<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- -----------------------------------------------------------------------------
Fixed-income market conditions have steadily improved since late last
year. Bonds began to rally in November 1994 on signs of slower economic
growth in the wake of a progressively tighter Federal Reserve monetary
policy. The recent trend toward lower long-term interest rates is in marked
contrast to most of 1994 when rapidly rising rates created one of the most
severe bear markets for bonds in recent history.
MUNICIPAL MARKET CONDITIONS
Long-term municipal bond yields, as tracked by The Bond Buyer Revenue Bond
Index*, dropped from a high of 7.37 percent in November 1994 to 6.29 percent
at the end of April 1995. This 108 basis point decline in yield corresponded
to a 13 percent price increase for 30-year municipal bonds. Short-term
municipal interest rates remained basically unchanged over the past six
months. Thus, the yield spread or difference between short-term and long-term
municipal bond interest rates narrowed as long rates declined.
The seasonal demand for municipals in December more than offset the
uncertainty caused by the Orange County, California bankruptcy filing. The
market anticipated cash inflows from the reinvestment of coupons and the
proceeds from bond calls and maturities in January at a time of scarce
supply. Tax-exempt bonds outperformed U.S. Treasury bonds through February
1995. The ratio of the Revenue Bond Index yield to the 30-year U.S. Treasury
yield fell from a high of 92 percent in November to 84 percent at the end of
February. A declining ratio means that municipal bond prices have been
stronger than U.S. Treasury prices. Tax reform proposals that advanced the
concept of a flat tax were partially responsible for municipals
underperforming Treasuries in March and April. By the end of April, the
Revenue/Treasury yield ratio had risen to 86 percent.
The pace of new-issue underwriting over the first four months of 1995 was
40 percent below the same period last year. With bond maturities and calls
estimated to exceed new issues coming to market in 1995 the outstanding
supply of municipal securities is expected to decline. This imbalance should
continue to strengthen municipal market conditions.
PERFORMANCE
The net asset value (NAV) of InterCapital Insured Municipal Income Trust
(IIM) increased from $11.41 to $12.75 per share during the six-month period
ended April 30, 1995. Based on this NAV change plus reinvestment of tax-free
dividends totaling $0.41 per share, the Trust's total NAV return for the
period was 16.00 percent. Concurrently, the Trust's market price on the New
York Stock Exchange rose from $10.375 to $11.25 per share. Based on this
stock price change and reinvestment of dividends, the Trust's total market
return for the period was 12.65 percent. The Trust began the period trading
at a 9 percent discount to NAV and closed at an 11.7 percent discount.
- ----------------
*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>
PORTFOLIO STRUCTURE
As of April 30, 1995, IIM's long-term investments were diversified among
12 municipal sectors and 72 issuers. The three largest sectors - electric,
hospital and water and sewer revenue - represented 45 percent of net assets.
The average maturity and call protection of the Trust's long-term holdings
were 25 years and 8 years, respectively. At the end of the period, the
Trust's net assets totaled $589 million.
Each issue in the portfolio was backed by triple "A" rated bond insurers.
Municipal bond insurance supports timely payment of principal and interest.
As of April 30, 1995, the distribution of bond insurers was:
<TABLE>
<CAPTION>
MUNICIPAL BOND INSURANCE PERCENT
- ----------------------------------------------------- ---------
<S> <C>
AMBAC Indemnity Corporation (AMBAC) .................. 27%
Financial Guaranty Insurance Company (FGIC) ......... 26
Financial Security Assurance Inc. (FSA) .............. 14
Municipal Bond Investors Assurance Corporation (MBIA) 33
</TABLE>
THE IMPACT OF LEVERAGING
The Trust's common shares continue to be leveraged. As reported
previously, leverage is created through the issuance of auction rate
preferred shares (ARPS). The ARPS auction periods normally range between one
week and one year. Proceeds from ARPS underwritings are 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 cost of the preferred shares (dividends plus operating and
remarketing expenses). Although higher short-term interest rates have
narrowed the yield spread, ARPS continue to provide positive incremental
income to common shareholders.
