<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- - -------------------------------------------------------------------------------
Strong economic growth in the fourth quarter of 1993 and a shift in
Federal Reserve Board monetary policy in February of 1994 caused the
fixed-income markets to reverse direction and led to the sharpest increase in
interest rates in more than six years. At the beginning of the year, market
concerns about inflation developed as the economy approached full employment
and commodity prices moved upward. The Federal Reserve Board responded by
tightening monetary policy. Since early February, the central bank has raised
the federal-funds rate--the interest rate banks charge each other for
overnight loans--250 basis points from 3.00 percent to 5.50 percent in six
separate moves through November. Between May and November, the discount
rate--the interest rate the Federal Reserve charges member banks for
loans--increased 175 basis points to 4.75 percent.
During InterCapital Insured Municipal Income Trust's (NYSE symbol: IIM)
fiscal year ended October 31, 1994, long-term municipal bond yields, as
measured by The Bond Buyer Revenue Bond Index,* rose 139 basis points from 5.56
percent to 6.95 percent. In February and March yields jumped 89 basis points
from 5.50 percent to 6.39 percent in response to the Federal Reserve Board's
initial tightening and subsequent municipal bond selling pressure. A semblance
of stability returned to the market between June and August. After Labor Day,
however, continued economic growth, aggressive tax-loss selling, heavy mutual-
fund redemptions and excessive dealer inventory led to further municipal market
deterioration.
The total yield increase of 139 basis points during the fiscal year was
equivalent to a 17 percent price decline for a 30-year municipal bond.
One-third of this price decline occurred in September and October.
The municipal market was also influenced by supply and demand conditions.
New-issue underwriting totaled a record $290 billion in 1993. The pace of
new-issue activity over the first 10 months of 1994, however, slowed 44
percent. The estimated issuance for 1994 is $160 billion. By way of
comparison, bond maturities and calls for redemption are expected to reach
$190 billion this year resulting in a reduction in the amount of municipal
debt outstanding. This scarcity would normally be expected to improve the
relative performance of municipal bonds under stable-to-improving interest
rate conditions.
PERFORMANCE
The Trust's net asset value (NAV) declined from $14.95 to $11.41 per share
during the fiscal year ended October 31, 1994. Based on this change and
reinvestment of tax-free dividends totaling $0.90 per share, the Trust's
total return for the fiscal year was -18.08 percent. Concurrently, the
Trust's market price on the New York Stock Exchange declined from $15.00 to
$10.375 per share. Based on this market change and reinvestment of dividends,
the Trust's total return for the fiscal year was -25.81 percent. The Trust
began the fiscal year trading at a 0.33 percent premium to NAV and closed at
a 9.07 percent discount to NAV.
- - ---------------
*The Bond Buyer Revenue Bond Index is an arithmetic average of the yields of
25 selected municipal revenue bonds with 30-year maturities. Credit ratings
of these bonds range from Aa1 to Baa1 by Moody's and AA+ to A- by Standard &
Poor's.
<PAGE>
<PAGE>
PORTFOLIO STRUCTURE
As of October 31, 1994, the portfolio's long-term investments were
diversified among 12 municipal sectors and 76 credits. The three largest
sectors were electric revenue, hospital revenue, and water & sewer revenue
bonds, representing 44 percent of net assets. The average maturity and call
protection of the Trust's long-term holdings was 25 years and 8.5 years,
respectively. Bonds subject to the alternative minimum tax (AMT) represented
approximately 18 percent of net assets. At the end of the period, the Trust
had net assets in excess of $592 million.
Each position in the portfolio was backed either by bond insurers that are
rated Aaa by Moody's Investors Service, Inc. and/or AAA by Standard & Poor's
Corp. This is to ensure the timely payment of principal and interest. As of
October 31, 1994, the distribution of long-term credit enhancements was:
<TABLE>
<CAPTION>
MUNICIPAL BOND INSURANCE PERCENT
- - ----------------------------------------------------- ---------
<S> <C>
AMBAC Indemnity Corporation (AMBAC) .................. 28%
Financial Guaranty Insurance Company (FGIC) ......... 27
Financial Security Assurance Inc. (FSA) .............. 13
Municipal Bond Investors Assurance Corporation (MBIA). 32
</TABLE>
THE IMPACT OF LEVERAGING
As reported previously, the Trust's common shares are leveraged. Leverage
is created through the issuance of auction rate preferred shares (ARPS). The
ARPS's auction periods normally range between one week and one year. Proceeds
from ARPS underwritings were used to purchase additional long-term municipal
bonds. Following the payment of ARPS dividends, the common shares earn
incremental income when the portfolio yield is higher than the costs of the
ARPS (yield plus operating and remarketing expenses). Although rising
short-term interest rates have narrowed the yield spread this year, ARPS
continue to provide positive incremental income to common shareholders.
