<PAGE> 1
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST Two World Trade Center, New York,
LETTER TO THE SHAREHOLDERS April 30, 1996 New York 10048
DEAR SHAREHOLDER:
During the first six months of InterCapital Insured Municipal Income Trust's
current fiscal year, interest rates initially declined, but reversed direction
in February and began to move higher. Last year's favorable market bond
environment was created by proposals to achieve a balanced federal budget within
five to seven years and by continued easing of Federal Reserve Board monetary
policy. However, budget negotiations reached a political impasse early in 1996
and federal offices were partially closed. This had an adverse impact on bonds.
Concerns also developed about an increase in the pace of the economic recovery,
which was marked by unexpectedly strong job growth in March and rising commodity
prices. The bond market reacted to these developments by pushing yields sharply
higher.
MUNICIPAL MARKET CONDITIONS
Long-term municipal revenue bond yields as tracked by The Bond Buyer Revenue
Bond Index* moved from 6.02 percent in October 1995 to a low of 5.63 percent in
January 1996. Interest rates subsequently began to rise in mid-February on signs
of stronger economic growth and renewed inflationary fears. The Index yield
reached 6.16 percent in April. Yields on one-year municipal notes declined from
3.82 percent to 3.70 percent over the past six months. The yield pickup for
extending maturities from one-to-thirty years was 246 basis points at the end of
April.
The risk of flat-tax legislation had caused the ratio of Revenue Bond Index
yields to 30-year U.S. Treasury bond yields to rise from 85 to 94 percent
between March and September 1995. However, as the prospects of a flat tax faded,
the ratio improved to 92 percent by the end of April. A declining ratio means
that municipal bond prices have
- ---------------------
*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 Investors Service, Inc., and AA+
to A- by Standard & Poor's Corp.
<PAGE> 2
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1996, continued
outperformed U.S. Treasury prices. Over the previous eight year period prior to
the flat-tax debate, long-term municipal yields averaged 89 percent of U.S.
Treasury yields.
Municipal underwriting activity was fueled by the trend of lower interest rates
in 1995. Between November 1995 and April 1996, new-issue volume increased 45
percent versus the same period a year ago. Despite a resurgence in underwriting,
dealers have continued to withdraw from the municipal business.
PERFORMANCE
The Trust's net asset value (NAV) declined from $13.69 to $13.25 per share
during the six-month period ended April 30, 1996. Based on this NAV change plus
reinvestment of tax-free dividends totaling $0.375 per share, the Trust's total
return was -0.09 percent. Over the same period, the Trust's market price on the
New York Stock Exchange declined from $11.50 to $11.25 per share. Based on this
market price change and reinvestment of tax-free dividends, the Trust's total
return was 0.98 percent. The Trust began the period trading at a 16 percent
discount to NAV and closed at a 15 percent discount. Undistributed net
investment income improved to $0.058 per share on April 30, 1996 versus $0.039
per share six months ago.
PORTFOLIO STRUCTURE
On April 30, 1996, the Trust's $584 million of net assets were diversified among
13 long-term municipal sectors and 71 credits. The five largest sectors
represented 64 percent of net assets. The average maturity and call protection
of the Trust's long-term portfolio were 24 and 7 years, respectively. Each
position in the portfolio was backed by triple "A" rated bond insurers. This is
to insure the timely payment of principal and interest.
<TABLE>
<CAPTION>
FIVE LARGEST SECTORS AS OF APRIL 30, 1996
(% OF NET ASSETS)
<S> <C>
ELECTRIC 18%
HOSPITAL 13%
WATER & SEWER 13%
IDR/PCR* 11%
GENERAL OBLIGATION 9%
OTHER 36%
</TABLE>
* Industrial Development/Pollution Control
<TABLE>
<CAPTION>
CREDIT ENHANCEMENTS AS OF APRIL 30, 1996
(% OF TOTAL LONG-TERM INVESTMENTS)
<S> <C>
MBIA 39%
FGIC 26%
AMBAC 22%
FSA 13%
</TABLE>
<PAGE> 3
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
LETTER TO THE SHAREHOLDERS April 30, 1996, continued
THE IMPACT OF LEVERAGING
As discussed in previous reports, the total income available for distribution to
common shareholders includes incremental income provided by the Trust's
outstanding Auction Rate Preferred Shares (ARPS). ARPS dividends reflect
prevailing short-term interest rates on maturities normally ranging from one
week to one year. Incremental income to common shares depends on two factors:
first, the spread between interest earned on the long-term bonds in the
established portfolio of investments and the ARPS auction rate plus ARPS
expenses; second, the amount of ARPS outstanding. The greater the amount of ARPS
outstanding, the greater the amount of incremental income available for
distribution to common shareholders.