Leverage also impacts net asset value. ARPS normally account for one-third
of a leveraged municipal bond 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. Since the value of the preferred shares does
not fluctuate, the NAV of the common shares reflects the full market price
change of the portfolio's investments.
As bond prices eroded in 1994 the degree of leverage and volatility
increased. The purchase and retirement of ARPS mitigated the impact of
leverage. However, as bonds rallied in 1995, leverage improved performance.
Over the last six months, the Trust purchased and retired $40 million in par
amount of ARPS. Currently, $155 million ARPS are outstanding. Additional ARPS
purchases may occur if ARPS become unprofitable (a negative yield spread) or
the degree of leverage increases beyond its normal range.
<PAGE>
DIVIDEND RESERVES
To more accurately reflect the income being earned by the Trust, on
January 27, 1995 the monthly dividend was reduced from $0.075 to $0.065 per
share. At the end of the period, the Trust had undistributed net investment
income of $0.037 per share available for future distributions, versus $0.06
per share on October 31, 1994. This dividend reserve or "cushion" helps
sustain the Trust's current monthly dividend. Higher yields in future ARPS
auctions and ARPS retirements may further erode the cushion. Future declines
in IIM's cushion may lead to further adjustment of the common-share dividend.
LOOKING AHEAD
Slower economic growth in 1995 and the extent of the Federal Reserve
Board's previous interest rate moves have improved bond market expectations.
Investor demand for municipal securities should also 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 continue to determine the Trust's future level of
income and influence its market price.
The Trust's procedure for reinvestment of all dividends and distributions
on common shares is through purchase in the open market. This method helps to
support the market value of the Trust's shares. In addition, we would like to
remind you that the Trustees have approved a procedure whereby the Trust,
when appropriate, may purchase shares in the open market or in privately
negotiated transactions at a price not above market value or net asset value,
whichever is lower at the time of purchase. During the six-month period ended
April 30, 1995, the Trust purchased 760,300 shares of common stock at a
weighted average discount of 10.36 percent. The Trust may also utilize
procedures to reduce or eliminate the amount of outstanding ARPS, including
their purchase in the open market or in privately negotiated transactions.
We appreciate your ongoing support of InterCapital Insured Municipal
Income Trust and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
Charles A. Fiumefreddo
Chairman of the Board
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (97.6%)
GENERAL OBLIGATION (9.0%)
District of Columbia,
$ 5,000 Refg Ser 1993 B (AMBAC) ........................................ 5.50 % 06/01/09 $ 4,707,450
6,000 Refg Ser 1993 B (FSA) .......................................... 5.50 06/01/10 5,569,560
3,400 Aurora, Illinois, Refg Ser 1993 A (FGIC) ........................ 5.125 01/01/19 2,922,708
8,500 Chicago, Illinois, Refg Ser 1993 A (MBIA) ....................... 5.50 01/01/17 7,719,700
10,000 Cook County, Illinois, Ser B (FGIC) ............................. 5.50 11/15/22 8,959,700
5,000 River Rouge School District, Michigan, 1993 Bldg & Site
Unltd Tax (FSA) ................................................. 5.625 05/01/22 4,625,350
3,000 Vicksburg Community Schools, Michigan, 1993 Refg (MBIA) ........ 5.625 05/01/20 2,807,400
7,215 Clark County Sanitation District, Nevada, Refg 1993 (FGIC) ..... 5.70 07/01/12 6,924,452
9,385 Washoe County, Nevada, Reno - Sparks Convention Ltd Tax Ser 1993
A (FGIC) ........................................................ 5.75 07/01/22 8,762,493
- ----------- --------------
57,500 52,998,813
