<PAGE> 1
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST Two World Trade Center
LETTER TO THE SHAREHOLDERS April 30, 2000 New York, New York 10048
DEAR SHAREHOLDER:
The U.S. economy continued its unprecedented expansion into the new year. Strong
growth pushed the unemployment rate to a 30-year low. Rising commodity prices
heightened concern about inflation. The price of oil moved above $30 per barrel
prior to ending April at $25 per barrel. Between June 1999 and March 2000, the
Federal Reserve Board raised the federal funds rate in five, 25 basis-point
moves to reach 6.00 percent. The Fed subsequently demonstrated its resistance to
inflation by raising the federal funds rate another 50 basis points to 6.50
percent in May. Economic growth and a less accommodative monetary policy caused
long-term interest rates to increase throughout 1999. In February, the U.S.
Treasury announced plans to retire debt with the federal budget surplus. This
precipitated a 50-75 basis-point rally in longer Treasury maturities.
MUNICIPAL MARKET CONDITIONS
The long-term insured municipal index began 1999 near a record low yield of 5.05
percent but increased to 5.97 percent by calendar year-end. This index reached a
high of 6.18 percent in January 2000 before ending April at 5.93 percent.
Because bond prices move inversely to changes in interest rates, higher yields
caused bond prices to decline significantly last year and improve modestly in
the first four months of 2000.
The ratio of municipal yields as a percentage of Treasury yields has been used
historically as a measure of relative value. Over the past five years the ratio
has ranged between an average high of 93 percent and an average low of 85
percent. The increase in the ratio from 92 percent at the end of 1999 to 99
percent at the end of April 2000 was primarily the result of the magnitude of
the rally in long Treasuries. A rising yield ratio indicates weaker relative
performance by municipals.
Higher interest rates reduced municipal market underwriting in 1999. New-issue
volume declined 20 percent last year. Refunding activity, the most
interest-rate-sensitive component of supply, was down more than
<PAGE> 2
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS April 30, 2000, continued
50 percent. In the first four months of this year, volume was 30 percent lower
than in the same period last year.
[30-YEAR BOND YIELDS 1994-2000 CHART]
<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
6.00 6.29 95.39
5.97 6.48 92.13
2000 6.18 6.49 95.22
6.04 6.14 98.37
5.82 5.83 99.83
5.91 5.96 99.16
</TABLE>
PERFORMANCE
During the six-month period ended April 30, 2000, the net asset value (NAV) of
Morgan Stanley Dean Witter Insured Municipal Trust (IMT) decreased from $14.91
to $14.85 per share. Based on this change, plus a reinvestment of tax-free
dividends totaling $0.47 per share, the Trust's total NAV return was 3.07
percent. IMT's value on the New York Stock Exchange (NYSE) moved from $13.6875
to $13.625 per share during this period. Based on this change plus reinvestment
of tax-free dividends, IMT's total market return was 3.08 percent. On April 30,
2000, IMT's share price was trading at a 8.25 percent discount to its NAV.
Monthly dividends for the second quarter of 2000, declared in March, were
unchanged at $0.0775 per share. The Trust's level of undistributed net
investment income was unchanged at $0.12 per share on April 30, 2000, versus six
months earlier.
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS April 30, 2000, continued
PORTFOLIO STRUCTURE
The Trust's investments were diversified among 12 long-term sectors and 53
credits. At the end of April, the portfolio's average maturity was 14 years.
Average duration, a measure of sensitivity to interest rate changes, was 4.1
years. Issues in the refunded bond category comprised 36 percent of net assets.
These bonds have been refinanced and will be redeemed on the dates shown in the
portfolio. Current information on the portfolio's credit enhancements, sector
distribution and geographic diversification is provided in the accompanying
charts and tables. Optional call provisions and their respective cost (book)
yields are also shown.
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 six month period, ARPS leverage contributed approximately $0.06 per
share to common share earnings. Weekly ARPS yields ranged between 3.35 and 5.30
percent. In comparison, the yield on one year municipal notes increased from
3.77 percent at the end of October 1999 to 4.23 percent at the end of April. The
Trust's two ARPS series totaling $130 million represented 29 percent of net
assets.