The leveraged capital structure of closed-end municipal bond funds
additionally impacts NAV. ARPS normally account for one-third of a fund's
underwritten capital structure. This produces a volatility factor for common
shares of 1.5 times the price change of bonds held in the portfolio. The
common stock's NAV per share reflects the full price change of the
portfolio's investments since the value of the preferred shares does not
fluctuate.
As the bond market has eroded, the degree of leverage and volatility has
increased. The purchase and retirement of ARPS counteracts this trend. During
the fiscal year, IIM purchased and retired $55 million in par amount of ARPS
so that $195 million in ARPS remain outstanding. Additional ARPS purchases
may occur if the degree of leverage increases or ARPS profitability (spread)
declines significantly.
DIVIDEND RESERVES
At the end of the fiscal year, IIM had undistributed net investment income
of $0.06 per share available for future distributions. This dividend reserve
or "cushion" helped sustain the Trust's current monthly dividend. Higher
yields in future ARPS auctions and ARPS retirements may further erode the
cushion. Declines in the dividend reserve may cause the Trust to adjust the
common share dividend.
<PAGE>
<PAGE>
LOOKING AHEAD
The overall direction of interest rates will primarily be determined by
the strength of the economy, the trend of inflation and the Federal Reserve
Board's responses. These conditions may continue to move interest rates
higher through mid-1995. Investor demand for municipal securities should be
sustained by significant bond maturities, calls for redemption and diminished
new-issue supply. Changing market conditions and the profitability of ARPS
are among the factors that will determine the Trust's future level of income
and influence the direction of the common stock market price.
The Trust's procedure for reinvestment of all dividends and distributions
on common shares is by purchase in the open market. This method helps to
support the market value of the Trust's shares. In addition, the Trustees
have approved a procedure whereby the Trust, when appropriate, purchases
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. Over the fiscal year, the Trust purchased
842,000 shares of common stock at a weighted average discount of 3.62
percent.
We appreciate your ongoing support of InterCapital Insured Municipal
Income Trust and look forward to continuing to serve your investment needs.
Very truly yours,
Charles A. Fiumefreddo
Chairman of the Board
<PAGE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1994
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (94.5%)
GENERAL OBLIGATION (8.6%)
District of Columbia,
$ 5,000 Refg Ser 1993 B (AMBAC Insured) .............................. 5.50% 6/ 1/09 $ 4,412,400
6,000 Refg Ser 1993 B (FSA Insured) ................................ 5.50 6/ 1/10 5,246,280
3,400 Aurora, Illinois, Refg Ser 1993 A (FGIC Insured) .............. 5.125 1/ 1/19 2,661,486
8,500 Chicago, Illinois, Refg Ser 1993 A (MBIA Insured) ............ 5.50 1/ 1/17 7,098,605
Cook County, Illinois,
2,000 Ser B (FGIC Insured) ......................................... 6.00 11/15/14 1,842,560
10,000 Ser B (FGIC Insured) ......................................... 5.50 11/15/22 8,230,700
5,000 River Rouge School District, Michigan, Bldg & Site Unltd Tax
1993 (FSA Insured) .......................................... 5.625 5/ 1/22 4,245,950
3,000 Vicksburg Community Schools, Michigan, 1993 Refg (MBIA
Insured) .................................................... 5.625 5/ 1/20 2,572,530
7,215 Clark County Sanitation District, Nevada, Refg 1993 (FGIC
Insured) .................................................... 5.70 7/ 1/12 6,487,006
9,385 Washoe County, Nevada, Reno-Sparks Convention Ltd Tax Ser 1993
A (FGIC Insured) ............................................ 5.75 7/ 1/22 8,038,440
- - ----------- -------------
59,500 50,835,957
- - ----------- -------------
EDUCATIONAL FACILITIES REVENUE (3.4%)
4,000 Alabama State University, Gen Tuition & Fee Ser 1993 (MBIA
Insured) .................................................... 5.70 5/ 1/15 3,517,080
5,050 Indiana University, Student Fee Ser J (FGIC Insured) ......... 5.00 8/ 1/18 3,883,097
10,000 Wayne State University, Michigan, Ser 1993 (AMBAC Insured) ... 5.50 11/15/18 8,491,400