- ----------- --------------
EDUCATIONAL FACILITIES REVENUE (3.7%)
4,000 Alabama State University, Gen Tuition & Fee Ser 1993 (MBIA) .... 5.70 05/01/15 3,816,480
5,050 Indiana University, Student Fee Ser J (FGIC) .................... 5.00 08/01/18 4,291,743
10,000 Wayne State University, Michigan, Ser 1993 (AMBAC) .............. 5.50 11/15/18 9,243,200
Rhode Island Health & Educational Building Corporation,
2,500 Providence College Ser 1993 (MBIA) ............................. 5.60 11/01/15 2,310,850
2,500 Providence College Ser 1993 (MBIA) ............................. 5.60 11/01/22 2,263,550
- ----------- --------------
24,050 21,925,823
- ----------- --------------
ELECTRIC REVENUE (18.8%)
16,000 Redding, California, Ser 1993 A COPs (FGIC) ..................... 5.684 06/01/19 15,011,680
Massachusetts Municipal Wholesale Electric Company,
8,000 1993 Ser A (AMBAC) ............................................. 5.00 07/01/10 7,172,800
10,000 1993 Ser A (AMBAC) ............................................. 5.45 07/01/18 9,152,400
8,000 North Carolina Eastern Municipal Power Agency, Refg
Ser 1993 B (FGIC) ............................................... 5.50 01/01/17 7,336,400
20,000 North Carolina Municipal Power Agency #1, Catawba Ser 1993
(AMBAC) ......................................................... 5.60 01/01/20 18,731,400
10,000 Piedmont Municipal Power Agency, South Carolina, Refg
Ser 1993 (AMBAC) ................................................ 5.375 01/01/25 8,922,700
15,000 South Carolina Public Service Authority, 1993 Refg Ser A (MBIA) 5.50 07/01/21 13,683,450
6,000 Lower Colorado River Authority, Texas, Jr Lien Refg 4th Ser
(FSA) ........................................................... 5.625 01/01/17 5,597,760
8,000 Texas Municipal Power Agency, Refg Ser 1993 (MBIA) .............. 5.25 09/01/12 7,349,840
10,000 Washington Public Power Supply System, Nuclear Proj #1, Refg Ser
1993 A (MBIA) ................................................... 5.70 07/01/17 9,253,500
10,000 Wisconsin Public Power Incorporated, Refg Ser 1993 A (AMBAC) ... 5.25 07/01/21 8,811,700
- ----------- --------------
121,000 111,023,630
- ----------- --------------
HOSPITAL REVENUE (14.0%)
2,100 District of Columbia, Children's Hospital Refg Ser 1992 A (FGIC) 6.25 07/15/10 2,101,197
9,250 Fulton-DeKalb Hospital Authority, Georgia, Refg Ser 1993 (MBIA) 5.50 01/01/20 8,425,362
3,000 Illinois Health Facilities Authority, Franciscan Sisters Health
Care 1992 Ser C (MBIA) .......................................... 5.75 09/01/18 2,778,690
4,800 Indiana Health Facilities Financing Authority, Deaconess
Hospital Refg (MBIA) ............................................ 5.75 03/01/15 4,508,016
5,000 Cedar Rapids, Iowa, St Lukes-Methodist Hospital Refg
Ser 1993 (FGIC) ................................................. 5.75 08/15/22 4,618,800
5,000 Kentucky Economic Development Finance Authority,
St Elizabeth Medical Center Inc Ser 1993 A (FGIC) ............... 6.00 12/01/22 4,900,550
</TABLE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1995 (unaudited) (continued)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- ---------- --------------
<C> <S> <C> <C> <C>
$12,000 Louisiana Public Facilities Authority, Our Lady of the Lake
Regional Medical Center Ser 1993 D & E (FSA) .................... 5.90 % 12/03/21 $11,407,440
10,000 Maine Health & Higher Educational Facilities Authority,
Ser 1993 A (FSA) ................................................ 5.50 07/01/23 8,878,500
5,000 Massachusetts Health & Educational Facilities Authority,
Lahey Clinic Medical Center Ser B (MBIA) ........................ 5.625 07/01/15 4,671,050
10,000 Michigan Hospital Finance Authority, Oakwood Hospital Obligated
Group Refg Ser 1993 A (FGIC) .................................... 5.625 11/01/18 9,189,100
5,000 Washington County Hospital Authority, Pennsylvania,
The Washington Hospital Ser 1993 (AMBAC) ........................ 5.625 07/01/23 4,625,050