LOOKING AHEAD
The Federal Reserve Board has expressed concern about consumer wealth and rising
prices. We anticipate that the central bank will continue to increase short-term
interest rates in an effort to slow the economy. We believe municipal bonds
continue to offer tax-conscious investors good long-term value.
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
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS April 30, 2000, continued
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, 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 six-month period ended April 30, 2000, the Trust
purchased and retired 3.5 percent of its common stock (784,300 shares) at a
weighted average market discount of 11.04 percent. The anti-dilutive effect of
acquiring treasury shares is reported in the table of Financial Highlights on
page 18.
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 April 30, 2000, continued
[LARGEST SECTORS CHART]
LARGEST SECTORS AS OF APRIL 30, 2000 (% OF NET ASSETS)
<TABLE>
<S> <C>
REFUNDED 36%
IDR/PCR* 14%
WATER & SEWER 13%
ELECTRIC 5%
MORTGAGE 5%
PUBLIC FACILITIES 5%
TRANSPORTATION 5%
</TABLE>
* INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE
[CREDIT RATINGS PIE CHART]
CREDIT ENHANCEMENTS AS OF APRIL 30, 2000 (% OF TOTAL LONG- TERM PORTFOLIO)
<TABLE>
<S> <C>
MBIA 33%
FGIC 28%
AMBAC 20%
FSA 15%
GNMA 4%
</TABLE>
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
<TABLE>
<CAPTION>
GEOGRAPHIC SUMMARY OF INVESTMENTS
---------------------------------
<S> <C>
BASED ON MARKET VALUE AS A PERCENT OF NET ASSETS
APRIL 30, 2000
ALASKA 0.7%
ALABAMA 0.9
DELAWARE 5.0
FLORIDA 8.0
GEORGIA 2.3
HAWAII 2.6
ILLINOIS 7.3
INDIANA 1.2
KANSAS 4.6
KENTUCKY 4.0
MASSACHUSETTS 4.7
MICHIGAN 5.7
MINNESOTA 0.4
MISSOURI 0.6
NEBRASKA 2.9
NEVADA 2.7
NEW JERSEY 6.2
NEW YORK 1.7
OHIO 1.1
PENNSYLVANIA 5.1
SOUTH CAROLINA 9.1
TENNESSEE 1.2
TEXAS 14.0
WASHINGTON 3.5
WISCONSIN 3.5
TOTAL 99.0%
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
</TABLE>
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
LETTER TO THE SHAREHOLDERS April 30, 2000, continued
<TABLE>
<CAPTION>
CALL AND COST (BOOK) YIELD STRUCTURE APRIL 30, 2000
WEIGHTED AVERAGE
CALL PROTECTION: 4 YEARS
YEARS BONDS CALLABLE PERCENT CALLABLE*
<S> <C>
2001 18%
2002 55%
2003 0%
2004 0%
2005 2%
2006 6%
2007 0%
2008 3%
2009 8%
2010+ 9%
</TABLE>
<TABLE>
<CAPTION>
COST (BOOK) YIELD**
WEIGHTED AVERAGE
BOOK YIELD: 6.5%
<S> <C>
2001 6.7%
2002 6.6%
2003
2004
2005 6.0%
2006 6.3%
2007
2008 6.1%
2009 5.9%
2010+ 5.8%
</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 FUND OPERATING EXPENSES. FOR
EXAMPLE, THE FUND EARNED A BOOK YIELD OF 6.7% ON 18% OF THE BONDS IN THE
LONG-TERM PORTFOLIO THAT ARE CALLABLE IN 2001.
PORTFOLIO STRUCTURE IS SUBJECT TO CHANGE.