Rhode Island Health & Educational Building Corporation,
Providence College
2,500 Ser 1993 (MBIA Insured) ...................................... 5.60 11/ 1/15 2,130,050
2,500 Ser 1993 (MBIA Insured) ...................................... 5.60 11/ 1/22 2,075,450
- - ----------- -------------
24,050 20,097,077
- - ----------- -------------
ELECTRIC REVENUE (18.8%)
16,000 Redding, California, Ser 1993 A COPs (FGIC Insured) .......... 5.684 6/ 1/19 13,762,400
Massachusetts Municipal Wholesale Electric Company,
8,000 1993 Ser A (AMBAC Insured) ................................... 5.00 7/ 1/10 6,650,880
10,000 1993 Ser A (AMBAC Insured) ................................... 5.31 7/ 1/18 8,330,100
10,000 North Carolina Eastern Municipal Power Agency, Refg Ser 1993 B
(FGIC Insured) .............................................. 5.50 1/ 1/17 8,380,900
20,000 North Carolina Municipal Power Agency #1, Catawba Ser 1993
(AMBAC Insured) ............................................. 5.46 1/ 1/20 16,977,000
10,000 Piedmont Municipal Power Agency, South Carolina, Refg Ser 1993
(AMBAC Insured) ............................................. 5.375 1/ 1/25 8,052,700
15,000 South Carolina Public Service Authority, 1993 Refg Ser A (MBIA
Insured) .................................................... 5.50 7/ 1/21 12,421,350
5,000 Austin, Texas, Comb Utilities (AMBAC Insured) ................. 5.875 5/15/21 4,429,400
8,775 Lower Colorado River Authority, Texas, Jr Lien Refg 4th Ser
(FSA Insured) ............................................... 5.625 1/ 1/17 7,530,442
10,000 Texas Municipal Power Agency, Refg Ser 1993 (MBIA Insured) ... 5.25 9/ 1/12 8,420,400
<PAGE>
<PAGE>
<CAPTION>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1994 (continued)
- - -----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
$ 10,000 Washington Public Power Supply System, Nuclear Proj #1, Refg
Ser 1993 A (MBIA Insured) ................................... 5.70% 7/ 1/17 $ 8,592,300
10,000 Wisconsin Public Power Incorporated, Refg Ser 1993 A (AMBAC
Insured) .................................................... 5.25 7/ 1/21 7,907,800
- - ----------- -------------
132,775 111,455,672
- - ----------- -------------
HOSPITAL REVENUE (14.1%)
2,100 District of Columbia, Children's Hospital Refg Ser 1992 A
(FGIC Insured) .............................................. 6.25 7/15/10 2,034,480
9,250 Fulton-DeKalb Hospital Authority, Georgia, Refg Ser 1993 (MBIA
Insured) .................................................... 5.50 1/ 1/20 7,736,330
3,000 Illinois Health Facilities Authority, Franciscan Sisters
Health Care 1992 Ser C (MBIA Insured) ....................... 5.75 9/ 1/18 2,580,150
4,800 Indiana Health Facilities Financing Authority, Deaconess
Hospital Refg (MBIA Insured) ................................ 5.75 3/ 1/15 4,181,808
5,000 Cedar Rapids, Iowa, St Lukes-Methodist Hospital Refg
Ser 1993 (FGIC Insured) ..................................... 5.75 8/15/22 4,276,100
5,000 Kentucky Economic Development Finance Authority, St Elizabeth
Medical Center Inc Ser 1993 A
(FGIC Insured) ............................................. 6.00 12/ 1/22 4,530,200
14,000 Louisiana Public Facilities Authority, Our Lady of the Lake
Regional Medical Center Ser 1993 D & E (FSA Insured) ........ 5.758 12/ 3/21 12,033,980
10,000 Maine Health & Higher Educational Facilities Authority,
Ser 1993 A (FSA Insured) .................................... 5.50 7/ 1/23 8,080,900
5,000 Massachusetts Health & Educational Facilities Authority, Lahey
Clinic Medical Center Ser B (MBIA Insured) .................. 5.625 7/ 1/15 4,312,550
10,000 Michigan Hospital Finance Authority, Oakwood Hospital
Obligated Group Refg Ser 1993 A (FGIC Insured) .............. 5.625 11/ 1/18 8,535,200
5,000 Washington County Hospital Authority, Pennsylvania, The
Washington Hospital Ser 1993 (AMBAC Insured) ................ 5.625 7/ 1/23 4,218,450
4,000 Chattanooga-Hamilton County Hospital Authority, Tennessee,
Erlanger Medical Center Refg Ser 1993
(FSA Insured) .............................................. 5.50 10/ 1/13 3,412,880
5,000 Shelby County Health, Educational & Housing Facility Board,
Tennessee, LeBonheur Children's Medical Center Inc Ser D
(MBIA Insured) .............................................. 5.50 8/15/19 4,158,100