ARPS yields ranged between 3.39 and 4.00 percent during the six months ended
April 30, 1996. Over the same period, ARPS leverage contributed $0.04 per share
to common share earnings. As of April 30, 1996, $155 million in ARPS were
outstanding, which represented 27 percent of net assets.
LOOKING AHEAD
Tax-reduction proposals may receive additional publicity. However, the balance
between the supply of new issues and demand created by maturities and calls for
redemption should remain positive for the municipal market. Long-term municipal
securities currently yield 90 percent of the yield on U.S. Treasury securities
and may be expected to move in tandem with the Treasury market.
The Trust's procedure for reinvestment of all dividends and distributions on
common shares is through purchases in the open market. This method helps to
support the market value of the Trust's shares. In addition, we would like to
remind you that the Trustees have approved a procedure whereby the Trust, when
appropriate, may purchase shares in the open market or in privately negotiated
transactions at a price not above market value of net asset value, whichever is
lower at the time of purchase. During the six-month period ended April 30, 1996,
the Trust purchased and retired 1,072,800 shares of common stock at a weighted
average market discount of 15.02 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> 4
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1996 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MUNICIPAL BONDS (98.0%)
General Obligation (8.8%)
District of Columbia,
$ 5,000 Refg Ser 1993 B (AMBAC)............................................... 5.50 % 06/01/09 $ 4,903,850
6,000 Refg Ser 1993 B (FSA)................................................. 5.50 06/01/10 5,953,260
3,400 Aurora, Illinois, Refg Ser 1993 A (FGIC).............................. 5.125 01/01/19 2,999,242
5,000 Chicago, Illinois, Refg Ser 1993 A (MBIA)............................. 5.50 01/01/17 4,660,850
10,000 Cook County, Illinois, Ser B (FGIC)................................... 5.50 11/15/22 9,203,400
5,000 River Rouge School District, Michigan, 1993 Bldg & Site Unltd Tax
(FSA)................................................................ 5.625 05/01/22 4,735,800
3,000 Vicksburg Community Schools, Michigan, 1993 Refg (MBIA)............... 5.625 05/01/20 2,854,200
7,215 Clark County Sanitation District, Nevada, Refg 1993 (FGIC)............ 5.70 07/01/12 7,149,777
9,385 Washoe County, Nevada, Reno - Sparks Convention Ltd Tax Ser 1993 A
(FGIC)............................................................... 5.75 07/01/22 9,088,340
- -------- ------------
54,000 51,548,719
- -------- ------------
Educational Facilities Revenue (3.8%)
4,000 Alabama State University, General Tuition & Fee Ser 1993 (MBIA)....... 5.70 05/01/15 3,904,840
5,050 Indiana University, Student Fee Ser J (FGIC).......................... 5.00 08/01/18 4,422,487
10,000 Wayne State University, Michigan, Ser 1993 (AMBAC).................... 5.50 11/15/18 9,433,300
Rhode Island Health & Educational Building Corporation,
2,500 Providence College Ser 1993 (MBIA).................................... 5.60 11/01/15 2,331,600
2,500 Providence College Ser 1993 (MBIA).................................... 5.60 11/01/22 2,290,875
- -------- ------------
24,050 22,383,102
- -------- ------------
Electric Revenue (18.1%)
16,000 Redding, California, Ser 1993 A COPs (FGIC)........................... 5.684 06/01/19 15,142,880
Massachusetts Municipal Wholesale Electric Company,
8,000 1993 Ser A (AMBAC).................................................... 5.00 07/01/10 7,452,640
10,000 1993 Ser A (AMBAC).................................................... 5.45 07/01/18 9,135,700
