<PAGE> 1
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST Two World Trade Center
LETTER TO THE SHAREHOLDERS October 31, 1998 New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the annual report on the operations of Morgan Stanley
Dean Witter Insured Municipal Trust (IMT) for the fiscal year ended October 31,
1998.
On December 21, 1998, after the close of the period under review, the Trust
changed its name from InterCapital Insured Municipal Trust to Morgan Stanley
Dean Witter Insured Municipal Trust. Information on the name change was mailed
to shareholders in mid-December under separate cover.
Since our last report six months ago, global financial turmoil, including the
Russian currency crisis, has continued to affect the securities markets. This
led to a flight-to-quality rally for U.S. Treasury bonds, with yields falling to
30-year lows. Municipal bond yields declined but lagged the downward trend of
Treasury yields.
The deflationary impact of the international financial crisis began to temper
U.S. economic growth prior to the summer's tumultuous market
BOND YIELDS 1994-1998
<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 5.4% 6.34% 85.17%
5.4 6.24 86.54
5.8 6.66 87.09
6.4 7.09 90.27
6.35 7.32 86.75
6.25 7.43 84.12
6.5 7.61 85.41
6.25 7.39 84.57
6.3 7.45 84.56
6.55 7.81 83.87
6.75 7.96 84.8
7 8.00 87.5
6.75 7.88 85.66
1995 6.4 7.70 83.12
6.15 7.44 82.66
6.15 7.43 82.77
6.2 7.34 84.47
5.8 6.66 87.09
6.1 6.62 92.15
6.1 6.86 88.92
6 6.66 90.09
5.95 6.48 91.82
5.75 6.33 90.84
5.5 6.14 89.58
5.35 5.94 90.07
1996 5.4 6.03 89.55
5.6 6.46 86.69
5.85 6.66 87.84
5.95 6.89 86.36
6.05 6.99 86.55
5.9 6.89 85.63
5.85 6.97 83.93
5.9 7.11 82.98
5.7 6.93 82.25
5.65 6.64 85.09
5.5 6.35 86.61
5.6 6.63 84.46
1997 5.7 6.79 83.95
5.65 6.80 83.09
5.9 7.10 83.1
5.75 6.94 82.85
5.65 6.91 81.77
5.6 6.78 82.6
5.3 6.30 84.13
5.5 6.61 83.21
5.4 6.40 84.38
5.35 6.15 86.99
5.3 6.05 87.6
5.15 5.92 86.99
1998 5.15 5.80 88.79
5.2 5.92 87.84
5.25 5.93 88.53
5.35 5.95 89.92
5.2 5.80 89.66
5.2 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
</TABLE>
Source: Municipal Market Data
<PAGE> 2
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS October 31, 1998, continued
activity. Lower commodity prices, cheaper imports and improved productivity
offset the potential inflationary impact of strong domestic employment. With
inflation held in check, the Federal Reserve Board provided liquidity to the
markets by lowering short-term interest rates. Since the end of September, the
Federal Reserve Open Market Committee cut the federal funds rate 75 basis points
from 5.50 percent to 4.75 percent in three separate moves.
MUNICIPAL MARKET CONDITIONS
Municipal bond yields followed the downward trend of Treasury yields at a more
moderate pace. At the end of October, long-term insured municipal index yields
stood at 5.05 percent, index yields declined 30 basis points over the last 12
months. In contrast, 30-year U.S. Treasury bond yields fell 100 basis points
during the same period.
As municipals lagged the rally in Treasuries, the ratio of municipal yields to
Treasury yields rose sharply to 98 percent. (A rising ratio means that
municipals have underperformed Treasuries and have become more attractive on a
relative basis.) This increase was similar to the jump witnessed in 1986, when
tax-reform proposals threatened the favorable tax advantage of municipal bonds.
The overall decline in interest rates has led to a substantial increase in
new-issue municipal volume. Municipal issuance is on a pace to challenge 1993's
underwriting record of $292 billion. Year-to-date, total municipal volume of
$234 billion is up 32 percent. Half the underwriter volume was enhanced with
bond insurance. Refundings represented 30 percent of total new issuance.