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS April 30, 2000 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
TAX-EXEMPT MUNICIPAL BONDS (97.8%)
General Obligation (4.0%)
$ 5,000 Hawaii, 1999 Ser CT (FSA)................................... 5.875% 09/01/17 $ 5,063,550
8,000 Chicago, Illinois, Refg Ser 1992 (AMBAC).................... 6.25 01/01/11 8,619,600
4,000 Clark County, Nevada, Transportation Impr Ltd Tax Ser
06/01/92 B (AMBAC)......................................... 6.50 06/01/17 4,401,760
-------- -----------
17,000 18,084,910
-------- -----------
Educational Facilities Revenue (3.9%)
Massachusetts Health & Educational Facilities Authority,
15,000 Northeastern University Ser E (MBIA)**..................... 6.55 10/01/22 15,737,400
1,745 Stonehill College Ser E (MBIA)............................. 6.60 07/01/20 1,827,521
-------- -----------
16,745 17,564,921
-------- -----------
Electric Revenue (5.1%)
7,000 Long Island Power Authority, New York, Ser 2000 A (FSA)
(WI)....................................................... 0.00 06/01/16 2,763,460
10,000 Piedmont Municipal Power Agency, South Carolina, 1991 Refg
Ser (FGIC)................................................. 6.25 01/01/18 10,099,200
10,000 Lower Colorado River Authority, Texas, Refg Ser 1999 A
(FSA)...................................................... 5.875 05/15/16 10,139,700
-------- -----------
27,000 23,002,360
-------- -----------
Hospital Revenue (4.3%)
5,000 Montgomery Special Care Facilities Financing Authority,
Alabama, Baptist Health Ser 1998 B (MBIA).................. 5.00 11/15/29 4,209,150
5,000 Brevard County Health Facilities Authority, Florida,
Wuesthoff Memorial Hospital Ser 1992 A (MBIA).............. 6.625 04/01/13 5,227,700
5,000 Fulco Hospital Authority, Georgia, Catholic Health East Ser
1998 A (MBIA).............................................. 5.00 11/15/28 4,202,000
3,000 Missouri Health & Educational Facilities Authority, SSM
Healthcare
Ser 1998 A (MBIA).......................................... 5.00 06/01/22 2,622,030
3,020 Amarillo Health Facilities Corporation, Texas, Baptist St
Anthony's Hospital Ser 1998 (FSA).......................... 5.50 01/01/16 2,960,748
-------- -----------
21,020 19,221,628
-------- -----------
Industrial Development/Pollution Control Revenue (14.1%)
6,000 Delaware Economic Development Authority, Delmarva Power &
Light Co Ser 1992 A (AMT) (AMBAC).......................... 6.85 05/01/22 6,285,300
5,000 Lawrenceburg, Indiana, Indiana & Michigan Power Co
Refg Ser D (Secondary FGIC)................................ 7.00 04/01/15 5,250,350
20,000 Burlington, Kansas, Kansas Gas & Electric Co Ser 1991
(MBIA)..................................................... 7.00 06/01/31 20,801,800
7,500 Humboldt County, Nevada, Sierra Pacific Power Co Refg Ser
1987 (AMBAC)............................................... 6.55 10/01/13 7,842,450
5,000 New York State Energy Research & Development Authority,
Brooklyn Union Gas Co 1996 Ser (MBIA)...................... 5.50 01/01/21 4,779,700
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS April 30, 2000 (unaudited) 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 $ 7,831,350
10,000 Texas Utilities Electric Co Collateralized Ser 1992 A (AMT)
(AMBAC).................................................. 6.75 04/01/22 10,451,700
-------- -----------
61,000 63,242,650
-------- -----------
Mortgage Revenue -- Single Family (4.7%)
3,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A
(MBIA)..................................................... 5.875 12/01/24 2,929,320
12,600 Nebraska Investment Finance Authority, GNMA-Backed 1991 Ser
A & B (AMT)................................................ 6.70 09/15/24 12,875,940
5,000 Ohio Housing Finance Agency, GNMA-Backed Ser A 1 & 2
(AMT)...................................................... 6.903 03/01/31 5,126,750
-------- -----------
20,600 20,932,010
-------- -----------
Public Facilities Revenue (4.7%)
20,000 Hudson County, New Jersey, Correctional Refg Ser 1992 COPs
(MBIA)..................................................... 6.60 12/01/21 20,877,200
-------- -----------
Resource Recovery Revenue (2.0%)