20,000 North Carolina Municipal Power Agency #1, Catawba Ser 1993 (MBIA)..... 5.60 01/01/20 18,730,600
10,000 Piedmont Municipal Power Agency, South Carolina, Refg Ser 1993
(MBIA)............................................................... 5.375 01/01/25 9,238,400
15,000 South Carolina Public Service Authority, 1993 Refg Ser A (MBIA)....... 5.50 07/01/21 14,012,550
6,000 Lower Colorado River Authority, Texas, Jr Lien Refg 4th Ser (FSA)..... 5.625 01/01/17 5,660,460
8,000 Texas Municipal Power Agency, Refg Ser 1993 (MBIA).................... 5.25 09/01/12 7,563,040
10,000 Washington Public Power Supply System, Nuclear Proj #1, Refg Ser 1993
A (MBIA)............................................................. 5.70 07/01/17 9,595,900
10,000 Wisconsin Public Power Incorporated, Refg Ser 1993 A (AMBAC).......... 5.25 07/01/21 9,043,400
- -------- ------------
113,000 105,575,570
- -------- ------------
Hospital Revenue (13.2%)
2,100 District of Columbia, Children's Hospital Refg Ser 1992 A (FGIC)...... 6.25 07/15/10 2,164,953
9,250 Fulton-DeKalb Hospital Authority, Georgia, Grady Memorial Hospital
Refg Ser 1993 (MBIA)................................................. 5.50 01/01/20 8,613,415
3,000 Illinois Health Facilities Authority, Franciscan Sisters Health Care
1992 Ser C (MBIA).................................................... 5.75 09/01/18 2,837,640
4,800 Indiana Health Facilities Financing Authority, Deaconess Hospital Refg
(MBIA)............................................................... 5.75 03/01/15 4,597,392
5,000 Cedar Rapids, Iowa, St Lukes-Methodist Hospital Refg Ser 1993
(FGIC)............................................................... 5.75 08/15/22 4,759,150
5,000 Kentucky Economic Development Finance Authority, St Elizabeth Medical
Center Inc Ser 1993 A (FGIC)......................................... 6.00 12/01/22 5,028,700
12,000 Louisiana Public Facilities Authority, Our Lady of the Lake Regional
Medical Center Ser 1993 D & E (FSA).................................. 5.90 12/03/21 11,550,360
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 5
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
<C> <S> <C> <C> <C>
$ 10,000 Maine Health & Higher Educational Facilities Authority, Ser 1993 A
(FSA)................................................................ 5.50 % 07/01/23 $ 9,270,000
5,000 Massachusetts Health & Educational Facilities Authority, Lahey Clinic
Medical Center Ser B (MBIA).......................................... 5.625 07/01/15 4,749,450
10,000 Michigan Hospital Finance Authority, Oakwood Hospital Refg Ser 1993 A
(FGIC)............................................................... 5.625 11/01/18 9,434,400
5,000 Washington County Hospital Authority, Pennsylvania, Washington
Hospital Ser 1993 (AMBAC)............................................ 5.625 07/01/23 4,705,200
4,000 Chattanooga-Hamilton County Hospital Authority, Tennessee, Erlanger
Medical Center Refg Ser 1993 (FSA)................................... 5.50 10/01/13 3,860,800
5,500 Wisconsin Health & Educational Facilities Authority, Sisters of the
Sorrowful Mother Health Care Ser AA (MBIA)........................... 6.25 06/01/20 5,555,165
- -------- ------------
80,650 77,126,625
- -------- ------------
Industrial Development/Pollution Control Revenue (10.5%)
7,500 Adams County, Colorado, Public Service Co of Colorado Refg 1993 Ser A
(MBIA)............................................................... 5.875 04/01/14 7,506,600
15,000 Indiana Development Finance Authority, PSI Energy Inc Ser 1993 B (AMT)
(MBIA)............................................................... 5.75 02/15/28 14,007,000