PERFORMANCE
The Trust's net asset value (NAV) increased from $15.96 to $16.13 per share
during the fiscal year ended October 31, 1998. Based on this NAV change plus
reinvestment of tax-free dividends of $0.955 per share, the Trust's total NAV
return was 7.31 percent. IMT's price on the New York Stock Exchange moved from
$15.25 to $15.625 per share. Based on this change in market price plus
reinvestment of dividends, the Trust's total market return was 8.79 percent. On
October 31, 1998, the Trust traded at a 3.13 percent discount to NAV.
Monthly dividends for the fourth quarter of 1998 were declared in September.
Beginning with the October 1998 dividend the monthly dividend was reduced from
$0.08 per share to $0.075 per share, to more closely reflect the Trust's
anticipated income. The level of undistributed net investment income increased
from $0.062 to $0.077 per share. Subsequent to the end of the fiscal year, the
Trust declared a capital gain distribution of $0.104301 per share.
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS October 31, 1998, continued
[LARGEST SECTOR PIE CHART]
<TABLE>
<CAPTION>
LARGEST SECTORS as of October 31, 1998 (% of Net Assets)
<S> <C>
Refunded 45%
IDR/PCR* 15%
Water & Sewer 9%
Mortgage 6%
All Others 25%
</TABLE>
* Industrial Development/Pollution Control Revenue
Portfolio structure is subject to change.
[CREDIT ENHANCEMENTS PIE CHART]
<TABLE>
<CAPTION>
CREDIT ENHANCEMENTS as of October 31, 1998 (% of Total Long-Term Portfolio)
<S> <C>
MBIA 36%
FGIC 27%
AMBAC 23%
FSA 9%
GNMA 5%
</TABLE>
Portfolio structure is subject to change.
<TABLE>
<CAPTION>
CALL STRUCTURE as of October 31, 1998
(% of Total Long-Term Portfolio)
WEIGHTED AVERAGE
CALL PROTECTION: 4 YEARS
Years Bonds Callable Percent Callable
<S> <C>
1999 0%
2000 0%
2001 21%
2002 63%
2003 0%
2004 0%
2005 2%
2006 5%
2007 0%
2008 5%
2009+ 4%
</TABLE>
Portfolio structure is subject to change.
<PAGE> 4
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS October 31, 1998, continued
PORTFOLIO STRUCTURE
The Trust remained fully invested in long-term municipal bonds during the fiscal
year. Investments were diversified among 12 long-term sectors and 56 credits. As
illustrated in the accompanying chart, the distribution of call dates in the
portfolio produced 4 years of weighted average call protection.
At the time of issuance, municipal bonds generally have 10 years of protection
from the municipality's option to call bonds for redemption. Interest rates have
declined since the Trust's inception and we anticipate that most municipal
issuers will use their optional call provisions to refinance portfolio holdings
at lower yields. In fact, the bonds in the refunded category have been
refinanced and the call dates have been announced.
The Trust's weighted average maturity was 14 years. Average duration (a measure
of price volatility to interest rate changes) was 4 years. To assure the timely
payment of principal and interest, each position in the portfolio was backed by
triple "A" rated bond insurance or an escrow or trust account containing
sufficient 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 12-month period, ARPS leverage contributed approximately $0.13 per
share to common share earnings. Weekly ARPS yields ranged between 3.19 and 4.20
percent. Two ARPS series totaling $130 million represented 26 percent of net
assets.
LOOKING AHEAD
Global economic conditions seem likely to keep inflationary pressures under
control and have contributed to lower interest rates. The fixed-income markets
have also begun to anticipate the
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS October 31, 1998, continued
possibility of additional monetary easing by the Fed. With the municipal
relationship to Treasuries more favorable than it has been in the last 10 years,
the outlook for municipal bonds is positive. We anticipate that the portfolio's
average duration will be extended as older, higher-yielding investments,
including refunded issues, are replaced.