8,325 Detroit Economic Development Corporation, Michigan, Ser 1991
-------- A (AMT) (FSA).............................................. 6.875 05/01/09 8,637,271
-----------
Transportation Facilities Revenue (5.0%)
5,000 Greater Orlando Aviation Authority, Florida, Ser 1992 A
(AMT) (FGIC)............................................... 6.50 10/01/12 5,236,100
5,000 Hillsborough County Port District, Florida, Tampa Port
Authority Refg Ser 1995
(AMT) (FSA)................................................ 5.75 06/01/13 5,051,850
2,500 Hawaii, Airports Second Lien Ser 1991 (AMT) (MBIA).......... 6.75 07/01/21 2,593,800
4,000 Illinois Toll Highway Authority, Priority Refg 1998 Ser A
(FSA)...................................................... 5.50 01/01/15 3,975,800
4,000 Regional Transportation Authority, Illinois, Refg Ser 1999
(FSA)...................................................... 5.75 06/01/21 3,980,400
2,000 Minneapolis-St Paul Metropolitan Airports Commission,
Minnesota, Ser 1998 A
(AMBAC).................................................... 5.00 01/01/30 1,721,720
-------- -----------
22,500 22,559,670
-------- -----------
Water & Sewer Revenue (13.3%)
7,000 Atlanta, Georgia, Water & Wastewater Ser 1999 A (FGIC)...... 5.00 11/01/29 5,994,380
5,000 Honolulu City & County, Hawaii, Wastewater Jr Ser 1998
(FGIC)..................................................... 4.50 07/01/28 3,898,800
7,790 Kenton County Water District #1, Kentucky, Refg Ser 1992
(FGIC)..................................................... 6.375 02/01/17 8,096,303
10,000 Louisville & Jefferson County Metropolitan Sewer District,
Kentucky, Ser 1999 A (FGIC)................................ 5.75 05/15/33 9,768,400
3,375 Massachusetts Water Resources Authority, 2000 Ser A
(FGIC)..................................................... 6.00 08/01/15 3,511,485
Detroit, Michigan,
3,400 Water Supply Refg Ser 1992 (FGIC).......................... 6.375 07/01/22 3,463,682
5,000 Water Supply Ser 1999 A (FGIC)............................. 5.75 07/01/26 4,906,700
5,000 Philadelphia, Pennsylvania, Water & Wastewater Ser 1998
(AMBAC).................................................... 5.25 12/15/14 4,880,050
10,000 Grand Strand Water & Sewer Authority, South Carolina, Refg
Ser 1992 (MBIA)............................................ 6.00 06/01/19 10,041,000
5,000 North Charleston Sewer District, South Carolina, Refg Ser
1992 A (MBIA).............................................. 6.00 07/01/18 5,024,750
-------- -----------
61,565 59,585,550
-------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS April 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
-----------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Other Revenue (0.6%)
$ 3,000 Philadelphia, Pennsylvania, Gas Works Second Ser 1998
(FSA)...................................................... 5.00% 07/01/23 $ 2,599,830
-------- -----------
Refunded (36.1%)
15,000 Delaware Health Facilities Authority, Medical Center of
Delaware Ser 1992 (MBIA) (ETM)............................. 6.25 10/01/06 15,968,099
10,000 Orange County, Florida, Tourist Development Tax Ser 1992 B
(AMBAC).................................................... 6.00 10/01/02+ 10,273,500
10,000 Reedy Creek Improvement District, Florida, Utilities Ser
1991-1 (MBIA).............................................. 6.50 10/01/01+ 10,346,800
15,000 Cook County, Illinois, Ser 1992 A (MBIA).................... 6.60 11/15/02+ 15,898,050
8,000 Detroit, Michigan, Water Supply Refg Ser 1992 (FGIC)........ 6.375 07/01/02+ 8,367,040
6,400 Bergen County Utilities Authority, New Jersey, Water
Pollution 1992 Ser A (FGIC)................................ 6.50 06/15/02+ 6,732,288
15,000 Harrisburg Authority, Pennsylvania, Water Ser of 1992
(FGIC)..................................................... 6.50 08/15/02+ 15,543,750
15,000 South Carolina Public Service Authority, 1991 Ser D
(AMBAC).................................................... 6.50 07/01/02+ 15,786,900
5,000 Chattanooga-Hamilton County Hospital Authority, Tennessee,
Erlanger Medical Center 1991 Ser A (FSA)................... 6.854 05/15/01+ 5,205,600
15,000 Amarillo Health Facilities Corporation, Texas, High Plains