4,000 Chattanooga-Hamilton County Hospital Authority, Tennessee,
Erlanger Medical Center Refg Ser 1993 (FSA) ..................... 5.50 10/01/13 3,719,600
5,000 Shelby County Health, Educational & Housing Facility Board,
Tennessee, LeBonheur Children's Medical Center Inc Ser D (MBIA) 5.50 08/15/19 4,551,300
Wisconsin Health & Educational Facilities Authority,
3,000 Lutheran Benevolent Development Fund Inc Ser 1993 B (FSA) ..... 5.50 02/15/09 2,857,590
5,500 Sisters of the Sorrowful Mother Health Care Ser AA (MBIA) ..... 6.25 06/01/20 5,410,680
- ----------- --------------
88,650 82,642,925
- ----------- --------------
INDUSTRIAL DEVELOPMENT/POLLUTION CONTROL REVENUE (9.5%)
7,500 Adams County, Colorado, Public Service Co of Colorado
Refg 1993 Ser A (MBIA) .......................................... 5.875 04/01/14 7,352,775
15,000 Indiana Development Finance Authority, PSI Energy Inc
Ser 1993 B (AMT) (MBIA) ......................................... 5.75 02/15/28 13,611,000
4,900 Monroe County, Michigan, Detroit Edison Co Ser CC (AMT) (MBIA) . 6.55 06/01/24 4,982,712
5,400 Forsyth, Montana, Puget Sound Power & Light Co Ser 1993 (MBIA) . 5.875 04/01/20 5,184,972
5,000 Washoe County, Nevada, Sierra Pacific Power Co Ser 1990
(AMT) (MBIA) .................................................... 6.65 06/01/17 5,150,250
6,000 New York State Energy Research & Development Authority, Brooklyn
Union Gas Co Ser D-1 & 2 (AMT) (MBIA) ........................... 5.635 07/08/26 5,565,300
15,000 Brazos River Authority, Texas, Texas Utilities Electric Co
Ser 1993 A (AMT) (AMBAC) ........................................ 6.05 04/01/25 14,303,100
- ----------- --------------
58,800 56,150,109
- ----------- --------------
MORTGAGE REVENUE - MULTI-FAMILY (1.5%)
1,000 Kentucky Housing Corporation, 1993 Ser A (MBIA) ................. 5.60 07/01/13 936,060
8,675 West Virginia Housing Development Fund, Ser A (AMBAC) .......... 5.65 11/01/21 7,829,274
- ----------- --------------
9,675 8,765,334
- ----------- --------------
MORTGAGE REVENUE - SINGLE FAMILY (6.8%)
17,415 Connecticut Housing Finance Authority, 1992 Ser A-2 (AMT)
(Secondary FSA) ................................................. 6.05 11/15/25 16,656,925
1,195 Maine Housing Authority, Mortgage Purchase 1990 Ser A-6 (AMT)
(Secondary MBIA) ................................................ 6.35 11/15/22 1,188,774
13,000 New Jersey Housing & Mortgage Finance Agency, Home Buyer 1990
Ser F-3 (AMT) (MBIA) ............................................ 5.95 04/01/25 12,406,420
10,000 Virginia Housing Development Authority, 1992 Ser B (AMT)
(Secondary FSA) ................................................. 6.30 01/01/27 9,797,300
- ----------- --------------
41,610 40,049,419
- ----------- --------------
</TABLE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1995 (unaudited) (continued)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- ---------- --------------
<C> <S> <C> <C> <C>
PUBLIC FACILITIES REVENUE (8.0%)
$ 12,000 California Public Works Board, Corrections Refg 1993 Ser A
(AMBAC) ......................................................... 5.00 % 12/01/19 $ 10,234,200
5,000 Florida Department of Management Services, Pool Refg
Ser 1992 (AMBAC) ................................................ 5.40 09/01/14 4,642,700
10,000 Chicago Public Building Commission, Illinois, Ser A 1993 (MBIA) 5.75 12/01/18 9,351,600
10,000 Metropolitan Pier & Exposition Authority, Illinois, McCormick
Place Ser 1992 A (Secondary AMBAC) .............................. 6.50 06/15/27 10,132,000
14,000 Marion County Convention & Recreational Facilities Authority,
Indiana, Excise Tax Refg Ser 1993 A (AMBAC) ..................... 5.50 06/01/21 12,590,060
- ----------- --------------
51,000 46,950,560
- ----------- --------------
STUDENT LOAN REVENUE (2.9%)
18,000 Pennsylvania Higher Education Assistance Agency, 1988 Ser D