The Trust's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps to
support the market value of the Trust's shares. In addition, we would like to
remind you that the Trustees have approved a procedure whereby the Trust may,
when appropriate, purchase shares in the open market or in privately negotiated
transactions at a price not above market value or net asset value, whichever is
lower at the time of purchase. The Trust may also utilize procedures to reduce
or eliminate the amount of outstanding ARPS, including their purchase in the
open market or in privately negotiated transactions.
We appreciate your ongoing support of Morgan Stanley Dean Witter 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
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On October 20, 1998, 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>
Edwin J. Garn
For......................................................... 18,800,003
Withheld.................................................... 317,687
Michael E. Nugent
For......................................................... 18,806,165
Withheld.................................................... 311,525
Philip J. Purcell
For......................................................... 18,786,949
Withheld.................................................... 330,741
</TABLE>
(2) ELECTION OF TRUSTEE BY PREFERRED SHAREHOLDERS:
<TABLE>
<S> <C>
John R. Haire
For......................................................... 2,472
Withheld.................................................... 0
</TABLE>
The following Trustees were not standing for reelection at this meeting: Michael
Bozic, Charles A. Fiumefreddo, Wayne E. Hedien, Dr. Manuel H. Johnson and John
L. Schroeder.
(3) RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE TRUST'S
INDEPENDENT ACCOUNTANTS:
<TABLE>
<S> <C>
For......................................................... 18,583,285
Against..................................................... 54,986
Abstain..................................................... 479,419
</TABLE>
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (97.8%)
General Obligation (3.6%)
$ 4,000 California, Refg Dtd 10/01/98 (MBIA)........................ 4.50% 10/01/28 $ 3,714,520
8,000 Chicago, Illinois, Refg Ser 1992 (AMBAC).................... 6.25 01/01/11 9,324,880
4,000 Clark County, Nevada, Transportation Impr Ltd Tax Ser
06/01/92 B (AMBAC)......................................... 6.50 06/01/17 4,802,160
- -------- -----------
16,000 17,841,560
- -------- -----------
Educational Facilities Revenue (4.1%)
Massachusetts Health & Educational Facilities Authority,
15,000 Northeastern University Ser E (MBIA)....................... 6.55 10/01/22 16,631,100
3,000 Stonehill College Ser E (MBIA)............................. 6.60 07/01/20 3,315,420
- -------- -----------
18,000 19,946,520
- -------- -----------
Electric Revenue (2.5%)
10,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg
Ser (FGIC)................................................. 6.25 01/01/18 10,669,700
1,630 Lower Colorado Authority, Texas, Jr Lien Refg Ser 1992
(AMBAC).................................................... 6.00 01/01/17 1,721,557
- -------- -----------
11,630 12,391,257
- -------- -----------
Hospital Revenue (4.0%)
5,000 Brevard County Health Facilities Authority, Florida,
Wuesthoff Memorial Hospital Ser 1992 A (MBIA).............. 6.625 04/01/13 5,494,250
4,000 South Miami Health Authority, Florida, Baptist Health Ser
1998 (MBIA) (WI)........................................... 5.00 11/15/28 3,938,760
3,700 Massachusetts Health & Educational Facilities Authority,
McLean Hospital
Ser C (FGIC)............................................... 6.625 07/01/15 4,078,769
3,000 Missouri Health & Educational Facilities Authority, SSM
Healthcare
Ser 1998 A (MBIA).......................................... 5.00 06/01/22 2,942,850
3,020 Amarillio Health Facilities Corporation, Texas, Baptist St
Anthony's Hospital
Ser 1998 (FSA)............................................. 5.50 01/01/16 3,221,253