5,000 Sullivan County Health, Educational & Housing Facilities
Board, Tennessee, Holston Valley Health Care Inc
Ser 1993 (MBIA Insured) .................................... 5.75 2/15/20 4,289,450
1,750 Chesapeake Hospital Authority, Virginia, Chesapeake Hospital
Refg Ser 1993 (MBIA Insured) ................................ 5.50 7/ 1/12 1,517,827
Wisconsin Health & Educational Facilities Authority,
3,000 Lutheran Benevolent Development Fund Inc Ser 1993 B (FSA
Insured) .................................................... 5.50 2/15/09 2,621,850
5,500 Sisters of the Sorrowful Mother Health Care Ser AA (MBIA
Insured) .................................................... 6.25 6/ 1/20 5,048,065
- - ----------- -------------
97,400 83,568,320
- - ----------- -------------
<PAGE>
<PAGE>
<CAPTION>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1994 (continued)
- - -----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (9.5%)
$ 7,500 Adams County, Colorado, Public Service Co of Colorado Refg
1993 Ser A (MBIA Insured) ................................... 5.875% 4/ 1/14 $ 6,870,825
15,000 Indiana Development Finance Authority, PSI Energy Inc Ser 1993
B (AMT) (MBIA Insured) ...................................... 5.75 2/15/28 12,540,600
4,900 Monroe County, Michigan, Detroit Edison Co Ser CC (AMT) (MBIA
Insured) .................................................... 6.55 6/ 1/24 4,732,224
5,400 Forsyth, Montana, Puget Sound Power & Light Co
Ser 1993 (MBIA Insured) ..................................... 5.875 4/ 1/20 4,722,948
5,000 Washoe County, Nevada, Sierra Pacific Power Co
Ser 1990 (AMT) (MBIA Insured) ............................... 6.65 6/ 1/17 4,851,950
6,000 New York State Energy Research & Development Authority,
Brooklyn Union Gas Co Ser D-1 & 2 (AMT) (MBIA Insured) ..... 5.635 7/ 8/26 5,034,600
20,000 Brazos River Authority, Texas, Texas Utilities Electric Co Ser
1993 A (AMT) (AMBAC Insured) ................................ 6.05 4/ 1/25 17,709,800
- - ----------- -------------
63,800 56,462,947
- - ----------- -------------
MORTGAGE REVENUE -MULTI-FAMILY (1.4%)
1,000 Kentucky Housing Corporation, 1993 Ser A (MBIA Insured) ...... 5.60 7/ 1/13 890,970
8,675 West Virginia Housing Development Fund, Multi Unit Ser A
(AMBAC Insured) ............................................. 5.65 11/ 1/21 7,401,597
- - ----------- -------------
9,675 8,292,567
- - ----------- -------------
MORTGAGE REVENUE -SINGLE FAMILY (6.2%)
17,445 Connecticut Housing Finance Authority, 1992 Ser A-2 (AMT)
(Secondary FSA Insured) ..................................... 6.05 11/15/25 15,415,623
1,195 Maine Housing Authority, Mortgage Purchase 1990 Ser A-6 (AMT)
(Secondary MBIA Insured) .................................... 6.35 11/15/22 1,093,258
13,000 New Jersey Housing & Mortgage Finance Agency, Home Buyer 1990
Ser F-3 (AMT) (MBIA Insured) ................................ 5.95 4/ 1/25 11,145,420
10,000 Virginia Housing Development Authority, 1992 Ser B (AMT)
(Secondary FSA Insured) ..................................... 6.30 1/ 1/27 9,072,700
- - ----------- -------------
41,640 36,727,001
- - ----------- -------------
PUBLIC FACILITIES REVENUE (5.4%)
12,000 California Public Works Board, Dept of Corrections Refg 1993
Ser A (AMBAC Insured) ....................................... 5.00 12/ 1/19 9,308,880
5,000 Florida Department of Management Services, Pool Refg Ser 1992
(AMBAC Insured) ............................................. 5.40 9/ 1/14 4,272,200
10,000 Chicago Public Building Commission, Illinois, Ser A 1993 (MBIA
Insured) .................................................... 5.75 12/ 1/18 8,683,900
10,000 Metropolitan Pier & Exposition Authority, Illinois, McCormick
Place Ser 1992 A (Secondary AMBAC Insured) .................. 6.50 6/15/27 9,470,100
- - ----------- -------------
37,000 31,735,080
- - ----------- -------------
STUDENT LOAN REVENUE (2.7%)
18,000 Pennsylvania Higher Education Assistance Agency,
- - ----------- 1988 Ser D (AMT) (AMBAC Insured) ............................. 6.05 1/ 1/19 16,259,040
<PAGE>
<PAGE>
<CAPTION>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1994 (continued)
- - -----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
TRANSPORTATION FACILITIES REVENUE (9.0%)
$ 5,000 Tucson, Arizona, Street & Highway Jr Lien Refg Ser 1993 (MBIA