4,900 Monroe County, Michigan, Detroit Edison Co Ser CC (AMT) (MBIA)........ 6.55 06/01/24 5,055,183
5,400 Forsyth, Montana, Puget Sound Power & Light Co Ser 1993 (MBIA)........ 5.875 04/01/20 5,287,680
5,000 Washoe County, Nevada, Sierra Pacific Power Co Ser 1990 (AMT)
(MBIA)............................................................... 6.65 06/01/17 5,196,000
New York State Energy Research & Development Authority,
6,000 Brooklyn Union Gas Co Ser D-1 & 2 (AMT) (MBIA)....................... 5.635 07/08/26 5,547,000
4,000 New York State Electric & Gas Corp 1987 Ser A (AMT) (MBIA)........... 6.15 07/01/26 4,018,840
15,000 Brazos River Authority, Texas, Texas Utilities Electric Co Ser 1993 A
(AMT) (AMBAC)........................................................ 6.05 04/01/25 14,837,400
- -------- ------------
62,800 61,455,703
- -------- ------------
Mortgage Revenue - Multi-Family (1.4%)
8,675 West Virginia Housing Development Fund, Ser A (AMBAC)................. 5.65 11/01/21 8,183,908
- -------- ------------
Mortgage Revenue - Single Family (7.5%)
3,000 Alaska Housing Finance Corporation, Governmental 1995 Ser A (MBIA).... 5.875 12/01/24 2,889,420
17,330 Connecticut Housing Finance Authority, 1992 Ser A-2 (AMT) (Secondary
FSA)................................................................. 6.05 11/15/25 17,002,116
1,195 Maine Housing Authority, Mortgage Purchase 1990 Ser A-6 (AMT)
(Secondary MBIA)..................................................... 6.35 11/15/22 1,205,576
13,000 New Jersey Housing & Mortgage Finance Agency, Home Buyer 1990 Ser F-3
(AMT) (MBIA)......................................................... 5.95 04/01/25 12,564,630
10,000 Virginia Housing Development Authority, 1992 Ser B (AMT) (Secondary
FSA)................................................................. 6.30 01/01/27 10,041,100
- -------- ------------
44,525 43,702,842
- -------- ------------
Public Facilities Revenue (7.4%)
10,000 California Public Works Board, Corrections Refg 1993 Ser A (AMBAC).... 5.00 12/01/19 8,896,000
5,000 Florida Department of Management Services, Pool Refg Ser 1992
(AMBAC).............................................................. 5.40 09/01/14 4,759,350
10,000 Chicago Public Building Commission, Illinois, Ser A 1993 (MBIA)....... 5.75 12/01/18 9,526,300
10,000 Metropolitan Pier & Exposition Authority, Illinois, McCormick Place
Ser 1992 A (Secondary AMBAC)......................................... 6.50 06/15/27 10,382,100
10,000 Marion County Convention & Recreational Facilities Authority, Indiana,
Excise Tax Refg Ser 1993 A (AMBAC)................................... 5.50 06/01/21 9,282,000
- -------- ------------
45,000 42,845,750
- -------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 6
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
<C> <S> <C> <C> <C>
Student Loan Revenue (3.1%)
$ 18,000 Pennsylvania Higher Education Assistance Agency, 1988 Ser D (AMT)
- -------- (AMBAC).............................................................. 6.05 % 01/01/19 $ 17,779,680
------------
Transportation Facilities Revenue (8.3%)
5,000 Tucson, Arizona, Street & Highway Jr Lien Refg Ser 1993 (MBIA)........ 5.50 07/01/12 4,941,600
5,000 Chicago, Illinois, Chicago-O'Hare Int'l Airport Second Lien Refg 1993
Ser A (AMT) (MBIA)................................................... 5.60 01/01/18 4,633,300
18,000 Regional Transportation Authority, Illinois, Ser 1993 B (FGIC)........ 5.85 06/01/23 17,336,880
3,000 Kentucky Turnpike Authority, Econ Dev Road Revitalization Refg Ser
1993 (AMBAC)......................................................... 5.50 07/01/11 2,969,340
3,125 Allegheny County, Pennsylvania, Pittsburgh Int'l Airport 1993 Ser C