Baptist Hospital Ser 1992 A & B (FSA)**.................... 6.562 01/01/02+ 15,646,800
10,000 Harris County, Texas, Sr Lien Toll Road Refg Ser 1992 A
(AMBAC).................................................... 6.50 08/15/02+ 10,541,800
15,000 Metropolitan Seattle, Washington, Sewer Ser U (FGIC)........ 6.60 01/01/01+ 15,508,200
15,000 Wisconsin Health & Educational Facilities Authority,
Children's Hospital Inc Ser 1992 B (FGIC).................. 6.50 08/15/02+ 15,799,350
-------- -----------
154,400 161,618,177
-------- -----------
433,155 TOTAL TAX-EXEMPT MUNICIPAL BONDS (Identified Cost $420,532,527)................. 437,926,177
-------- -----------
SHORT-TERM TAX-EXEMPT MUNICIPAL OBLIGATION (1.2%)
5,200 Harris County Health Facilities Development Corporation,
-------- Texas, St Luke's Episcopal Hospital Ser 1997 B (Demand
05/01/00) (Identified Cost $5,200,000)..................... 6.00* 02/15/27 5,200,000
-----------
$438,355 TOTAL INVESTMENTS (Identified Cost $425,732,527) (a)................. 99.0% 443,126,177
========
OTHER ASSETS IN EXCESS OF LIABILITIES................................ 1.0 4,458,107
----- -----------
NET ASSETS........................................................... 100.0% $447,584,284
===== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
PORTFOLIO OF INVESTMENTS April 30, 2000 (unaudited) 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 $19,190,154 and the aggregate gross
unrealized depreciation is $1,796,504, resulting in net
unrealized appreciation of $17,393,650.
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
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2000 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $425,732,527)............................. $443,126,177
Cash........................................................ 28,766
Interest receivable......................................... 7,517,116
Prepaid expenses............................................ 180,047
-----------
TOTAL ASSETS............................................ 450,852,106
-----------
LIABILITIES:
Payable for:
Investments purchased................................... 2,826,810
Investment management fee............................... 129,706
Dividends to preferred shareholders..................... 128,568
Shares of beneficial interest repurchased............... 82,655
Accrued expenses............................................ 100,083
-----------
TOTAL LIABILITIES....................................... 3,267,822
-----------
NET ASSETS.............................................. $447,584,284
===========
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, 21,393,313 shares
outstanding)............................................... 297,714,802
Net unrealized appreciation................................. 17,393,650
Accumulated undistributed net investment income............. 2,648,680
Accumulated net realized loss............................... (172,848)
-----------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS............ 317,584,284
-----------
TOTAL NET ASSETS........................................ $447,584,284
===========
NET ASSET VALUE PER COMMON SHARE
($317,584,284 divided by 21,393,313 common shares
outstanding)............................................... $14.85
===========
</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 six months ended April 30, 2000 (unaudited)
NET INVESTMENT INCOME:
INTEREST INCOME............................................. $13,649,515
----------
EXPENSES
Investment management fee................................... 791,451
Auction commission fees..................................... 181,975
Professional fees........................................... 56,847
Transfer agent fees and expenses............................ 42,626
Shareholder reports and notices............................. 16,583
Registration fees........................................... 16,374
Auction agent fees.......................................... 11,318
Custodian fees.............................................. 11,292
Trustees' fees and expenses................................. 8,616
Other....................................................... 11,656