Insured) .................................................... 5.50% 7/ 1/12 $ 4,430,500
7,000 Chicago, Illinois, Chicago-O'Hare Intl Airport Second Lien
Refg 1993 Ser A (AMT) (MBIA Insured) ........................ 5.60 1/ 1/18 5,834,500
25,000 Regional Transportation Authority, Illinois, Ser 1993 B (FGIC
Insured) .................................................... 5.85 6/ 1/23 21,602,000
Kentucky Turnpike Authority, Eco Dev Road Revitalization
2,000 Refg Ser 1993 (AMBAC Insured) ................................ 5.50 7/ 1/09 1,814,160
3,000 Refg Ser 1993 (AMBAC Insured) ................................ 5.50 7/ 1/11 2,652,360
3,125 Allegheny County, Pennsylvania, Pittsburgh Intl Airport 1993
Ser C (AMT) (FSA Insured) ................................... 5.625 1/ 1/23 2,609,062
10,000 Pennsylvania Turnpike Commission, Refg Ser O
(FGIC Insured) .............................................. 5.50 12/ 1/17 8,567,900
3,250 Salt Lake City, Utah, Airport Refg Ser 1993 B
(FGIC Insured) .............................................. 5.875 12/ 1/18 2,844,043
3,000 Richmond Metropolitan Authority, Virginia, Expressway 1992 Ser
B (FGIC Insured) ............................................ 6.25 7/15/22 2,826,990
- - ----------- -------------
61,375 53,181,515
- - ----------- -------------
WATER & SEWER REVENUE (11.2%)
20,000 Central Lake County Joint Action Water Agency, Illinois, Refg
Ser 1993 (FGIC Insured) ..................................... 5.375 5/ 1/20 16,179,400
10,000 Louisville & Jefferson County Metropolitan Sewer District,
Kentucky, Ser 1993 (MBIA Insured) ........................... 5.30 5/15/19 8,210,600
3,000 Detroit, Michigan, Sewage Refg Ser A (FGIC Insured) .......... 5.70 7/ 1/13 2,662,200
15,000 Houston, Texas, Water & Sewer 1992 Ser C
(MBIA Insured) .............................................. 5.75 12/ 1/15 13,263,600
5,000 Loudoun County Sanitation Authority, Virginia,
Refg Ser 1992 (FGIC Insured) ................................ 6.25 1/ 1/30 4,671,200
Seattle, Washington, Sewer
10,000 Refg Ser Y (FGIC Insured) .................................... 5.70 1/ 1/15 8,692,300
10,000 Refg Ser X (FGIC Insured) .................................... 5.50 1/ 1/16 8,432,600
5,000 West Virginia Water Development Authority, Loan Program II
Refg Ser A-11 (FSA Insured) ................................. 5.50 11/ 1/23 4,058,350
- - ----------- -------------
78,000 66,170,250
- - ----------- -------------
OTHER REVENUE (4.2%)
5,000 Indianapolis, Indiana, Gas Utility Ser 1994 A
(AMBAC Insured) ............................................. 5.875 6/ 1/24 4,339,700
14,000 Marion County Convention & Recreation Facilities Authority,
Indiana, Excise Tax Refg Ser 1993 A
(AMBAC Insured) ............................................. 5.50 6/ 1/21 11,494,560
10,000 Rhode Island Depositors Economic Protection Corporation, Refg
1992 Ser B (MBIA Insured) ................................... 6.00 8/ 1/17 8,962,500
- - ----------- -------------
29,000 24,796,760
- - ----------- -------------
652,215 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $639,993,546) ................................. 559,582,186
- - ----------- -------------
<PAGE>
<PAGE>
<CAPTION>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS October 31, 1994 (continued)
- - -----------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- - ----------- -------- ---------- -------------
<S> <C> <C> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATION (1.9%)
$ 12,000 West Side Calhoun County Development Corporation, Texas, SOHIO
Chemical Co/BP -North America
Ser 1985 (Tender 11/1/94) (Identified Cost $12,000,000) ..... 3.40%* 12/ 1/15 $ 12,000,000
- - ----------- -------------
$664,215 TOTAL INVESTMENTS (IDENTIFIED COST $651,993,546) (a) ......... 96.4% 571,582,186
=========== CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ........................... 3.6 21,176,585
----- -------------
NET ASSETS ............................................................... 100.0% $592,758,771
===== =============
<FN>
- - ---------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
* Variable or floating rate security. Coupon rate shown reflects current
rate.
(a) The aggregate cost for federal income tax purposes is $651,993,546;
the aggregate gross and net unrealized depreciation is $80,411,360.