(AMT) (FSA).......................................................... 5.625 01/01/23 2,903,250
10,000 Pennsylvania Turnpike Commission, Refg Ser O 1992 (FGIC).............. 5.50 12/01/17 9,330,000
3,250 Salt Lake City, Utah, Airport Refg Ser 1993 B (FGIC).................. 5.875 12/01/18 3,162,705
3,000 Richmond Metropolitan Authority, Virginia, Expressway 1992 Ser B
(FGIC)............................................................... 6.25 07/15/22 3,082,920
- -------- ------------
50,375 48,359,995
- -------- ------------
Water & Sewer Revenue (12.6%)
20,000 Central Lake County Joint Action Water Agency, Illinois, Refg Ser 1993
(FGIC)............................................................... 5.375 05/01/20 18,161,400
10,000 Louisville & Jefferson County Metropolitan Sewer District, Kentucky,
Ser 1993 (MBIA)...................................................... 5.30 05/15/19 9,143,500
3,000 Detroit, Michigan, Sewage Refg Ser 1993 A (FGIC)...................... 5.70 07/01/13 2,955,840
15,000 Houston, Texas, Water & Sewer 1992 Ser C (MBIA)....................... 5.75 12/01/15 14,604,150
5,000 Loudoun County Sanitation Authority, Virginia, Refg Ser 1992 (FGIC)... 6.25 01/01/30 5,119,700
Seattle, Washington,
10,000 Sewer Refg Ser Y (FGIC).............................................. 5.70 01/01/15 9,599,900
10,000 Sewer Refg Ser X (FGIC).............................................. 5.50 01/01/16 9,459,300
5,000 West Virginia Water Development Authority, Loan Program II Refg Ser
A-11
(FSA)................................................................ 5.50 11/01/23 4,658,950
- -------- ------------
78,000 73,702,740
- -------- ------------
Other Revenue (2.5%)
5,000 Indianapolis, Indiana, Gas Utility Ser 1994 A (AMBAC)................. 5.875 06/01/24 4,816,900
10,000 Rhode Island Depositors Economic Protection Corporation, Refg 1992 Ser
B (MBIA)............................................................. 6.00 08/01/17 9,939,500
- -------- ------------
15,000 14,756,400
- -------- ------------
Refunded (0.8%)
5,000 Shelby County Health, Educational & Housing Facility Board, Tennessee,
- -------- LeBonheur Children's Medical Center Inc Ser D (MBIA) (ETM)........... 5.50 08/15/19 4,827,750
------------
599,075 TOTAL MUNICIPAL BONDS (Identified Cost $588,086,361)........................................... 572,248,784
- -------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 7
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
PORTFOLIO OF INVESTMENTS April 30, 1996 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM MUNICIPAL OBLIGATION (0.2%)
$ 1,100 Metropolitan Nashville Airport Authority, Tennessee, American Airlines
- -------- Inc Refg Ser 1995 B (Demand 05/01/96) (Identified Cost $1,100,000)... 4.05*% 10/01/12 $ 1,100,000
------------
$600,175 TOTAL INVESTMENTS (Identified Cost $589,186,361) (a).................................. 98.2% 573,348,784
========
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........................................ 1.8 10,716,040
----- ------------
NET ASSETS............................................................................ 100.0% $584,064,824
===== ============
</TABLE>
- ---------------------
AMT Alternative Minimum Tax.
COPs Certificates of Participation.
ETM Escrowed to Maturity.
* Current coupon of variable rate security.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation was
$641,575 and the aggregate gross unrealized depreciation was
$16,479,152, resulting in net unrealized depreciation of
$15,837,577.
Bond Insurance:
AMBAC AMBAC Indemnity Corporation.
FGIC Financial Guaranty Insurance Company.
FSA Financial Security Assurance Inc.
MBIA Municipal Bond Investors Assurance Corporation.