(AMT) (AMBAC) ................................................... 6.05 01/01/19 17,256,060
- ----------- --------------
TRANSPORTATION FACILITIES REVENUE (8.7%)
5,000 Tucson, Arizona, Street & Highway Jr Lien Refg Ser 1993 (MBIA) . 5.50 07/01/12 4,780,200
7,000 Chicago, Illinois, Chicago-O'Hare Intl Airport Second Lien
Refg 1993 Ser A (AMT) (MBIA) .................................... 5.60 01/01/18 6,310,780
18,000 Regional Transportation Authority, Illinois, Ser 1993 B (FGIC) . 5.85 06/01/23 16,938,000
Kentucky Turnpike Authority, Econ Dev Road Revitalization
2,000 Refg Ser 1993 (AMBAC) .......................................... 5.50 07/01/09 1,963,160
3,000 Refg Ser 1993 (AMBAC) .......................................... 5.50 07/01/11 2,878,710
3,125 Allegheny County, Pennsylvania, Pittsburgh Intl Airport
1993 Ser C (AMT) (FSA) .......................................... 5.625 01/01/23 2,834,875
10,000 Pennsylvania Turnpike Commission, Refg Ser O (FGIC) ............ 5.50 12/01/17 9,350,100
3,250 Salt Lake City, Utah, Airport Refg Ser 1993 B (FGIC) ........... 5.875 12/01/18 3,108,105
3,000 Richmond Metropolitan Authority, Virginia, Expressway
1992 Ser B (FGIC) ............................................... 6.25 07/15/22 3,016,320
- ----------- --------------
54,375 51,180,250
- ----------- --------------
WATER & SEWER REVENUE (12.3%)
20,000 Central Lake County Joint Action Water Agency, Illinois, Refg
Ser 1993 (FGIC) ................................................. 5.375 05/01/20 17,777,600
10,000 Louisville & Jefferson County Metropolitan Sewer District,
Kentucky, Ser 1993 (MBIA) ....................................... 5.30 05/15/19 9,043,800
3,000 Detroit, Michigan, Sewage Refg Ser 1993 A (FGIC) ................ 5.70 07/01/13 2,881,650
15,000 Houston, Texas, Water & Sewer 1992 Ser C (MBIA) ................. 5.75 12/01/15 14,371,050
5,000 Loudoun County Sanitation Authority, Virginia, Refg Ser 1992
(FGIC) .......................................................... 6.25 01/01/30 5,002,400
Seattle, Washington, Sewer
10,000 Refg Ser Y (FGIC) .............................................. 5.70 01/01/15 9,516,700
10,000 Refg Ser X (FGIC) .............................................. 5.50 01/01/16 9,266,200
5,000 West Virginia Water Development Authority, Loan Program II Refg
Ser A-11 (FSA) .................................................. 5.50 11/01/23 4,485,400
- ----------- --------------
78,000 72,344,800
- ----------- --------------
OTHER REVENUE (2.4%)
5,000 Indianapolis, Indiana, Gas Utility Ser 1994 A (AMBAC) .......... 5.875 06/01/24 4,736,900
10,000 Rhode Island Depositors Economic Protection Corporation, Refg
1992 Ser B (MBIA) ............................................... 6.00 08/01/17 9,677,000
- ----------- --------------
15,000 14,413,900
- ----------- --------------
617,660 TOTAL MUNICIPAL BONDS (IDENTIFIED COST $605,842,362) .................................... 575,701,623
- ----------- --------------
</TABLE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1995 (unaudited) (continued)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- ---------- --------------
<C> <S> <C> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATION (0.4%)
$ 2,600 East Baton Rouge Parish, Louisiana, Exxon Corp Ser 1993 (Tender
05/01/95) (Identified Cost $2,600,000) .......................... 4.90%* 03/01/22 $ 2,600,000
- ----------- --------------
$620,260 TOTAL INVESTMENTS (IDENTIFIED COST $608,442,362) (A) ........................ 98.0% 578,301,623
===========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES .............................. 2.0 11,536,953
-------- --------------
NET ASSETS .................................................................. 100.0% $589,838,576
========= ==============
</TABLE>
[FN]
Bond Insurance:
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
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 $608,442,362;
the aggregate gross and net unrealized depreciation is $30,140,739.