</TABLE>
See Notes to Financial Statements
- - -----------------------------------------------------------------------------
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
October 31, 1994
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Alabama .............. 0.6%
Arizona .............. 0.8
California ........... 3.9
Colorado ............. 1.2
Connecticut .......... 2.6
District of Columbia 2.0
Florida .............. 0.7
Georgia .............. 1.3
Illinois ............. 14.2%
Indiana .............. 6.1
Iowa ................. 0.7
Kentucky ............. 3.0
Louisiana ............ 2.0
Maine ................ 1.6
Massachusetts ........ 3.3
Michigan ............. 5.3
Montana .............. 0.8%
Nevada ............... 3.3
New Jersey ........... 1.9
New York ............. 0.9
North Carolina ....... 4.3
Pennsylvania ......... 5.3
Rhode Island ......... 2.2
South Carolina ....... 3.4
Tennessee ............ 2.0%
Texas ................ 10.7
Utah ................. 0.5
Virginia ............. 3.0
Washington ........... 4.3
West Virginia ........ 1.9
Wisconsin ............ 2.6
-------
Total ................ 96.4%
=======
</TABLE>
<PAGE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS
- - -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $651,993,546) (Note 1) . $571,582,186
Cash ..................................... 15,640,760
Receivable for:
Interest ................................. 12,588,962
Investments sold ......................... 8,541,427
Deferred organizational expenses (Note 1) 23,931
Prepaid expenses .......................... 127,722
--------------
TOTAL ASSETS .......................... 608,504,988
--------------
LIABILITIES:
Payable for:
Shares of beneficial interest purchased:
Preferred ............................... 15,000,000
Common .................................. 459,819
Investment management fee (Note 2) ...... 194,858
Accrued expenses (Note 3) ................. 91,540
--------------
TOTAL LIABILITIES ..................... 15,746,217
--------------
NET ASSETS:
Preferred shares of beneficial interest
(1,000,000 shares authorized of
non-participating $.01 par value 3,900
shares outstanding) (Note 4) ............. 195,000,000
--------------
Common shares of beneficial interest
(unlimited shares authorized of $.01 par
value, 34,865,113 shares outstanding)
(Note 5) ................................. 486,262,943
Unrealized depreciation on investments ... (80,411,360)
Accumulated undistributed net investment
income ................................... 2,085,395
Accumulated net realized loss on
investments .............................. (10,178,207)
--------------
NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS .................. 397,758,771
--------------
TOTAL NET ASSETS ...................... $592,758,771
==============
NET ASSET VALUE PER COMMON SHARE,
($397,758,771 divided by 34,865,113
common shares outstanding) ............... $11.41
==============
<CAPTION>
STATEMENT OF OPERATIONS
For the year ended October 31, 1994
- - -----------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
INTEREST INCOME ..................... $42,621,691
---------------
EXPENSES
Investment management fee (Note 2) 2,521,269
Auction commission fees ........... 649,679
Transfer agent fees and expenses
(Note 3) ........................ 189,852
Professional fees ................. 120,090
Auction agent fees ................ 107,092
Shareholder reports and notices ... 73,727
Registration fees ................. 40,900
Trustees' fees and expenses
(Note 3) ........................ 29,810
Organizational expenses (Note 1) .. 7,198
Other ............................. 41,149
---------------
TOTAL EXPENSES ................... 3,780,766
---------------
NET INVESTMENT INCOME ........... 38,840,925
---------------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS (Note 1):
Net realized loss on investments .. (10,178,207)
Net change in unrealized
appreciation on investments ..... (114,431,371)
---------------
NET LOSS ON INVESTMENTS .......... (124,609,578)
---------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ..... $ (85,768,653)
===============
</TABLE>
<PAGE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 26,
1993 THROUGH
FOR THE YEAR ENDED OCTOBER 31, 1993
OCTOBER 31, 1994 (NOTE 1)
------------------ ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ............................................... $ 38,840,925 $ 22,358,513
Net realized gain (loss) on investments ............................. (10,178,207) 359,635
Net change in unrealized appreciation on investments ................ (114,431,371) 34,020,011
------------------ ----------------
Net increase (decrease) in net assets resulting from operations ... (85,768,653) 56,738,159
------------------ ----------------
Dividends to preferred shareholders from net investment income ...... (7,323,339) (3,920,320)
Dividends and distributions to common shareholders from:
Net investment income ............................................... (31,802,504) (16,067,880)
Net realized gain on investments .................................... (359,635) --
------------------ ----------------
Total dividends and distributions .................................. (39,485,478) (19,988,200)
------------------ ----------------
Increase (decrease) from transactions in shares of beneficial
interest (Notes 4 & 5):
Common .............................................................. (10,865,631) 497,028,565
Preferred ........................................................... (55,000,000) 250,000,000
------------------ ----------------
Total transactions ................................................. (65,865,631) 747,028,565
------------------ ----------------
Total increase (decrease) .......................................... (191,119,762) 783,778,524
NET ASSETS:
Beginning of period ................................................. 783,878,533 100,009
------------------ ----------------
END OF PERIOD (including undistributed net income of $2,085,395 and
$2,370,313, respectively) .......................................... $ 592,758,771 $783,878,533
================== ================
</TABLE>
See Notes to Financial Statements
<PAGE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
- - -----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- InterCapital Insured Municipal
Income Trust (the "Trust") is registered under the Investment Company Act of
1940, as amended, as a diversified, closed-end management investment company.
The Trust was organized as a Massachusetts business trust on March 12, 1992
and had no operations other than those relating to organizational matters and
the issuance of 7,113 common shares of beneficial interest to Dean Witter
InterCapital Inc. (the "Investment Manager") for $100,009. The Trust
commenced operations on February 26, 1993.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- Portfolio securities are valued for the
Trust by an outside indepen-dent pricing service approved by the
Trustees. The pricing service has informed the Trust that in valuing the
Trust's 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 Trust's
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 on the
identified cost method. The Trust amortizes premiums and discounts on
securities purchased 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 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.