- --------------------------------------------------------------------------------
GEOGRAPHIC SUMMARY OF INVESTMENTS
Based on Market Value as a Percent of Net Assets
April 30, 1996
<TABLE>
<S> <C>
Alabama..................... 0.7%
Alaska...................... 0.5
Arizona..................... 0.8
California.................. 4.1
Colorado.................... 1.3
Connecticut................. 2.9
District of Columbia........ 2.2
Florida..................... 0.8
Georgia..................... 1.5
Illinois.................... 13.7
Indiana..................... 6.4
Iowa........................ 0.8%
Kentucky.................... 2.9
Louisiana................... 2.0
Maine....................... 1.8
Massachusetts............... 3.7
Michigan.................... 5.9
Montana..................... 0.9
Nevada...................... 3.7
New Jersey.................. 2.2
New York.................... 1.6
North Carolina.............. 3.2
Pennsylvania................ 5.9%
Rhode Island................ 2.5
South Carolina.............. 4.0
Tennessee................... 1.7
Texas....................... 7.3
Utah........................ 0.5
Virginia.................... 3.1
Washington.................. 4.9
West Virginia............... 2.2
Wisconsin................... 2.5
----
Total....................... 98.2%
====
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1996 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $589,186,361).......... $573,348,784
Cash..................................... 49,705
Interest receivable...................... 11,437,693
Deferred organizational expenses......... 13,144
Prepaid expenses......................... 51,937
------------
TOTAL ASSETS......................... 584,901,263
------------
LIABILITIES:
Payable for:
Common shares of beneficial interest
repurchased......................... 550,690
Investment management fee............ 175,248
Accrued expenses......................... 110,501
------------
TOTAL LIABILITIES.................... 836,439
------------
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, 32,382,513 shares outstanding)... 458,012,407
Net unrealized depreciation.............. (15,837,577)
Accumulated undistributed net investment
income.................................. 1,866,223
Accumulated net realized loss............ (14,976,229)
------------
NET ASSETS APPLICABLE TO COMMON
SHAREHOLDERS......................... 429,064,824
------------
TOTAL NET ASSETS..................... $584,064,824
============
NET ASSET VALUE PER COMMON SHARE
($429,064,824 divided by 32,382,513
common shares outstanding).............. $13.25
======
STATEMENT OF OPERATIONS
For the six months ended April 30, 1996 (unaudited)
NET INVESTMENT INCOME:
<S> <C>
INTEREST INCOME.......................... $ 17,290,854
------------
EXPENSES
Investment management fee................ 1,069,004
Auction commission fees.................. 192,981
Transfer agent fees and expenses......... 90,251
Professional fees........................ 60,660
Shareholder reports and notices.......... 37,813
Auction agent fees....................... 22,470
Custodian fees........................... 14,196
Registration fees........................ 13,699
Trustees' fees and expenses.............. 11,745
Organizational expenses.................. 3,589
Other.................................... 24,244
------------
TOTAL EXPENSES BEFORE EXPENSE
OFFSET............................... 1,540,652
LESS: EXPENSE OFFSET................. (14,041)
------------
TOTAL EXPENSES AFTER EXPENSE
OFFSET............................... 1,526,611
------------
NET INVESTMENT INCOME................ 15,764,243
------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss........................ (385,684)
Net change in unrealized appreciation.... (16,350,797)
------------
NET LOSS............................. (16,736,481)
------------
NET DECREASE............................. $ (972,238)
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX
MONTHS ENDED FOR THE YEAR
APRIL 30, ENDED
1996 OCTOBER 31, 1995
- ------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 15,764,243 $ 32,518,057
Net realized loss.................................... (385,684) (4,412,338)
Net change in unrealized appreciation/depreciation... (16,350,797) 80,924,580
------------ ------------
NET INCREASE (DECREASE).......................... (972,238) 109,030,299
------------ ------------
DIVIDENDS FROM NET INVESTMENT INCOME:
Preferred............................................ (2,828,677) (5,967,188)
Common............................................... (12,363,518) (27,342,089)
------------ ------------
TOTAL............................................ (15,192,195) (33,309,277)
------------ ------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Preferred............................................ -- (40,000,000)
Common............................................... (12,609,367) (15,641,169)
------------ ------------
TOTAL............................................ (12,609,367) (55,641,169)
------------ ------------
TOTAL INCREASE (DECREASE)........................ (28,773,800) 20,079,853
NET ASSETS:
Beginning of period.................................. 612,838,624 592,758,771
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$1,866,223 and $1,294,175, respectively)......... $584,064,824 $612,838,624