- -------- -----------
18,720 19,675,882
- -------- -----------
Industrial Development/Pollution Control Revenue (15.1%)
6,000 Delaware Econmic Development Authority, Delmarva Power &
Light Co
Ser 1992 A (AMT) (AMBAC)................................... 6.85 05/01/22 6,616,680
5,000 Lawrenceburg, Indiana, Indiana & Michigan Power Co Refg Ser
D
(Secondary FGIC)........................................... 7.00 04/01/15 5,536,600
20,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991
(MBIA)..................................................... 7.00 06/01/31 21,840,600
7,500 Humboldt County, Nevada, Sierra Pacific Power Co Refg Ser
1987 (AMBAC)............................................... 6.55 10/01/13 8,250,975
5,000 New York State Energy Research & Development Authority,
Brooklyn Union Gas Co 1996 Ser (MBIA)...................... 5.50 01/01/21 5,272,000
7,000 Montgomery County Industrial Development Authority,
Pennsylvania,
Philadelphia Electric Co Refg 1991 Ser B (MBIA)............ 6.70 12/01/21 7,638,050
Brazos River Authority, Texas,
7,500 Houston Lighting & Power Co 1992 A (AMBAC)................. 6.70 03/01/17 8,232,750
10,000 Texas Utilities Electric Co Collateralized Ser 1992 A (AMT)
(AMBAC).................................................. 6.75 04/01/22 10,977,400
- -------- -----------
68,000 74,365,055
- -------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS October 31, 1998, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Mortgage Revenue - Single Family (5.5%)
$ 3,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A
(MBIA)..................................................... 5.875% 12/01/24 $ 3,162,780
15,300 Nebraska Investment Finance Authority, GNMA-Backed 1992 Ser
A & B (AMT)................................................ 6.71 09/15/24 16,271,703
6,950 Ohio Housing Finance Agency, GNMA-Backed Ser A 1 & 2
(AMT)...................................................... 6.903 03/24/31 7,371,170
- -------- -----------
25,250 26,805,653
- -------- -----------
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 3,815,422
-----------
Public Facilities Revenue (4.4%)
20,000 Hudson County, New Jersey, Correctional Refg Ser 1992 COPs
(MBIA)..................................................... 6.60 12/01/21 21,847,200
- -------- -----------
Resource Recovery Revenue (1.8%)
8,325 Detroit Economic Development Corporation, Michigan, Ser 1991
- -------- A
(AMT) (FSA)................................................ 6.875 05/01/09 9,007,151
-----------
Transportation Facilities Revenue (2.8%)
5,000 Greater Orlando Aviation Authority, Florida, Ser 1992 A
(AMT) (FGIC)............................................... 6.50 10/01/12 5,517,400
5,000 Hillsborough County Port District, Florida, Tampa Port
Authority
Refg Ser 1995 (AMT) (FSA).................................. 5.75 06/01/13 5,403,350
2,500 Hawaii, Airports Second Lien Ser 1991 (AMT) (MBIA).......... 6.75 07/01/21 2,709,600
- -------- -----------
12,500 13,630,350
- -------- -----------
Water & Sewer Revenue (8.7%)
7,500 Tampa Bay Water, Florida, Utility Ser 1998 B (FGIC)......... 4.75 10/01/27 7,181,475
5,000 Douglasville - Douglas County Water Sewer Authority,
Georgia, Ser 1998 (FGIC)................................... 4.50 06/01/23 4,654,950
7,790 Kenton County Water District #1, Kentucky, Refg Ser 1992
(FGIC)..................................................... 6.375 02/01/17 8,543,838
3,000 Detroit, Michigan, Water Supply Refg Ser 1992 (FGIC)........ 6.375 07/01/22 3,282,270
375 Cleveland, Ohio, Waterworks Ser F 1992 B (AMBAC)............ 6.50 01/01/11 408,649
2,700 Mahoning Valley Sanitary District, Ohio, Refg Ser 1998
(FSA)...................................................... 5.125 12/15/16 2,767,554
10,000 Grand Strand Water & Sewer Authority, South Carolina, Refg
Ser 1992 (MBIA)............................................ 6.00 06/01/19 10,630,700
5,000 North Charleston Sewer District, South Carolina, Refg Ser