<PAGE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
- - ------------------------------------------------------------------------
E. Organizational and Offering Expenses -- The Investment Manager paid
the organizational and offering expenses of the Trust's common shares in
the amounts of $36,000 and $562,354, respectively, and paid $413,581 in
offering expenses of the Trust's preferred shares. The organizational
expenses have been reimbursed by the Trust for the full amount thereof
and are being amortized by the straight-line method over a period not to
exceed five years from the commencement of operations. Offering expenses
have been reimbursed by the Trust and were charged to capital at the
time of issuance of the Trust's respective shares.
2. INVESTMENT MANAGEMENT AGREEMENT -- Pursuant to an Investment Management
Agreement, the Trust pays its Investment Manager a management fee, calculated
weekly and payable monthly, by applying the annual rate of 0.35% to the
Trust's average weekly net assets.
Under the terms of the Agreement, in addition to managing the Trust's
investments 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, 1994 aggregated
$49,318,850 and $125,881,233, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At October 31, 1994, the Trust had transfer agent
fees and expenses payable of approximately $16,000.
Effective January 1, 1994, the Trust adopted an unfunded noncontributory
defined benefit pension plan covering all independent Trustees of the Trust
who will have served as an independent Trustee 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, 1994, included in Trustees' fees and
expenses in the Statement of Operations, amounted to $9,946. At October 31,
1994, the Trust had an accrued pension liability of $9,883 which is included
in accrued expenses in the Statement of Assets and Liabilities.
Dean Witter Distributors Inc., the Trust's principal underwriter and an
affiliate of the Investment Manager has informed the Trust that it received
approximately $3,938,000 in underwriting discounts and commissions in
connection with the offering of the preferred shares.
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. On
April 15, 1993, the Trust issued 5,000 shares of Auction Rate Preferred
Shares ("Preferred Shares") consisting of 1,000 shares each of Series One
through Five for gross total proceeds of $250,000,000. Underwriting discounts
and commissions were charged to capital at the time of issuance. The
preferred shares 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.
<PAGE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
- - -----------------------------------------------------------------------------
During the year ended October 31, the Trust purchased and retired
preferred shares as follows:
<TABLE>
<CAPTION>
SERIES SHARES AMOUNT
- - -------- -------- -------------
<S> <C> <C>
1 300 $15,000,000
2 100 5,000,000
4 400 20,000,000
5 300 15,000,000
-------- -------------
Total 1,100 $55,000,000
======== =============
</TABLE>
Dividends, which are cumulative, are reset through auction procedures.
<TABLE>
<CAPTION>
RESET RANGE OF
SHARES* SERIES RATE* DATE DIVIDEND RATES**
- - --------- -------- -------- --------- ----------------
<S> <C> <C> <C> <C>
700 1 3.15 % 11/4/94 2.08 % -3.41 %
900 2 3.389 1/6/95 3.10 -3.389
1,000 3 3.45 3/3/95 2.649 -3.45
600 4 3.40 11/4/94 2.70 -3.53
700 5 3.30 11/4/94 3.125 -3.45
<FN>
- - ---------------
* As of October 31, 1994.
** For the period ended October 31, 1994.
</TABLE>
Subsequent to October 31, 1994 and up through December 13, 1994, the Trust
paid dividends to Series 2, 3 at a rate of 3.89% and 3.45%, respectively, and
to each of the Series 1, 4 and 5 at rates ranging from 2.875% to 3.50%, 3.32%
to 3.73%, and 3.125% to 3.85%, respectively, in the aggregate amount of
$810,590.
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.
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 (Note 1) ................................................ 7,113 $ 71 $ 99,938
Shares issued at close of public offering on February 26, 1993*.. 33,000,000 330,000 463,087,646
Shares issued on March 25, 1993 to cover over-allotment ........ 2,700,000 27,000 37,935,000
Offering costs and underwriting discounts associated with the
issuance of preferred shares ................................... (4,351,081)
------------ ---------- --------------
Balance, October 31, 1993 ....................................... 35,707,113 357,071 496,771,503
Treasury shares purchased and retired (weighted average
discount 3.62%)** .............................................. (842,000) (8,420) (10,857,211)
------------ ---------- --------------
Balance, October 31, 1994 ....................................... 34,865,113 $348,651 $485,914,292
============ ========== ==============
<FN>
- - ---------------
* Net of offering costs of $562,354.
** The Trustees have voted to retire the shares purchased.
</TABLE>
<PAGE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
- - -----------------------------------------------------------------------------
6. FEDERAL INCOME TAX STATUS -- At October 31, 1994, the Trust had a net
capital loss carryover of approximately $10,178,000 which will be available
through October 31, 2002, to offset future capital gains, to the extent
provided by regulations.