See Notes to Financial Statements
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
April 30, 1995 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
Alabama ............. 0.6%
Arizona ............. 0.8
California .......... 4.3
Colorado ............ 1.3
Connecticut ......... 2.8
District of Columbia 2.1
Florida ............. 0.8
Georgia ............. 1.4
Illinois ............ 14.1%
Indiana ............. 6.7
Iowa ................ 0.8
Kentucky ............ 3.3
Louisiana ........... 2.4
Maine ............... 1.7
Massachusetts ....... 3.6
Michigan ............ 5.7
Montana ............. 0.9%
Nevada .............. 3.5
New Jersey .......... 2.1
New York ............ 0.9
North Carolina ...... 4.4
Pennsylvania ........ 5.8
Rhode Island ........ 2.4
South Carolina ...... 3.8
Tennessee ........... 1.4%
Texas ............... 7.1
Utah ................ 0.5
Virginia ............ 3.0
Washington .......... 4.8
West Virginia ....... 2.1
Wisconsin ........... 2.9
-------
Total ............... 98.0%
=======
</TABLE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $608,442,362) ......... $578,301,623
Cash .................................... 458,781
Interest receivable ..................... 11,740,962
Deferred organizational expenses ....... 20,362
Prepaid expenses ........................ 53,339
--------------
TOTAL ASSETS .......................... 590,575,067
--------------
LIABILITIES:
Payable for:
Common shares of beneficial interest
purchased ............................. 446,170
Investment management fee .............. 173,361
Accrued expenses ........................ 116,960
--------------
TOTAL LIABILITIES ..................... 736,491
--------------
NET ASSETS:
Preferred shares of beneficial interest,
(1,000,000 shares authorized of
non-participating $.01 par value, 3,100
shares outstanding) .................... 155,000,000
--------------
Common shares of beneficial interest,
(unlimited shares authorized of $.01
par value, 34,104,813 shares
outstanding) ........................... 478,105,475
Net unrealized depreciation ............. (30,140,739)
Accumulated undistributed net investment
income ................................. 1,271,987
Accumulated net realized loss ........... (14,398,147)
--------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS ......................... 434,838,576
--------------
TOTAL NET ASSETS ...................... $589,838,576
==============
NET ASSET VALUE PER COMMON SHARE,
($434,838,576 divided by 34,104,813
common shares outstanding) ............. $12.75
==============
</TABLE>
STATEMENT OF OPERATIONS For the six months ended April 30, 1995 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ....................... $17,824,430
-------------
EXPENSES
Investment management fee ............ 1,000,367
Auction commission fees .............. 231,721
Transfer agent fees and expenses .... 110,823
Professional fees .................... 48,584
Shareholder reports and notices ..... 42,933
Auction agent fees ................... 28,517
Trustees' fees and expenses .......... 16,191
Registration fees .................... 13,762
Organizational expenses .............. 3,569
Other ................................ 24,627
-------------
TOTAL EXPENSES ....................... 1,521,094
-------------
NET INVESTMENT INCOME ................ 16,303,336
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss ..................... (4,219,940)
Net change in unrealized depreciation 50,270,621
-------------
NET GAIN ............................. 46,050,681
-------------
NET INCREASE ......................... $62,354,017
=============
</TABLE>
See Notes to Financial Statements
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS (continued)
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEAR
APRIL 30, 1995 ENDED
(UNAUDITED) OCTOBER 31, 1994
------------------ ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ........................................ $ 16,303,336 $ 38,840,925
Net realized loss ............................................ (4,219,940) (10,178,207)
Net change in unrealized appreciation (depreciation) ........ 50,270,621 (114,431,371)