1992 A (MBIA).............................................. 6.00 07/01/18 5,322,000
- -------- -----------
41,365 42,791,436
- -------- -----------
Refunded (44.5%)
15,000 Delaware Health Facilities Authority, Medical Center of
Delaware
Ser 1992 (MBIA) (ETM)...................................... 6.25 10/01/06 17,248,950
10,000 Orange County, Florida, Tourist Development Tax Ser 1992 B
(AMBAC).................................................... 6.00 10/01/02+ 10,848,700
10,000 Reedy Creek Improvement District, Florida, Utilities Ser
1991-1 (MBIA).............................................. 6.50 10/01/01+ 10,898,200
15,000 Cook County, Illinois, Ser 1992 A (MBIA).................... 6.60 11/15/02+ 16,879,350
8,955 Illinois Health Facilities Authority, Southern Illinois
Hospital Services
Ser 1991 (MBIA)............................................ 6.625 03/01/02+ 9,925,812
6,000 Louisiana, Ser 1992 A (AMBAC)............................... 6.50 05/01/02+ 6,654,840
9,300 New Orleans, Louisiana, Issue of 1992 (FGIC)................ 7.50 09/01/02+ 10,547,781
7,000 Detroit, Michigan, Water Supply Refg Ser 1992 (FGIC)........ 6.375 07/01/02+ 7,734,300
5,000 Farmington Hills Hospital Finance Authority, Michigan,
Botstford General Hospital Ser 1992 A (MBIA)............... 6.50 02/15/02+ 5,520,900
6,400 Bergen County Utilities Authority, New Jersey, 1992 Water
Pollution
Ser A (FGIC)............................................... 6.50 06/15/02+ 7,119,040
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS October 31, 1998, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 4,575 Cleveland, Ohio, Waterworks Ser F 1992 B (AMBAC)............ 6.50% 01/01/02+ $ 5,041,742
15,000 Harrisburg Authority, Pennsylvania, Water Ser of 1992
(FGIC)..................................................... 6.50 08/15/02+ 16,476,600
15,000 South Carolina Public Service Authority, 1991 Ser D
(AMBAC).................................................... 6.50 07/01/02+ 16,711,950
5,000 Chattanooga-Hamilton County Hospital Authority, Tennessee,
Erlanger Medical Center 1991 Ser A (FSA)................... 6.854 05/15/01+ 5,462,850
15,000 Amarillo Health Facilities Corporation, Texas, High Plains
Baptist Hospital
Ser 1992 A & B (FSA)....................................... 6.562 01/01/02+ 16,492,199
10,000 Harris County, Texas, Sr Lien Toll Road Refg Ser 1992 A
(AMBAC)**.................................................. 6.50 08/15/02+ 11,158,500
15,000 Metropolitan Seattle, Washington, Sewer Ser U (FGIC)........ 6.60 01/01/01+ 16,214,250
Wisconsin Health & Educational Facilities Authority,
15,000 Children's Hospital Inc Ser 1992 B (FGIC).................. 6.50 08/15/02+ 16,726,349
10,000 Wausau Hospital Inc Ser 1991 B (AMBAC)..................... 6.70 02/15/01+ 10,857,300
- -------- -----------
197,230 218,519,613
- -------- -----------
440,515 TOTAL TAX- EXEMPT MUNICIPAL BONDS (Identified Cost $434,458,857)................. 480,637,099
- -------- -----------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS (1.4%)
2,000 Texas Water Development Board, Revolving Fund Ser 1992 - A
(Demand 11/02/98).......................................... 3.70* 03/01/15 2,000,000
5,100 Lincoln County, Wyoming, Exxon Corp Ser 1984 B (Demand
11/02/98).................................................. 3.70* 11/01/14 5,100,000
- -------- -----------
7,100 TOTAL SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATIONS
- --------
(Identified Cost $7,100,000) 7,100,000
-----------
$447,615 TOTAL INVESTMENTS (Identified Cost $441,558,857) (a).................... 99.2% 487,737,099
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................ 0.8 3,892,895
----- -----------
NET ASSETS............................................................... 100.0% $491,629,994
===== ============
</TABLE>
- ---------------------
<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 $46,334,318 and the aggregate gross
unrealized depreciation is $156,076, resulting in net
unrealized appreciation of $46,178,242.