7. DIVIDENDS TO COMMON SHAREHOLDERS --The Trust has declared the following
dividends from net investment income --
<TABLE>
<CAPTION>
AMOUNT PER
DECLARATION DATE SHARE RECORD DATE PAYABLE DATE
- - ----------------- ----------- ----------------- -----------------
<S> <C> <C> <C>
November 1, 1994 $0.075 November 11, 1994 November 25, 1994
November 29, 1994 $0.075 December 9, 1994 December 23, 1994
</TABLE>
8. SELECTED QUARTERLY FINANCIAL DATA --(unaudited)
<TABLE>
<CAPTION>
QUARTERS ENDED*
----------------------------------------------------------------------------------
10/31/94 7/31/94 4/30/94 1/31/94
-------------------- ------------------ -------------------- ------------------
PER PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE TOTAL SHARE
---------- -------- --------- ------- ---------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total investment income ... $ 10,537 $ 0.30 $10,484 $0.30 $ 10,633 $0.30 $10,968 $0.31
Net investment income ..... 9,527 0.27 9,561 0.27 9,722 0.28 10,031 0.28
Net realized and unrealized
gain (loss) on investments (51,331) (1.45) 8,759 0.25 (85,898) (2.43) 3,861 0.11
<CAPTION>
Quarters Ended*
------------------------------------------------------------
10/31/93 7/31/93 4/30/93**
------------------ -------------------- ------------------
PER PER PER
TOTAL SHARE TOTAL SHARE TOTAL SHARE
--------- ------- ---------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Total investment income .......................... $11,110 $0.31 $ 10,150 $0.29 $ 3,266 $ 0.09
Net investment income ............................ 10,188 0.29 9,321 0.26 2,850 0.08
Net realized and unrealized gain (loss) on
investments ..................................... 28,602 0.80 7,129 0.20 (1,351) (0.04)
<FN>
- - ---------------
* Totals expressed in thousands of dollars.
** For the period February 26, 1993 (commencement of operations) through April 30, 1993.
</TABLE>
<PAGE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
FINANCIAL HIGHLIGHTS
- - -----------------------------------------------------------------------------
Selected ratios and per share data for a common share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 26, 1993*
FOR THE YEAR ENDED THROUGH OCTOBER
OCTOBER 31, 1994** 31, 1993**
------------------ ------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ................ $ 14.95 $ 14.06
------------------ ------------------
Net investment income ............................... 1.10 0.63
Net realized and unrealized loss on investments .... (3.52) 0.96
------------------ ------------------
Total from investment operations .................... (2.42) 1.59
------------------ ------------------
Less dividends, distributions and other charges:
Dividends from net investment income .............. (0.90) (0.45)
Common share equivalent of dividends paid to
preferred shareholders .......................... (0.21) (0.11)
Offering costs charged against capital ............ -- (0.14)
Distributions from net realized gains on
investments ..................................... (0.01) --
------------------ ------------------
Total dividends, distributions and other charges ... (1.12) (0.70)
------------------ ------------------
Net asset value, end of period ...................... $ 11.41 $ 14.95
================== ==================
Market value, end of period ......................... $ 10.375 $ 15.00
================== ==================
TOTAL INVESTMENT RETURN + ........................... (25.81)% 3.05%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ............ $592,759 $783,879
Ratio to average net assets of common shareholders:
Total expenses .................................... 0.80% 0.63%(2)
Net investment income before preferred stock
dividends ....................................... 8.23% 6.49%(2)
Preferred stock dividends ......................... 1.55% 1.14%(2)
Net investment income available to common
shareholders .................................... 6.68% 5.35%(2)
Asset coverage on preferred shares at end of period 304% 313%
Portfolio turnover rate ........................... 7% 3%(1)
<FN>
- - ---------------
* Commencement of operations.
** The per share amounts were computed using an average number of shares
outstanding during the period.
+ Total investment return is based upon the current market value on the
last day of each period reported. Dividends and distributions, if any are
assumed to be reinvested at the prices obtained under the Trust's
dividend reinvestment plan. Total investment return does not reflect
sales charges or brokerage commissions.
(1) Not annualized.
(2) Annualized.
</TABLE>
See Notes to Financial Statements
<PAGE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- - -----------------------------------------------------------------------------
To the Shareholders and Trustees of InterCapital Insured Municipal Income
Trust
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of InterCapital
Insured Municipal Income Trust (the "Trust") at October 31, 1994, the results
of its operations for the year then ended, and the changes in its net assets
and the financial highlights for the year then ended and for the period
February 26, 1993 (commencement of operations) through October 31, 1993, 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 owned at October 31, 1994 by correspondence with
the custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
December 13, 1994
1994 FEDERAL TAX NOTICE (unaudited)
During the year ended October 31, 1994, the Trust paid the following per
share amounts from tax-exempt income: $.090 to common shareholders, $1,245 to
series 1 preferred shareholders, $1,585 to series 2 preferred shareholders,
$1,492 to series 3 preferred shareholders, $1,363 to series 4 preferred
shareholders, $1,514 to series 5 preferred shareholders.
<PAGE>
<PAGE>
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
James F. Willison
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center--Plaza 2
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
INTERCAPITAL
INSURED
MUNICIPAL
INCOME TRUST
ANNUAL REPORT
OCTOBER 31, 1994