------------------ ----------------
Net increase (decrease) ..................................... 62,354,017 (85,768,653)
------------------ ----------------
Dividends to preferred shareholders from net investment income (2,961,831) (7,323,339)
Dividends and distributions to common shareholders from:
Net investment income ........................................ (14,154,913) (31,802,504)
Net realized gain ............................................ -- (359,635)
------------------ ----------------
Total ....................................................... (17,116,744) (39,485,478)
------------------ ----------------
Transactions in shares of beneficial interest:
Common ....................................................... (8,157,468) (10,865,631)
Preferred .................................................... (40,000,000) (55,000,000)
------------------ ----------------
Total transactions .......................................... (48,157,468) (65,865,631)
------------------ ----------------
Total decrease .............................................. (2,920,195) (191,119,762)
NET ASSETS:
Beginning of period ........................................... 592,758,771 783,878,533
------------------ ----------------
END OF PERIOD (including undistributed net investment income
of $1,271,987 and $2,085,395, respectively) ................ $589,838,576 $ 592,758,771
================== ================
</TABLE>
See Notes to Financial Statements
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited)
- -----------------------------------------------------------------------------
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"). 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 independent 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 by the identified cost
method. The Trust amortizes premiums and accretes 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.
E. Organizational Expenses and Offering Costs -- The Investment Manager paid
the organizational expenses and offering costs of the Trust's common shares
in the amounts of $36,000 and
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- -----------------------------------------------------------------------------
$562,354, respectively. The organizational expenses are being amortized by
the straight-line method over a period not to exceed five years from the
commencement of operations. Offering costs 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, 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 six months ended April 30, 1995 aggregated
$-0- and $29,991,667, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At April 30, 1995, the Trust had transfer agent fees
and expenses payable of approximately $17,000.
The Trust adopted 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, 1995 included in Trustees' fees and expenses in the
Statement of Operations amounted to $5,902. At April 30, 1995, the Trust had
an accrued pension liability of $15,593 which is included in accrued expenses
in the Statement of Assets and Liabilities.
4. PREFERRED SHARES OF BENEFICIAL INTEREST -- The Trust is authorized to
issue up to 1,000,000 non-participating preferred shares of beneficial
interest having a par value of $.01 per share, in one or more series, with
rights as determined by the Trustees, without approval of the common
shareholders. 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. 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.
During the six months ended April 30, 1995, the Trust purchased and
retired preferred shares as follows:
<TABLE>
<CAPTION>
SERIES SHARES AMOUNT
- -------- -------- -------------
<S> <C> <C>
1 300 $15,000,000
4 200 10,000,000
5 300 15,000,000
</TABLE>
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
- -----------------------------------------------------------------------------
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>
400 1 3.90 % 5/05/95 2.875% - 5.75%
900 2 4.299 5/05/95 3.39 - 4.30
1,000 3 4.42 5/05/95 3.45 - 4.42
400 4 4.45 5/05/95 3.32 - 6.00
400 5 4.09 5/05/95 3.00 - 5.75
</TABLE>
- ----------
* As of April 30, 1995.