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
InterCapital Insured Municipal Income (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 commenced operations on February 26, 1993.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Portfolio securities are valued by an outside
independent pricing service approved by the Trustees. The pricing service has
informed the Trust that in valuing the portfolio securities, it uses both a
computerized matrix of tax-exempt securities and evaluations by its staff, in
each case based on information concerning market transactions and quotations
from dealers which reflect the bid side of the market each day. The portfolio
securities are thus valued by reference to a combination of transactions and
quotations for the same or other securities believed to be comparable in
quality, coupon, maturity, type of issue, call provisions, trading
characteristics and other features deemed to be relevant. Short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
The Trust amortizes premiums and accretes discounts over the life of the
respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable and nontaxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Trust records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net 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
<PAGE> 11
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued
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 -- Dean Witter InterCapital Inc. (the "Investment
Manager") paid the organizational expenses of the Trust's common shares in the
amount of $36,000 which have been reimbursed for the full amount thereof. Such
expenses have been deferred and are being amortized by the straight-line method
over a period not to exceed five years from the commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Trust pays a management fee,
calculated weekly and payable monthly, by applying the annual rate of 0.35% to
the Trust's weekly net assets.
Under the terms of the Agreement, the Investment Manager maintains certain of
the Trust's books and records and furnishes, at its own expense, office space,
facilities, equipment, clerical, bookkeeping and certain legal services and pays
the salaries of all personnel, including officers of the Trust who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Trust.
3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The proceeds from sales of portfolio securities, excluding short-term
investments, for the six months ended April 30, 1996 aggregated $12,870,640.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Trust's transfer agent. At April 30, 1996, the Trust had transfer agent fees and
expenses payable of approximately $8,400.
The Trust has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Trust who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended April 30, 1996
included in Trustees' fees and expenses in the Statement of Operations amounted
to $3,455. At April 30, 1996, the Trust had an accrued pension liability of
$24,605 which is included in accrued expenses in the Statement of Assets and
Liabilities.
<PAGE> 12
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued
4. PREFERRED SHARES OF BENEFICIAL INTEREST
The Trust is authorized to issue up to 1,000,000 non-participating preferred
shares of beneficial interest having a par value of $.01 per share, in one or
more series, with rights as determined by the Trustees, without approval of the
common shareholders. 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.
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 3.00% 05/03/96 3.00 % - 5.125%
900 2 3.63 05/03/96 3.35 - 4.625
1,000 3 3.85 05/03/96 3.30 - 4.30
400 4 3.85 05/03/96 3.25 - 5.00
400 5 3.85 05/03/96 3.275 - 5.125
</TABLE>
- ---------------------
* As of April 30, 1996.
** For the six months ended April 30, 1996.
Subsequent to April 30, 1996 and up through June 5, 1996, the Trust paid
dividends to each of the Series 1 through 5 at rates ranging from, 3.00% to
3.85%, respectively, in the aggregate amount of $545,561.
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, 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.
<PAGE> 13
INTERCAPITAL INSURED MUNICIPAL INCOME TRUST
NOTES TO FINANCIAL STATEMENTS April 30, 1996 (unaudited) continued
5. COMMON SHARES OF BENEFICIAL INTEREST
Transactions in common shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
CAPITAL
PAID IN
EXCESS OF
SHARES PAR VALUE PAR VALUE
---------- --------- ------------
<S> <C> <C> <C>
Balance, October 31, 1994...................................................... 34,865,113 $348,651 $485,914,292
Treasury shares purchased and retired (weighted average discount 11.59%)*...... (1,409,800) (14,098) (15,627,071)
---------- -------- ------------
Balance, October 31, 1995...................................................... 33,455,313 334,553 470,287,221
Treasury shares purchased and retired (weighted average discount 15.02%)*...... (1,072,800) (10,728) (12,598,639)
---------- -------- ------------
Balance, April 30, 1996........................................................ 32,382,513 $323,825 $457,688,582
========== ======== ============
</TABLE>
- ---------------------
* The Trustees have voted to retire the shares purchased.