----------
TOTAL EXPENSES.......................................... 1,148,738
Less: expense offset........................................ (11,268)
----------
NET EXPENSES............................................ 1,137,470
----------
NET INVESTMENT INCOME................................... 12,512,045
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 1,100,442
Net change in unrealized appreciation....................... (3,832,174)
----------
NET LOSS................................................ (2,731,732)
----------
NET INCREASE................................................ $9,780,313
==========
</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 SIX
MONTHS ENDED FOR THE YEAR
APRIL 30, ENDED
2000 OCTOBER 31, 1999
--------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $12,512,045 $ 25,671,501
Net realized gain (loss)............................. 1,100,442 (1,273,290)
Net change in unrealized appreciation................ (3,832,174) (24,952,418)
------------ ------------
NET INCREASE (DECREASE).......................... 9,780,313 (554,207)
------------ ------------
Dividends to preferred shareholders from net
investment income................................... (2,498,944) (4,423,314)
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS
FROM:
Net investment income................................ (10,122,668) (20,206,147)
Net realized gain.................................... -- (2,338,083)
------------ ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS................ (10,122,668) (22,544,230)
------------ ------------
Decrease from transactions in common shares of
beneficial interest................................. (10,338,615) (3,344,045)
------------ ------------
NET DECREASE..................................... (13,179,914) (30,865,796)
NET ASSETS:
Beginning of period.................................. 460,764,198 491,629,994
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$2,648,680 and $2,758,247, respectively)......... $447,584,284 $460,764,198
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 2000 (unaudited)
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 April 30, 2000 (unaudited) 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.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended April 30, 2000 aggregated
$22,250,376 and $30,773,407, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager, is
the Trust's transfer agent. At April 30, 2000, the Trust had transfer agent fees
and expenses payable of approximately $2,800.
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 six months ended April 30, 2000
included in Trustees' fees and expenses in the Statement of Operations amounted
to $2,482. At April 30, 2000, the Trust had an accrued pension liability of
$41,609 which is included in accrued expenses in the Statement of Assets and
Liabilities.
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER INSURED MUNICIPAL TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 2000 (unaudited) continued
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 4.19% 01/09/01 3.35% - 4.19%
TH 1,800 90,000 4.67 05/04/00 3.35 - 5.30
</TABLE>
---------------------
* As of April 30, 2000.
** For the six months ended April 30, 2000.
Subsequent to April 30, 2000 and up through June 2, 2000 the Trust paid
dividends to Series TU and TH at rates ranging from 4.19% to 5.05% in the
aggregate amount of $539,208.
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 April 30, 2000 (unaudited) continued
5. COMMON SHARES OF BENEFICIAL INTEREST
Transactions in common shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL
PAID IN
PAR EXCESS OF
SHARES VALUE PAR VALUE
---------- -------- ------------
<S> <C> <C> <C>
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
Treasury shares purchased and retired (weighted average
discount 11.04%)*.......................................... (784,300) (7,843) (10,330,772)
---------- -------- ------------
Balance, April 30, 2000..................................... 21,393,313 $213,933 $297,500,869
========== ======== ============
</TABLE>
---------------------
* The Trustees have voted to retire the shares purchased.