** For the six months ended April 30, 1995.
Subsequent to April 30, and up through June 9, 1995, the Trust paid
dividends to Series 1 through 5 at rates ranging from 3.90% to 4.40%, 4.15%
to 4.30%, 4.14% to 4.70%, 4.10% to 4.60%, and 4.09% to 4.60%, respectively,
in the aggregate amount of $762,518.
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
Treasury shares purchased and retired (weighted
average discount 10.36%)** ......................... (760,300) (7,603) (8,149,865)
------------ ---------- --------------
Balance, April 30, 1995 ............................. 34,104,813 $341,048 $477,764,427
============ ========== ==============
</TABLE>
- ----------
* Net of offering costs of $562,354.
** The Trustees have voted to retire the shares purchased.
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS (unaudited) (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>
DECLARATION AMOUNT PER
DATE SHARE RECORD DATE PAYABLE DATE
- -------------- ----------- --------------- --------------
<S> <C> <C> <C>
April 25, 1995 $0.065 May 5, 1995 May 19, 1995
June 6, 1995 0.065 June 16, 1995 June 30, 1995
</TABLE>
8. SELECTED QUARTERLY FINANCIAL DATA --
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------
4/30/95 1/31/95
----------------- -----------------
PER PER
TOTAL* SHARE TOTAL* SHARE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Total investment income ......... $ 8,723 $0.25 $ 9,101 $0.27
Net investment income ........... 7,973 0.24 8,330 0.24
Net realized and unrealized gain 21,048 0.62 25,003 0.73
</TABLE>
<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) (51,331) (1.45) 8,759 0.25 (85,898) (2.43) 3,861 0.11
</TABLE>
<TABLE>
<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) 28,602 0.80 7,129 0.20 (1,351) (0.04)
</TABLE>
- ----------
* Total expressed in thousands.
+ For the period February 26, 1993 (commencement of operations) through April
30, 1993.
<PAGE>
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED FEBRUARY 26, 1993*
APRIL 30, 1995** FOR THE YEAR ENDED THROUGH OCTOBER
(UNAUDITED) OCTOBER 31, 1994** 31, 1993
---------------- ------------------ ------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value,
beginning of period ............................... $ 11.41 $ 14.95 $ 14.06
---------------- ------------------ ------------------
Net investment income .............................. 0.48 1.10 0.63
Net realized and unrealized gain (loss) ............ 1.35 (3.52 ) 0.96
---------------- ------------------ ------------------
Total from investment operations ................... 1.83 (2.42 ) 1.59
---------------- ------------------ ------------------
Less dividends and distributions from:
Net investment income ............................. (0.41) (0.90 ) (0.45)
Common share equivalent of dividends paid to
preferred shareholders ........................... (0.08) (0.21 ) (0.11)
---------------- ------------------ ------------------
Total dividends and distributions .................. (0.49) (1.11 ) (0.56)
Offering costs charged against capital ............. -- (0.01 ) (0.14)
---------------- ------------------ ------------------
Net asset value, end of period ..................... $ 12.75 $ 11.41 $ 14.95
================ ================== ==================
Market value, end of period ........................ $ 11.25 $ 10.375 $ 15.00
================ ================== ==================
TOTAL INVESTMENT RETURN+ ........................... 12.65%(1) (25.81 )% 3.05%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) .......... $ 589,839 $ 592,759 $ 783,879
Ratios to average net assets of common
shareholders:
Total expenses .................................... 0.74%(2) 0.80 % 0.63%(2)
Net investment income before preferred stock
dividends ........................................ 7.90%(2) 8.23 % 6.49%(2)
Preferred stock dividends ......................... 1.44%(2) 1.55 % 1.14%(2)
Net investment income available to common
shareholders ..................................... 6.46%(2) 6.68 % 5.35%(2)
Asset coverage on preferred shares at end of period 385% 304 % 313%
Portfolio turnover rate ............................ 0% 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 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
- -----------------------------------------------------------------------------
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.
<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 Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
INTERCAPITAL
INSURED
MUNICIPAL
INCOME
TRUST
SEMIANNUAL REPORT
APRIL 30, 1995
