 1999 November 19, 1999
$0.0775 December 3, 1999 December 17, 1999
</TABLE>
7. FEDERAL INCOME TAX STATUS
At October 31, 1999, the Trust had a net capital loss carryover of approximately
$1,273,000 which will be available through October 31, 2007 to offset future
capital gains to the extent provided by regulations.
17
<PAGE> 18
MORGAN STANLEY DEAN WITTER 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*
-------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 16.13 $ 15.96 $ 15.80 $ 15.86 $ 14.27
--------- --------- -------- -------- ---------
Income (loss) from investment operations:
Net investment income...................................... 1.15 1.18 1.18 1.27 1.21
Net realized and unrealized gain (loss).................... (1.18) 0.15 0.23 (0.02) 1.65
--------- --------- -------- -------- ---------
Total income (loss) from investment operations.............. (0.03) 1.33 1.41 1.25 2.86
--------- --------- -------- -------- ---------
Less dividends and distributions from:
Net investment income...................................... (0.90) (0.95) (0.99) (1.02) (1.02)
Common share equivalent of dividends paid to preferred
shareholders............................................. (0.20) (0.21) (0.21) (0.21) (0.23)
Net realized gain.......................................... (0.10) -- (0.05) (0.08) (0.02)
--------- --------- -------- -------- ---------
Total dividends and distributions........................... (1.20) (1.16) (1.25) (1.31) (1.27)
--------- --------- -------- -------- ---------
Anti dilutive effect of acquiring treasury shares........... 0.01 -- -- -- --
--------- --------- -------- -------- ---------
Net asset value, end of period.............................. $ 14.91 $ 16.13 $ 15.96 $ 15.80 $ 15.86
========= ========= ======== ======== =========
Market value, end of period................................. $ 13.688 $ 15.625 $ 15.25 $ 15.00 $ 14.625
========= ========= ======== ======== =========
TOTAL RETURN+............................................... (6.36)% 8.79% 8.80% 10.31% 24.59%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses.............................................. 0.69%(1) 0.68% 0.69%(1) 0.70(1) 0.72%(1)
Net investment income before preferred stock dividends...... 7.32% 7.33% 7.50% 7.54% 7.88%
Preferred stock dividends................................... 1.26% 1.29% 1.35% 1.35% 1.50%
Net investment income available to common shareholders...... 6.06% 6.04% 6.15% 6.19% 6.38%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $460,764 $491,630 $487,886 $485,849 $490,116
Asset coverage on preferred shares at end of period......... 354% 378% 375% 373% 377%
Portfolio turnover rate..................................... 16% 6% -- 1% 3%
</TABLE>
- ---------------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total 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
return does not reflect brokerage commissions.
(1) Does not reflect the effect of expense offset of 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE> 19
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER 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 Morgan Stanley Dean Witter Insured
Municipal Trust (the "Trust") at October 31, 1999, 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, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
December 9, 1999
--------------------------------------------------------------------
1999 FEDERAL TAX NOTICE (unaudited)
During the year ended October 31, 1999, the Trust paid the
following per share amounts from tax-exempt income: $0.91 to
common shareholders, $1,632 to Series TU preferred
shareholders and $1,515 to Series TH preferred shareholders.
For the year ended October 31, 1999, the Trust paid the
following per share amounts from long-term capital gains,
$0.09 to common shareholders, $163 to Series TU preferred
shareholders and $155 to Series TH preferred shareholders.
19
<PAGE> 20
TRUSTEES
- ----------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
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
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
James F. Wilson
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- ----------------------------------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- ----------------------------------
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- ----------------------------------
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
MORGAN STANLEY
DEAN WITTER
INSURED
MUNICIPAL TRUST
Annual Report
October 31, 1999