6. FEDERAL INCOME TAX STATUS
At October 31, 1995, the Trust had a net capital loss carryover of approximately
$14,590,000 of which $10,178,000 will be available through October 31, 2002 and
$4,412,000 will be available through October 31, 2003 to offset future capital
gains to the extent provided by regulations.
7. DIVIDENDS TO COMMON SHAREHOLDERS
The Trust declared the following dividends from net investment income:
<TABLE>
<CAPTION>
DECLARATION AMOUNT RECORD PAYABLE
DATE PER SHARE DATE DATE
- --------------- --------- ------------- --------------
<S> <C> <C> <C>
April 23, 1996 $0.0625 May 3, 1996 May 17, 1996
May 28, 1996 $0.0625 June 7, 1996 June 21, 1996
</TABLE>
<PAGE> 14
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 SIX FOR THE YEAR FOR THE PERIOD
MONTHS ENDED FOR THE YEAR ENDED FEBRUARY 26, 1993*
APRIL 30, ENDED OCTOBER 31, THROUGH
1996** OCTOBER 31, 1995** 1994**++ OCTOBER 31, 1993**
- -----------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period... $13.69 $11.41 $ 14.95 $14.06
------ ------ ------- ------
Net investment income.................. 0.48 0.96 1.10 0.63
Net realized and unrealized gain
(loss)................................ (0.53) 2.22 (3.53) 0.96
------ ------ ------- ------
Total from investment operations....... (0.05) 3.18 (2.43) 1.59
------ ------ ------- ------
Less dividends from:
Net investment income............... (0.37) (0.80) (0.90) (0.45)
Common share equivalent of dividends
paid to preferred shareholders..... (0.09) (0.16) (0.21) (0.11)
------ ------ ------- ------
Total dividends........................ (0.46) (0.96) (1.11) (0.56)
Anti-dilutive effect of acquiring
treasury shares....................... 0.07 0.06 0.01 --
Offering costs charged against
capital............................... -- -- (0.01) (0.14)
------ ------ ------- ------
Net asset value, end of period......... $13.25 $13.69 $ 11.41 $14.95
====== ====== ======= ======
Market value, end of period............ $11.25 $11.50 $10.375 $15.00
====== ====== ======= ======
TOTAL INVESTMENT RETURN+............... 0.98%(1) 19.11% (25.81)% 3.05%(1)
RATIOS TO AVERAGE NET ASSETS OF COMMON
SHAREHOLDERS:
Total expenses before expense offset... 0.68%(2)(4) 0.71%(3) 0.80% 0.63%(2)
Net investment income before preferred
stock dividends....................... 6.91%(2) 7.51%(3) 8.23% 6.49%(2)
Preferred stock dividends.............. 1.24%(2) 1.38% 1.55% 1.14%(2)
Net investment income available to
common shareholders................... 5.67%(2) 6.13% 6.68% 5.35%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands............................. $584,065 $612,839 $592,759 $783,879
Asset coverage on preferred shares at
end of period......................... 377% 395% 304% 313%
Portfolio turnover rate................ --%(1) 1% 7% 3%(1)
</TABLE>
- ---------------------
* 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 are assumed to be reinvested at the
prices obtained under the Trust's dividend reinvestment plan. Total
investment return does not reflect brokerage commissions.
++ Restated for comparative purposes.
(1) Not annualized.
(2) Annualized.
(3) The above expense and net investment income ratios would have been 0.70%
and 7.52%, respectively, which reflects 0.01% effect for custody cash
credits.
(4) The above annualized expense ratio would have been 0.67% after expense
offset, which reflects 0.01% effect for custody cash credits.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 15
(This page has been left blank intentionally.)
<PAGE> 16
TRUSTEES
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
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.
INTERCAPITAL
INSURED
MUNICIPAL
INCOME
TRUST
SEMIANNUAL REPORT
APRIL 30, 1996