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
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS October 31, 1998, continued
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
October 31, 1998
<TABLE>
<S> <C>
Alaska................... 0.7%
California............... 0.8
Delaware................. 4.9
Florida.................. 10.0
Georgia.................. 0.9
Hawaii................... 0.6
Illinois................. 7.3
Indiana.................. 1.1
Kansas................... 4.4
Kentucky................. 1.7
Louisiana................ 3.5
Massachusetts............ 4.9
Michigan................. 5.2
Missouri................. 0.6
Nebraska................. 3.3
Nevada................... 2.7
New Jersey............... 5.9
New York................. 1.8
Ohio..................... 3.2
Pennsylvania............. 4.9
South Carolina........... 8.8
Tennessee................ 1.1
Texas.................... 11.0
Washington............... 3.3
Wisconsin................ 5.6
Wyoming.................. 1.0
------
Total.................... 99.2%
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
ASSETS:
Investments in securities, at value
(identified cost $441,558,857)............................. $487,737,099
Cash........................................................ 1,012,508
Interest receivable......................................... 7,200,647
Prepaid expenses............................................ 61,232
------------
TOTAL ASSETS............................................ 496,011,486
------------
LIABILITIES:
Payable for:
Investments purchased................................... 3,960,467
Investment management fee............................... 170,105
Dividends to preferred shareholders..................... 129,400
Accrued expenses and other payables......................... 121,520
------------
TOTAL LIABILITIES....................................... 4,381,492
------------
NET ASSETS.............................................. $491,629,994
============
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, 22,416,813 shares
outstanding)............................................... 311,397,839
Net unrealized appreciation................................. 46,178,242
Accumulated undistributed net investment income............. 1,715,822
Accumulated undistributed net realized gain................. 2,338,091
------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS............ 361,629,994
------------
TOTAL NET ASSETS........................................ $491,629,994
============
NET ASSET VALUE PER COMMON SHARE
($361,629,994 divided by 22,416,813 common shares
outstanding)............................................... $16.13
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the year ended October 31, 1998
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $28,801,887
-----------
EXPENSES
Investment management fee................................... 1,714,521
Auction commission fees..................................... 350,411
Transfer agent fees and expenses............................ 110,217
Professional fees........................................... 104,878
Shareholder reports and notices............................. 60,794
Registration fees........................................... 32,483
Custodian fees.............................................. 20,104
Auction agent fees.......................................... 17,608
Trustees' fees and expenses................................. 13,396
Other....................................................... 32,643
-----------
TOTAL EXPENSES.......................................... 2,457,055
Less: expense offset........................................ (20,017)
-----------
NET EXPENSES............................................ 2,437,038
-----------
NET INVESTMENT INCOME................................... 26,364,849
-----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 2,338,083
Net change in unrealized appreciation....................... 1,110,562
-----------
NET GAIN................................................ 3,448,645
-----------
NET INCREASE................................................ $29,813,494
===========
</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, 1998 OCTOBER 31, 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 26,364,849 $ 26,508,096
Net realized gain.................................... 2,338,083 --
Net change in unrealized appreciation................ 1,110,562 5,274,961
------------ ------------
NET INCREASE..................................... 29,813,494 31,783,057
------------ ------------
Dividends to preferred shareholders from net
investment income................................... (4,623,746) (4,757,694)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS
FROM:
Net investment income................................ (21,408,649) (22,161,286)
Net realized gain.................................... -- (1,233,114)
------------ ------------
TOTAL............................................ (21,408,649) (23,394,400)
------------ ------------
Decrease from transactions in common shares of
beneficial interest................................. (37,122) (1,594,423)
------------ ------------
NET INCREASE..................................... 3,743,977 2,036,540
NET ASSETS:
Beginning of period.................................. 487,886,017 485,849,477
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$1,715,822 and $1,383,368, respectively)......... $491,629,994 $487,886,017
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Insured Municipal Trust (the "Trust"), formerly
InterCapital Insured Municipal Trust (the Trust changed its name effective
December 21, 1998), 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.