6. DIVIDENDS TO COMMON SHAREHOLDERS
On March 28, 2000, the Trust declared the following dividends from net
investment income:
<TABLE>
<CAPTION>
AMOUNT RECORD PAYABLE
PER SHARE DATE DATE
--------- ------------ -------------
<S> <C> <C>
$0.0775 May 5, 2000 May 19, 2000
$0.0775 June 9, 2000 June 23, 2000
</TABLE>
7. FEDERAL INCOME TAX STATUS
At October 31, 1999, the Trust had a net 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 SIX FOR THE YEAR ENDED OCTOBER 31*
MONTHS ENDED ----------------------------------------------------
APRIL 30, 2000* 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period.............. $ 14.91 $ 16.13 $ 15.96 $ 15.80 $ 15.86 $ 14.27
------- -------- -------- ------- ------- --------
Income (loss) from investment operations:
Net investment income............................ 0.58 1.15 1.18 1.18 1.27 1.21
Net realized and unrealized gain (loss).......... (0.11) (1.18) 0.15 0.23 (0.02) 1.65
------- -------- -------- ------- ------- --------
Total income (loss) from investment operations.... 0.47 (0.03) 1.33 1.41 1.25 2.86
------- -------- -------- ------- ------- --------
Less dividends and distributions from:
Net investment income............................ (0.47) (0.90) (0.95) (0.99) (1.02) (1.02)
Common share equivalent of dividends paid to
preferred shareholders......................... (0.12) (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................. (0.59) (1.20) (1.16) (1.25) (1.31) (1.27)
------- -------- -------- ------- ------- --------
Anti-dilutive effect of acquiring treasury
shares........................................... 0.06 0.01 -- -- -- --
------- -------- -------- ------- ------- --------
Net asset value, end of period.................... $ 14.85 $ 14.91 $ 16.13 $ 15.96 $ 15.80 $ 15.86
======= ======== ======== ======= ======= ========
Market value, end of period....................... $13.625 $ 13.688 $ 15.625 $ 15.25 $ 15.00 $ 14.625
======= ======== ======== ======= ======= ========
TOTAL RETURN+..................................... 3.08%(1) (6.36)% 8.79% 8.80% 10.31% 24.59%
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS:
Total expenses.................................... 0.71%(2)(3) 0.69%(3) 0.68% 0.69%(3) 0.70%(3) 0.72%(3)
Net investment income before preferred stock
dividends........................................ 7.73%(2) 7.32% 7.33% 7.50% 7.54% 7.88%
Preferred stock dividends......................... 1.54%(2) 1.26% 1.29% 1.35% 1.35% 1.50%
Net investment income available to common
shareholders..................................... 6.19%(2) 6.06% 6.04% 6.15% 6.19% 6.38%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........... $447,584 $460,764 $491,630 $487,886 $485,849 $490,116
Asset coverage on preferred shares at end of
period........................................... 344% 354% 378% 375% 373% 377%
Portfolio turnover rate........................... 5%(1) 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) Not annualized.
(2) Annualized.
(3) 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
REVISED INVESTMENT POLICY (unaudited)
On January 26, 2000, the Trustees of Morgan Stanley Dean Witter Insured
Municipal Trust (the "Trust") approved an investment policy whereby the Trust
would be permitted to invest up to 10% of its assets in inverse floating rate
municipal obligations. The inverse floating rate municipal obligations in which
the Trust will invest are typically created through a division of a fixed rate
municipal obligation into two separate instruments, a short-term obligation and
a long-term obligation. The interest rate on the short-term obligation is set at
periodic auctions. The interest rate on the long-term obligation is the rate the
issuer would have paid on the fixed income obligation: (i) plus the difference
between such fixed rate and the rate on the short-term obligation, if the
short-term rate is lower than the fixed rate; or (ii) minus such difference if
the interest rate on the short-term obligation is higher than the fixed rate.
The interest rates on these obligations generally move in the reverse direction
of market interest rates. If market interest rates fall, the interest rate on
the obligation will increase and if market interest rates increase, the interest
rate on the obligation will fall. Inverse floating rate municipal obligations
offer the potential for higher income than is available from fixed rate
obligations of comparable maturity and credit rating. They also carry greater
risks. In particular, the prices of inverse floating rate municipal obligations
are more volatile, i.e., they increase and decrease in response to changes in
interest rates to a greater extent than comparable fixed rate obligations.
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. 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
The financial statements included herein have been taken from the records of the
Trust without examination by the independent accountants and accordingly they do
not express an opinion thereon.
MORGAN STANLEY
DEAN WITTER
INSURED
MUNICIPAL TRUST
Semiannual Report
April 30, 2000