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1998, continued
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), formerly Dean Witter InterCapital
Inc., 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, 1998 aggregated
$28,369,075 and $28,860,186, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is
the Trust's transfer agent. At October 31, 1998, the Trust had transfer agent
fees and expenses payable of approximately $1,500.
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1998, 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, 1998 included
in Trustees' fees and expenses in the Statement of Operations amounted to
$5,381. At October 31, 1998, the Trust had an accrued pension liability of
$38,696 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 3.69% 01/06/99 3.61% - 3.69%
TH 1,800 90,000 3.19 11/06/98 3.19 - 4.20
</TABLE>
- ---------------------
* As of October 31, 1998.
** For the year ended October 31, 1998.
Subsequent to October 31, 1998 and up through December 21, 1998, the Trust paid
dividends to Series TU and TH at rates ranging from 3.00% to 3.69% in the
aggregate amount of $623,484.
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.
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS October 31, 1998, 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, 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
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
========== ======== ============
</TABLE>
- ---------------------
* The Trustees have voted to retire the shares purchased.
6. DIVIDENDS TO COMMON SHAREHOLDERS
On September 29, 1998, the Trust declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
- --------- ---------------- -----------------
<S> <C> <C>
$0.075 November 6, 1998 November 20, 1998
$0.075 December 4, 1998 December 18, 1998
</TABLE>
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*
----------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 15.96 $ 15.80 $ 15.86 $ 14.27 $ 16.95
-------- -------- -------- -------- --------
Net investment income....................................... 1.18 1.18 1.27 1.21 1.33
Net realized and unrealized gain (loss)..................... 0.15 0.23 (0.02) 1.65 (2.67)
-------- -------- -------- -------- --------
Total from investment operations............................ 1.33 1.41 1.25 2.86 (1.34)
-------- -------- -------- -------- --------
Less dividends and distributions from:
Net investment income...................................... (0.95) (0.99) (1.02) (1.02) (1.12)
Common share equivalent of dividends paid to preferred
shareholders............................................. (0.21) (0.21) (0.21) (0.23) (0.22)
Net realized gain.......................................... -- (0.05) (0.08) (0.02) --
-------- -------- -------- -------- --------
Total dividends and distributions........................... (1.16) (1.25) (1.31) (1.27) (1.34)
-------- -------- -------- -------- --------
Net asset value, end of period.............................. $ 16.13 $ 15.96 $ 15.80 $ 15.86 $ 14.27
======== ======== ======== ======== ========
Market value, end of period................................. $ 15.625 $ 15.25 $ 15.00 $ 14.625 $ 12.625
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN+.................................... 8.79% 8.80% 10.31% 24.59% (18.84)%
RATIOS TO AVERAGE NET ASSETS OF COMMON SHAREHOLDERS:
Total expenses.............................................. 0.68% 0.69%(1) 0.70%(1) 0.72%(1) 0.77%
Net investment income before preferred stock dividends...... 7.33% 7.50% 7.54% 7.88% 8.45%
Preferred stock dividends................................... 1.29% 1.35% 1.35% 1.50% 1.38%
Net investment income available to common shareholders...... 6.04% 6.15% 6.19% 6.38% 7.07%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $491,630 $487,886 $485,849 $490,116 $491,360
Asset coverage on preferred shares at end of period......... 378% 375% 373% 377% 307%
Portfolio turnover rate..................................... 6% -- 1% 3% 6%
</TABLE>
- ---------------------
* The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total investment return is based upon the current market value on the last
day of each period reported. Dividends and distributions are assumed to be
reinvested at the prices obtained under the Trust's dividend reinvestment
plan. Total investment return does not reflect brokerage commissions.
(1) 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"), formerly InterCapital Insured Municipal Trust, at
October 31, 1998, 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, 1998 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 21, 1998
1998 FEDERAL TAX NOTICE (unaudited)
For the year ended October 31, 1998, all of the Trust's
dividends from net investment income received by both common
and preferred shareholder classes were exempt interest
dividends, excludable from gross income for Federal income tax
purposes.
19
<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
- -------------------------------------------------
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, 1998
